Sify Technologies - Rights Offering Provides Opportunity

(11min)

Summary

  • In recent weeks, American Depository Shares ("ADS") of Sify Technologies have sold off by more than 70% as a result of a highly-dilutive and somewhat confusing rights offering.
  • The company is looking to raise gross proceeds of $30 million from existing shareholders in a heavily discounted offering that will increase the number of outstanding shares by 135%.
  • Investors with the ability to locate ADS for borrowing could hedge massive gains in a pair trade.
  • Moreover, with the offering providing an opportunity to grab new ADS at a large discount to prevailing trading prices, speculative investors should consider buying rights in the open market.
  • For my part, I would expect the ADS to return to a higher trading range more reflective of the company's assigned valuation before the rights offering once the selling pressure starts to abate.
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Erik Isakson

In recent weeks, American Depository Shares ("ADS") of Indian ICT solutions provider Sify Technologies Limited or "Sify" (NASDAQ:SIFY), have sold off by more than 70% as a result of a highly-dilutive and confusing rights offering.

While Sify announced its intent

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This article was written by

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I am mostly a trader engaging in both long and short bets intraday and occasionally over the short- to medium term. My historical focus has been mostly on tech stocks but over the past couple of years I have also started broad coverage of the offshore drilling and supply industry as well as the shipping industry in general (tankers, containers, drybulk). In addition, I am having a close eye on the still nascent fuel cell industry.

I am located in Germany and have worked quite some time as an auditor for PricewaterhouseCoopers before becoming a daytrader almost 20 years ago. During this time, I managed to successfully maneuver the burst of the dotcom bubble and the aftermath of the world trade center attacks as well as the subprime crisis.

Despite not being a native speaker, I always try to deliver high quality research to followers and the entire Seeking Alpha community.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of SIFYR either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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