Special situation (demerger, rights issue, delisting) - checklist

(T Anil Kumar) #1


Over the last one month i have worked on understanding special situation (risk arbritrage) investments in general and rights issue, delisting and demerger in particular. I think these are one of the best ways to earn MARKET NEUTRAL return. Ofcourse ‘Shit happens’ and special situation and if our analysis goes wrong downside can be huge & permanent loss of capital.

Please find below checklist which I have put together, which is mostly a compilation from Neeraj Marathe, Ashish Kila and Sanjay Bakshi blog. Please note that I do not have much practical experience in specialsituation investmentand the intention in putting up the checklist is to seek guidance from senior investors and learn together with other investors who like me have not yet participated in special situation investment.

Please suggest if no notice any errors or you think any importantadditional steps which you think I might have missed.

Here are some excellent resources to begin with

  1. Rights issue basics: http://neerajmarathe.blogspot.in/2012/04/rights-issues-get-it-right.html

  2. Playing delisting cases: http://neerajmarathe.blogspot.in/2011/04/playing-delisting-cases.html

  3. How to evaluate delisting cases. This is an excellent presentation by Ashish Kila, CIO of perfect research, where he has explained the entire delisting process and the past cases in which delisting failed. http://goo.gl/Oyf2y

  4. Can you teach risk arbitrage(Sanjay Bakshi) - http://fundooprofessor.wordpress.com/2012/10/20/teach/

Special-situation-checklist.xlsx (10.1 KB)

(sarthak kumar) #2


Is there a stock advisory service in India focussed on special situations.


(ramanhp) #3

I guess Kotak Mahindra has a special situation themed mutual fund.


YES,Katalyst wealth.com

(josephseby) #5

Can any senior and experianced members put some light on the new IPO coming from GVK power for airport vertical. What will be its effect on the retail investors of GVK power

(Kritesh Abhishek) #6

Hi Anil,

Good post. Thank you for taking the initiative and sharing the details.

These special situations (also called value catalysts) are really worth learning as they are capable of both creating and destroying wealth for the shareholders in a short period of time.

Besides, few other similar situations (catalysts) on which the investors should also keep an eagle eye are - Earning release, Stock buybacks (Repurchases), Significant dividend announcement, Product launches, Stock splits, Bonus, Spinoffs, Liquidation, Lawsuits & investigations and Addition to index.
( Read more here – 11 Must-Know Catalysts That Can Move The Share Price.).

Thanks again for the post. Cheers

P.S. The checklist spreadsheet is not opening (but the resources links are working fine). Please rectify it.

(srvn) #7

Hi…in valuepickr is there a post thread for special situations where opportunities are posted and discussed? if yes, pls. share link

(Niraj Kumar) #8

There is good special situation opportunity available with open offer of fortis and fortis malar by ihh group. Current market price of fortis share rs 147 open offer price rs 170. Potential gain about 15 percent . Time frame within 90 days. Considering current volatility and high valuation in various stocks it may be good opportunity for small gain. As I see it risk is very less in this situation except regularity approvals from CCI and sebi as both party is willing and no much choice. IHH group is leading hospital chain in Asia with market cap of around 10 billion us dollar and listed in Singapore and Malaysia stock exchange. They have already running hospital with around 1000 beds in South India so very well versed with healthcare business in India. Also likely to improve corporate governance issue in fortis and current valuation of fortis considering future potential of healthcare industry is also decent so no much downside risk from current level.
Fortis open offer

Disc: Yesterday took some position after announcement