12-16-08: Satyam (SAY) Founder Raju's Groundhog Day
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December 16th is a day that Satyam (NYSE: SAY) Chairman and Founder, B. Ramalinga Raju, will never forget after an ambitious merger plan backfired on him.
Yesterday morning, Satyam announced plans to acquire a 100% stake in Maytas Properties and a 51% share in Maytas Infra. Investors took offense to the deal, sending the stock down 55%. The first major problem was that the target companies are connected to the Chairman, the second major issue was Satyam is an IT business process outsourcing company while the target companies are India-infrastructure plays.
After seeing the reaction from investors, late yesterday Satyam announced that they are not going ahead with its proposed Maytas acquisitions.
Monday's (12/15) closing price for Satyam was $12.55. Yesterday, after the merger news, the priced had plummeted to $5.70. Today, after the merger was terminated, the stock is up 49% but is only at $8.50 per share. Even though Saytam is the same company today as it was Monday, with no merger, investors have shaved over $4 off the stock price.
Investors are sending the message to Raju that they simply cannot trust him after a move like this. It will take some time to restore the trust.
If you've ever seen the movie Groundhog Day with Bill Murray you will remember that he had to keep repeating a day he hated (Groundhog Day) over and over again. This is likely the same thing Satyam's Raju is seeing, as he will have to live with this bad day over and over again.
Yesterday morning, Satyam announced plans to acquire a 100% stake in Maytas Properties and a 51% share in Maytas Infra. Investors took offense to the deal, sending the stock down 55%. The first major problem was that the target companies are connected to the Chairman, the second major issue was Satyam is an IT business process outsourcing company while the target companies are India-infrastructure plays.
After seeing the reaction from investors, late yesterday Satyam announced that they are not going ahead with its proposed Maytas acquisitions.
Monday's (12/15) closing price for Satyam was $12.55. Yesterday, after the merger news, the priced had plummeted to $5.70. Today, after the merger was terminated, the stock is up 49% but is only at $8.50 per share. Even though Saytam is the same company today as it was Monday, with no merger, investors have shaved over $4 off the stock price.
Investors are sending the message to Raju that they simply cannot trust him after a move like this. It will take some time to restore the trust.
If you've ever seen the movie Groundhog Day with Bill Murray you will remember that he had to keep repeating a day he hated (Groundhog Day) over and over again. This is likely the same thing Satyam's Raju is seeing, as he will have to live with this bad day over and over again.
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