erelation, I have thought about your question relating to rights issue (instead of new share placement to CMIA & amfraser).
I looked thru the AR and i think a good reason is, the chairman has 36 m warrants - he has to come up with about S$11 million to exercise the warrants in 2013. Boy, it is a lot of dough, isnt it?
So why do a rights issue and he has to cough up a few more million $??? If he priced the rights at 15-20 cents..... it's tough to cough up that kind of money. U agree?
This comment by ethan999 from CNA forum is a reasonable one:
.....unlike weak placements to random retail shareholders, this was a strategic placement done for big time committed investors (CMIA) and will be joining the board and contribute to management.
A total of 63 million shares were purchased - under such circumstances it wouldn't have been feasible for them to buy from the open market without being forced to push up Eratat's share price astronomically considering the average daily volume is only a few million, which of course wouldn't be in line with a fund's mandate to maximize profits for its shareholders and use its clout and leverage to negotiate for the best possible price in such scenarios.
Considering this was a strategic business partnership in which CMIA would be actively participating in management affairs, the fact that CMIA got their shares at a slight discount seems to only be fair and a common practice of goodwill among business partners.
And as earlier mentioned, yes the fact that the fund is willing to become a major shareholder, along with the fact that they are probably also privy to internal information on the results and prospects of Eratat bodes very well for Eratat in the long run.
