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Re: Mr. Fister post# 157022

Tuesday, 08/13/2019 9:52:38 AM

Tuesday, August 13, 2019 9:52:38 AM

Post# of 163718

But in SIAF's case, how do you achieve relevant information in order to judge the mispricing and probability for occurring?



One is fairly obvious if you did your due diligence. In SIAF’s case, the opportunity falls under partial spinoffs category.

The first step is to focus on what is knowable to reduce uncertainties, and pay less attention on other possibilities that are unlikely to occur or things that are unknowable.

One example that we know already is that Tri-Way has an enterprise value of $340M, and 18.3% of that will be distributed to SIAF shareholders. We also know that for every 100 SIAF you own, you would be eligible to receive 39 shares of TRW. This also translates to for every 1 SIAF share you own, you would be getting $0.39 TRW in value.

Currently, the stock is trading at $0.15. This means that you can purchase the entire parent company for free AND TRW shares on 60% discount. Therefore it matter not so much for now if you are receiving $13 book value or $1 book value on the parent company. All you need to know is it Is for free.

The current value of TRW is up for discussions, but it is highly unlikely for it to decrease or increase by a huge margin before the distribution. Therefore even if our calculation is far off by 90% or the worst case scenario occurred, it is highly unlikely we are paying too much for both ownership of SIAF and TRW. But on the other hand, if things turn on our favor, the possible return is substantial.

how do you achieve relevant information in order to judge the mispricing and probability for occurring? One example happened just a week ago, shareholders are forced to sell their shares for technical reasons. It is not fundamental reason but rather technical.

It is not that complicated is it? All you need is a little bit of common sense and a math skill of a 5th grader. But people have a tendency to make things complicated.

Good question!

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