In my view the value of a company (and therefore over time it's share price) is equivalent to the discounted valued of cash flows that are able to be distributed to its owners over it's life. In Paperlinx's case no cash can be distributed until the hybrid debt is paid off therefore the company has nil intrinsic value at this time. Meanwhile any cash and profits accrue (even if not paid out) to hybrid holders until such time as they have been fully paid or accept some other deal.
I take the point that management have an incentive to protect ordinary holders and they could stall leaving things in limbo. In the end I believe they will have to make a deal or both classes will suffer and they will be removed. Either that or they will be sued for oppression under the Corps Act.
I have taken this opportunity of extreme uncertainty to reduce my cost base of PXUPA. If I am right the securities will be worth a multiple of the current price. Perhaps some ordinary holders would like to hedge their bets by joining me?
SRS Price at posting:
3.2¢ Sentiment: Hold Disclosure: Held
