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Thursday, September 5, 2013

Novus Energy Sale - Why Are Assets Being Let Go For 35% Less Than Recent Transactions?

A few facts on this Novus Energy sale to Yanchang:

1) Novus was my largest position by a considerable margin

2) My gain on my average cost base is 50%

3) Despite that gain I feel a little like I'm chewing on a lemon

I knew the sale price was considerably below market value for those assets.  I had no idea why.

Then I read an article in the Calgary Herald that may shed some light on things.  I've put together some thoughts here:

http://seekingalpha.com/article/1674652-is-novus-energys-sale-to-yanchang-petroleum-the-best-deal-for-shareholders-or-for-management

The article first explains that the sale is 35% below the average of the last 7 Viking transactions.  Then it jumps to comments from the Novus CEO who is bragging about how the new company that he will be working for is going to become a "major player" making big time acquisitions.

So shareholders like me get to sell out at a discount price to the very large company that will now be employing the Novus CEO and Chairman.  He gets to run a much bigger operation and get a fat pay cheque.  The rest of us just get a disappointing price.

Maybe another bidder will step up and pay something close to a fair price.

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