L
Logarithm n Blues
Member
Hi all,
Some of the course materials suggest that Investment trust companies may be priced at a discount to their net asset value.
ie. (as I understand it) price of 100% of shares < Market value of assets - liabilities
In cases where this is true couldn't it become possible for a very wealthy individual to buy up all the shares and wind up the company to make a quick profit?
I understand that this won't be practical if the difference is small:
-There will be lots of dealing expenses.
-Prices of the ITC shares and of the underlying assets may move. Especially if the market spots what's going on.
-The investor doesn't have the power to wind up the company. They would rely on the board co-operating with their wishes.
-Costs of admin and likely legal fees in making all this stuff happen.
But would you suggest that this means that any discount to NAV will be small?
Some of the course materials suggest that Investment trust companies may be priced at a discount to their net asset value.
ie. (as I understand it) price of 100% of shares < Market value of assets - liabilities
In cases where this is true couldn't it become possible for a very wealthy individual to buy up all the shares and wind up the company to make a quick profit?
I understand that this won't be practical if the difference is small:
-There will be lots of dealing expenses.
-Prices of the ITC shares and of the underlying assets may move. Especially if the market spots what's going on.
-The investor doesn't have the power to wind up the company. They would rely on the board co-operating with their wishes.
-Costs of admin and likely legal fees in making all this stuff happen.
But would you suggest that this means that any discount to NAV will be small?