# What is a good reason to accumulate a stock that is going to be delisted?

There is a stock in the Philippine market under Resorts World Manila with the stock code RWM and I have been monitoring this stock for about a year now. There is a broker called AURORA that has been accumulating hundreds and hundreds of millions slowly and supporting the price of the stock and slowly rising the prices by a few cents a day.

I've never seen someone accumulate so many shares and despite the constant rise in prices, no one is buying it. Whenever on the rare occasion that the price starts to look great for a day and appears to be a breakout, it will always get slammed down by other sellers. I am really wondering how unusual this stock behaves. The stock is a hotel/resort/casino that mainly caters to gamblers.

Just today, there was an announcement that this stock will delist this october and have a tender offer to be announced soon.

Current according to the article: After the tender offer is completed, non-public shareholders will hold at least 90 percent of the total listed and outstanding common shares

What is the purpose of the accumulation that I have seen the past year? Is that the group buying back the shares? Is it some kind of market manipulation?

News on delisting

Expectation that the price set by the tender offer will be larger than the market price when the accumulation starts, possibly driven by higher likely goodwill in the tender price.

• That means the broker accumulating had inside information then? – Pherdindy Aug 14 '19 at 11:56
• Can't say that a priori: maybe yes, maybe an expectation based on public information – Vitomir Aug 14 '19 at 16:59

This is a type of corporate takeover strategy--a tender offer in this particular instance. Tender offers can fall into the hostile or friendly category depending on the percentage of the shareholders that they favor. There is more than one potential reason for the share accumulation:

1--Aurora may have been accumulating shares on behalf of the acquirer so that the acquirer has the ability to sue the target company if the takeover is unsuccessful. This is could be a reason if the acquirer doesn't control the board of the target already. This seems unlikely in this case.

2--Aurora may have been accumulating shares on behalf of the acquirer so that the acquirer has a good chance of winning a proxy fight in the case they don't control the board. This seems unlikely in this case.

3--Aurora may have been accumulating shares on behalf of a third party who has the intention of holding out for a better price or refusing to tender unless they are negotiated with directly. This could happen if information had leaked about the tender. Tenders are generally priced higher than the market price. The language used in the press release from your OP makes this seem unlikely in this case.

4--Aurora may have been accumulating shares on behalf of the acquirer because the acquirer knows that the price on the open market is less than the price that they will be offering through the tender offer. They are just saving themselves some cash by doing this. This is a definite possibility in this case.

5--Aurora may have been accumulating shares on behalf of the target to trigger a poison pill. This would force the acquirer to negotiate directly with the board of the target and negate the effectiveness of the tender offer. This seems unlikely in this case.

This above list is by no means comprehensive. Just a few reasons for share accumulations like this to occur. Learning more about corporate governance would help you understand this topic a bit more.