When I shared my full year results end of last year, I mentioned ARA Asset Management's offer of $1.78 a share and how it translates to 35% to 78% capital gains for me if the offer is to be accepted.
At the time, I had a fixed deposit maturing and ARA Asset Management's share price was at $1.71. So, I decided to plonk the money from the fixed deposit into their stock.
It looked like it would be a sure win, an arbitrage opportunity, and I would get a 4% "interest rate" so to speak within half a year or so.
At the time, I knew some shareholders thought $1.78 was too low a price and I knew there was a possibility that the offer would not be accepted. No issues, I thought. I could keep the investment and receive 5c dividend year after year which would give me a yield of around 3%.
However, at the back of my mind, there was a very small voice which asked if I really want a much larger position in ARA Asset Management and with a yield of only 3% to boot in case the offer is rejected by shareholders?
That voice did not go away
Today, I decided to accept a yield of about 2.6% from Mr. Market. After costs, it would be a bit lesser. I closed my "ARA fixed deposit" and received what is very good "interest income" for a 2 months fixed deposit.
I thought of this position as a "fixed deposit". So, like a fixed deposit it should behave.
I still retain my original investment in ARA Asset Management. What I divested was my more recent "investment".
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