SIFY - Sify Technologies - Rights Offering Provides Opportunity

2024-06-12 16:23:44 ET

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.
• However, with the rights 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.

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

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