Melco Resorts (MRP) The Tender Offer Saga Continues

I have made a post about MRP before. MRP made a tender offer as the first step to ultimately, delist from the PSE. But investors has been angry at the “fair price” offered on the tender. Since previously, they just sold a follow on offering which is double the amount of the tender. 14 for the FOO and 7.25 for the tender offer. An investor who believed in the people behind MRP, even without earnings, are rewarded by more than -50% of their investments. MRP on the other hand upon turning around the company and now registering a profit wants to buy out the investors for half of what they paid.

Surely, many investors will be angry. Especially the long term people who held on to the stock since the beginning. And business is business. What ultimately matters is the bottom line. But is it worth it to make money and be unfair to people who trusted you? I’m not here for the emotional bandwagon but I think, this decision of MRP is the solution to that problem.

I think MRP wants to make amends. They want to show people that they are fair. Just today, they have revised their tender document, stating that they are deferring the tender offer schedule (and price… hopefully), and then scrapping the idea of going private. The goal now is to increase the stake of the parent company.

Upon knowing of this information, yours truly made a buy order on MRP at the price of P7.12. My reasoning behind it is this:

  • MRP wants to change the price of the tender
  • They won’t delist anymore which means the tender offer would be thought of like a buy back.
  • They ‘might’ increase the tender offer price but lower the amount of shares to be bought since they are not delisting anymore. My reasoning behind it is because of the attention they got for being unfair on the price, increasing the tender would prove the naysayers wrong and regain investors trust.

Things that could happen

I could be wrong and the tender price might go down which would seem like the people behind the company are taking advantage of the the shareholders. Saying they are doing a tender offer to increase their stock price then saying they changed their minds. (Much like what happened to Elon Musk?)

If this happen, I’ll just take it to experience and move on. But I want to believe that people are good and honest and they will do the right thing. If not, that’s ok. I’ll just move on to other opportunities and avoid them in the future. Note to self: make a list of the names of directors and management if the bad thing happens and avoid them in the future.

Probabilities of Situations Happening

  1. First situation is that the tender offer price remains the same. In this scenario, I am safe. As I have entered at the price of 7.12, I will break even and make a little profit if the tender offer price remains the same.
  2. Tender Offer Price Increase. This is the ideal scenario and we will make some profit.
  3. Tender Offer Price Decrease. The worst case scenario. We will lose money and the stock price will drop pre-tender or around the new lower tender offer price.

In all of those scenarios combines we have 2/3 chance of either making small profit or making large profit.

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