46% No Risk Investment in EDC

Value Investing Philippines is not about making huge sums of money by investing. We are all about NOT LOSING MONEY. So, we only grab opportunities wherein there is no way that we could lose money. And today, we have that opportunity.

EDC (Energy Development Corporation), in its recent press release today made an announcement that it will go private. In other words, they want to be delisted from the Philippine Stock Exchange. Therefore, they want to tender offer the remaining public shares for the premium price of P7.25 per share.

Now here is the fun part, EDC is trading at the market for P4.95 per share. Doing the math, that’s a 46% return on your investment for 2 – 3 months until the tender offer is complete.

Should You participate or not?

It depends. EDC has initiated a suspension on its stock today. And tomorrow where the suspension would be lifted, there might be a run on its shares. Meaning, it might be so in demand tomorrow that we might not get into a position where we could make any sizeable profit. If that happens, I think its better to look forward than try to follow the crowd. Its a no-risk investment though, so whatever might happen tomorrow. I’m going to observe what will happen.

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