Taking over the Singapore Flyer – Good Decision? – 30 Aug 2014

Posted on August 29th, 2014 in SG stocks


What happens when a company’s decision does not go down well with its shareholders and analysts?

Shareholders dump the shares, causing the share price to come down.

This is exactly what happened to Straco Corp’s share price when it announced on 28th Aug 2014 that it had agreed to purchase the troubled Singapore flyer for $140 million in a 90:10 joint venture, with WTS Leisure Pte. Ltd’s taking the smaller stake.

Shareholders and analysts were not optimistic that Straco Corp could turn around the flagging business of the Singapore Flyer.  They think that the cash that they would have to use for the purchase could be better used elsewhere to generate better returns. They think the price paid for the Singapore Flyer is too high.  They don’t like the additional debt that Straco Corp would have to take to fund this purchase.

The next day, the share price of Straco Corp plunged more than 10% to $0.725 before recovering some lost ground to close at $0.785, 4.3% below its previous day closing price of $0.82.

Nothing in charting could have prepared you for the drop in Straco Corp’s share price. Just because you’re a fan of the Singapore Flyer does not mean the market will agree with you. But now you know the reason why Straco Corp’s share price dropped.  Charts don’t explain the story.  Fundamentally, events, sentiments and opinions drive how the charts move. The question now is, if you’re invested in Straco Corp, do you hang on, or offload?


Our Best, Always

Empower Advisory Team

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