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As Legendary Investor Fred C. Dobbs Can Tell You Not Only Have to Have
the Golden Touch, But You've Got to Know How Hold On to Value
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Continuing
our fairy tale theme, another instalment on Goldilocks Investment
Fund.
In
doing a bit of research on GFH, I just happened to discover that
Goldilocks owned some 9.98% of the shares of Khaleeji Commercial Bank
Bahrain.
From a quick look at previous years KHCB financials, their
ownership first emerged in the FYE 2017 report and has been
consistent since then.
What changed was that as of FYE 2016 Shuaa
Capital owned 14.01% of KHCB.
In the FYE 2017 report it
“disappeared” from the list of major shareholders – 5% and
above.
According to the Bahrain
Stock Exchange,
on 26 September 2017, Shuaa sold 100 million shares to Goldilocks at
BHD 0.096 per share on the Special Order Market.
According to Bahrain Stock Exchange data, the closing price on that day in the
regular market was BHD 0.1113 so Goldilocks bought at a 15%
discount.
Goldilocks already owned some 3,950,000 shares as of that
date and apparently acquired another 829,110 shares prior to FY 2017 end.
Shuaa retained 40,779,824 shares or 3.88 % of its holding
then.
It’s not clear if it still does.
What was Goldilocks’
return on its investment?
KHCB paid no cash dividends since
Goldilocks’ acquisition.
So the return is change in the market
value of stock.
KHCB closed at BHD 0.052
on 2
May
2020.
ROI is negative 46% (based only on the cost of the 100 million shares purchased from Shuaa).
That’s before consideration of the likely negative impact on Goldilocks and other KHCB's existing shareholders of KHCB’s
need to raise BHD 37.1 million in new Tier 1 equity.
But
save some of your pity for KHCB which is sitting on a similar size
block of Treasury Shares at an average cost of BHD 0.1138 and facing
a much lower ROI – negative
54%.
You’ll
recall and if you don’t AA will
remind you that
Shuaa bought AlImtiaz's 14% stake in KHCB in December 2006 for BHD
0.065 per share. Approximately one month after ADFG bought a little
over 48% of Shuaa.
Shuaa’s ROI on its investment in the 100 million in KHCB shares it sold Goldilocks was roughly a positive 48%.
Side note: Ending of film pictured above presents an unrealistic scenario when atomic weight is considered, though it has a nice cinematic effect.
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