06 Apr OSIM Shares – Should You Give In To the Final Offer
A darling in the local stock market and a successful home grown business which Singaporeans are proud of.
It is no wonder Ron Sim’s delisting offer for OSIM caused a stir in the stock market.
I believed that when OSIM was first selling luxury massage chairs, I imagine the naysayers would say things like “who would buy massage chairs at such high prices?”; “a bulky chair at home?”; and “massage chairs cannot be better than human touch”. The naysayers were not wrong entirely, they were probably not the target audience. OSIM found a niche in a stress-ridden Singapore whereby their customers are willing to enjoy a massage after a day of hard work. Also, customers may buy these chairs for their aged parents as a form of filial piety.
I want to give Ron Sim credit as an entrepreneur and his tenacity to make his dream come true. Singapore needs more entrepreneurs.
Infopedia had a section about Ron Sim’s life. He had six siblings and his family wasn’t well to do. He had to take odd jobs to pay his way to tertiary education. He found his talent in sales but his first business peddling household goods failed after five years. He started a new healthcare company and eventually named it OSIM in 1994. I also learned that the name came from his surname, and the ‘O’ symbolised the world, like a globe. He went on to build a strong brand and made his fortune of $1.16B (2016 estimate by Forbes).
Short History of OSIM Stocks
Most of OSIM’s growth came in the period of 2010 to 2014, after the infamous acquisition of Brookstone which eventually filed for bankruptcy. Other acquisitions like TWG were a lot more successful.
If we were to measure a company’s friendliness to shareholders based on the dividends given, OSIM should be considered a friend.
Dividends were given on most years except 2008 and 2009 where the financial crisis happened, coupled with the write off of Brookstone. Else dividends have been growing for the past 7 years. Dividend distribution frequency was quarterly.
2015 earnings was terrible due to poor sales in China. This resulted in the tumbling OSIM share prices to date. It lost more than half from its peak.
First and Second Offer
Ron Sim owns close to 70 percent of OSIM. He initially offered $1.32 to other shareholders in Mar 16, right after the stock market corrected about 30 percent. It was an opportunity to scoop up shares cheaply.
The offer was low – a general perception and a view held by market analysts. Something that I learned over the years is that it doesn’t even matter what is a fair value for OSIM shares. The offer price is fair as long as the majority is willing to sell the shares. Willing buyers, willing sellers.
But no, shareholders said thank you, to the first offer.
Ron Sim had to up the offer price to $1.39 in Apr 16 and indicated that it is the final offer. But will he succeed with this new offer?
What To Do?
My view is that he would not succeed in delisting the company.
He still needs at least 20 percent shares and I doubt he would collect enough. This is because the second offer price of $1.39 is still low, a far cry from the high of $2.94.
Many shareholders would have bought the shares above this offer price and psychologically difficult to sell at a loss.
In any delisting offer, shareholders can afford to be patient and monitor the rate that the shares have been collected by the offeror. Shareholders can decide to sell the shares as the offeror is closer to the 90 percent mark. Else, higher offers may come in favour of the shareholders.
As I said, I believe the delisting would not realise. OSIM will continue to stay listed for years to come :)
Maybe the offer wasn’t meant to delist. Maybe it was meant to signal the market of the undervalued price of OSIM which have crashed to a low point. An offer would have brought attention and increase the share price.
Should you buy now? I think it is too late to join the party especially when he said this is the final offer.
P.S.: I am not offering any investment advice. I am stating my opinion. You should consult a financial advisor if you need help regarding this offer.