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Money Matters: Trades for Less Than Cash?


A number of mails in a few newsgroups I’ve subscribed to go like this:

QIP of 71.7 lakh shares made at Rs 625 per share in October 2010- Rs 448 crore

Add Cash and Cash Equivalents on March 31, 2010

Net Current Assets-Rs 225 crore

PAT For 9Months to December 2010-Rs 89 crore

Cash and Cash Equivalents With Money Matters As of Dec 31, 2010- Rs 762 crore

Number of Shares Outstanding- 3.5 crore

Cash Value of Money Matters stock– Rs 217 per share.

Current Market Price-Rs 115

Discount to cash in hand- 50 per cent.

Stock made a 52 week high of Rs 780 in October 2010

Down 85 per cent since then.

Even with no further operations-Money Matters stock should trade above Rs 217

Okay, before you rush in to invest:

1) The invested cash can be "funny" money – the QIP that was made, it may actually be challenged as based on "false" prospectus, and the money might need to be returned. You think it can’t happen? It can, has and remains a risk.

2) If they get indicted, MMFSL is history – the penalty it may pay can be greater than the cash it has.

3) The negative view now will mean they can’t get much more business in future, especially if their "contacts" are spooked that they will get investigated if they do a deal. EPS slowed from 6.69 to 2.85, and remember the scam arrests happened in November (which was mid-quarter). We have no idea how bad its going to get.

Of course, there’s not much debt and that way things are not quite bad for the company, it’s just that if they get hauled over coals, it’s not a worthwhile investment even at these levels. Just saying. On the other hand, knowing how scam companies are performing beautifully nowadays, it may just be that this was the best time to invest.


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