You've obviously never seen or read about repossession. Banks, when they lend money, usually secure their investment with your asset. So yes if you have a house that is mortgaged, it is true you do NOT own the house. If you try and borrow more money against that house that is already 95% from borrowed money, they will NOT lend you more money. Why? Because you don't own it. You aim to own it of course somewhere in the future, and the bank hopes you do because they make loads on interest. But if things go wiry they have no qualms in selling your property below market value. They just want their money back
As for CNP, is it worth 24c if they sell half their assets? Thats the multi BILLION dollar question isn't it? Questions to ask.
* What sale price will they get for the assets? * How will it affect their on-going revenues? * Will the sales satisfy the banks in terms of how much they want debt lowered? * What growth strategies will the company have in place to increase shareholder wealth? * How many shares will the company place and at what price? * How will the US and Australian economies perform and how will it effect rentals?
I can think of more quetions, all which make it impossible to ascertain whether the company is worth more than 24c if they sell half their assets.
Do you seriously think the company would trade at 24c if it was obvious that it is worth much more? Do you think maybe institutions are just waiting for the other to make the first move and then they'll all buy this ridiculously cheap company holding hands?
Purely and simply, there is too much uncertainty at the moment. There is no straight forward answer as to the current value of CNP as there are still too many unanswered questions. If everything falls the right way then yes CNP is under-valued, if they don't (and there are a number of factors outside CNP's control) then 24c might end up looking expensive in the future. This will play out for a few months yet.
CNP Price at posting:
0.0¢ Sentiment: None Disclosure: Not Held
