- This topic has 3 replies, 2 voices, and was last updated 3 years ago by
.
- Posts
hi
I found this point a bit difficult to understand when I was debriefing the new mock:
“the discounted share price would reflect the additional risk of investing in a company as a minority shareholder.”
can you please explain this in detail?
thanks.I am sorry but I do not know which new mock you are referring to and therefore the context of the sentence.
hi
pre- June mock.
the full explanation is shown below:
“Issuing only 20% of the share capital to the public at the initial listing would make them minority shareholders effectively. As such, their ability to influence the decision-making process in the company would be severely curtailed, since even if all the new investors voted as a bloc against a decision, they would not be able to overturn it. The discounted share price would reflect the additional risk of investing in a company as a minority shareholder. In this case, the position of the unsecured bondholders is important. If the unsecured bondholders, holding between 10% and 12.6% of the share capital in an equity-for-debt swap, are included with the new investors, the equity stake rises to 30%–32.6%. In such a case, shareholders, as a bloc, would have a significant influence on the company’s decisions….”I am not able to access the mock you refer to and so it is difficult for me to say anything without seeing the full question.
However from what you have written, it would appear than what is meant by ‘the discounted share price’ is referring to the fact that the share price will be lower than it was before, which fits in with the statement that it would reflect the additional risk for minority shareholders (the more the risk then the less they would be prepared to pay).
- You must be logged in to reply to this topic.