Re-reading some previous posts, I would like to point out something that needs to be clarified. There appears to have been some confusion between "book value" and "market value". Previous posts have stated that based on the press release, ICVI should trade a $2.85/share, its "book value".
However, the press release stated their assets had an approximate "market value" of over $200 million. Let me repeat..."market value". Secondly, assuming the book value approximated the market value (highly unlikely), we still cannot infer the equity has a value of $2.85/share. For one, we don't know if ME has any existing debt. Further, if the assets have a current market value of $200 million, then we have to discount the future cash flows to some present value, reducing the value of the equity. Thirdly, if we continued to follow the line of thinking that the market value of the assets approximates the book value, then valuing ME at 1.5x book is inappropriate in this case. This is often a valuation measure, b/c on companies balance sheets the assets are valued at historical cost, which may not approximate current market value. This is the not the case here.
The bottom line of this long drawn out essay is that more questions need to be answered here. On the other hand, there seems to be more upside potential than downside risk, which warrants investing in ICVI at these levels. |
