FV of a Listed Company to Dissolve

CFA General
#1

Hi all, There’s a company that I would like to invest in for it’s high dividend yield, but I’m not quite sure how to look it in terms of future value because it’s set to dissolve in 5 years. When the company dissolves, the shares will cease to trade on the exchange and will represent only the right to receive certain distributions payable to the shareholders of record at the time of the termination. Upon termination, the compnay is obligated to distribute ratably to these holders the net monies remaining in the hands of the Trustees (after paying and providing for all expenses and obligations), plus the balance in the Principal Charges account (primarily representing the costs of surface lands acquired over the years). After payment of this final distribution, the shares would be cancelled and have no further value. All other property must be conveyed and transferred to the reversioner under the terms of the agreement. As time approaches towards dissolution, would the stock’s price decrease to trade at the price of Earnings? (Current P/E = ~8.5) Anybody have any insight on how to treat this stock? Thanks!

#2

What’s the company? I know for a while I was invested in BPT which is a trust that owns oil. At some future date around 2020 the oil was going to be gone and the trust would cease to exist. At that point the shares would just delist. In financial theory the shares will keep dropping over time until the company is dissolved, but in reality there are probably a lot of idiot investors who don’t understand this and will keep the stock bid up to a bit more than liquidation value.

#3

Stock is GNI

#4

Stock is GNI

#5

Anybody else?

#6

Looks like you can’t really value this as a normal stock. It’s more like a series of fixed payments plus an uncertain payment at maturity.

#7

Hello Mister Walrus Wrote: ------------------------------------------------------- > Looks like you can’t really value this as a normal > stock. It’s more like a series of fixed payments > plus an uncertain payment at maturity. Sounds like a bond with high credit risk, wouldn’t you say?