KEY POINTS:
There was a good turnout for the impeccably well-timed Warehouse AGM yesterday. That's despite the fact that a large number of small shareholders have already taken their money and run.
As at September 2005, The Warehouse had more than 16,000 individual shareholders. That number had dwindled to just
9369 by September this year and may have fallen further in the last two days as hedge funds and arbitrage players have jumped back in, offering mum and dad shareholders another chance to get out at a decent price.
The share price could go a lot higher of course and some small shareholders may even be thinking of buying in at around $6.30 in anticipation of a $1 plus per share gain.
There have been some analysts suggesting that Woolworths can afford to pay above $8. In theory Woolworths looks the most likely to win a bidding war and should at least end up paying something north of $7.30 (a price the shares have already hit in the past 12 months).
But in theory the All Blacks ought to be world champions right now.
It's one thing to have an opinion on the most likely outcome, it's another thing to bet on something that has all the hallmarks of a sporting contest - high risks, high stakes and the chance that a busybody ref will ruin the game.
The broking community was extremely confident that the High Court would overturn the Commerce Commission ban on the sale - but that doesn't mean they were all buying in. The surging share price of the past two days is a sign of just how cautiously most were playing this.
As one broker - with a client who took a $1 million punt on the outcome of the case - said yesterday, the High Court decision came more as a relief than a cause for celebration.
It makes more sense for the big funds to invest on takeover plays. A hedge fund will typically spread the risk by investing in a large number of stocks around the world which are subject to M&A activity.
They will have some big wins and some big losses. But as their name suggests, they know how to hedge risk so that their returns are ultimately positive. Small investors don't have that luxury.
The opportunity cost of staying in the stock also has to be considered. While shareholders have been waiting for the Commerce Commission case to run its course and the bidding war to begin, their money could have been earning 8 per cent per annum in the bank.
So it's not surprising that many have been advised to sell on the numerous price spikes The Warehouse has seen in the past year.
The floating pool of available stock is now less than 30 per cent.
Last year both Foodstuffs and Woolworths acquired 10 per cent stakes (which enable them to block a full takeover bid).
And The Warehouse share register has always been dominated by founder Stephen Tindall. Having spun out almost half his wealth to create the charitable Tindall Foundation, he personally holds just 26.7 per cent of the company. The foundation holds 21.3 per cent.
The extent to which Tindall can influence the decision of the foundation, of which he is a trustee, is not clear. But the potential conflict may not ultimately be that relevant.
Even when it comes to his personal shareholding, it is reasonable to assume his motivation won't be far from that of other shareholders.
By getting involved in the process Tindall may help Foodstuffs or PEP present a viable alternative to Woolworths.
They may even succeed. But Tindall can't lose either way.
One thing Tindall will have a firm view on is what his business is worth. You can be sure he won't let it go for a bargain. Not because he needs the money, but because he has a lot of emotional investment in the charitable trust and how its wealth can be used. And because he also has a lot of pride in the company he has created.