ipod,You raised a great point on your post regarding CNP/CER...

ipod,

You raised a great point on your post regarding CNP/CER share prices. It's something that I have spent hours thinking about but have simply not been able to get my head around.

CNP (currently) has about 850m shares on issue but CER has a whopping 2.2bn. It seems to me that anyone who has bought shares in either has given little regard to the market cap (i.e. SP x shares on issue), the shareholder equity on the balance sheet, NTA or future earnings.

I came to the conclusion, rightly or wrongly, that:

a) buyers are 'anchoring' around price levels between the two entities (presumably because of their connection with each other and their sharing of the 'Centro' name) so as one drops, the other does over time by association as the market assumes (wrongly IMO) that the fate of the two is linked.

b) There was some 'the market must be right' so as the prices drop, you get a self fulfilling cascade downwards. This was compounded with the ever worsening financial crisis.

c) The activity by Orbis whilst acquiring a CER stake kept the sp high for a time but this soon ended.

d) There was some 'rear view mirror' investing when buyers looked to past historical highs (CNP $10, CER $2ish) and assumed that any run up post-announcement would see CNP a lot higher than CER simply because it used to be that way. At a fundamental level this makes no sense, especially now CNP holders will become so diluted. Interestingly though, that's how it played out today.

I don't like to try and predict how things will happen, but on fundamentals alone, we should expect a cross over again in the coming weeks that sees the CER share price exceed that of CNP. I have a feeling that gap will widen considerably over time as well.

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