What's the most important thing for a listed company to focus on when considering an acquisition? The following quotes from four different ASX listings in the past month indicates that there is almost a consensus that deals must be structured to increase Earnings Per Share (EPS):"The acquisition is expected to... Show More
If you are going to venture into micro cap stocks, you need to be wide awake to the fact that there are two alternate universes for the one market segment. There is the conventional world where investors buy and sell interests in businesses that are striving to create value for their... Show More
"If a strategic investor buys new shares in a microcap at a premium and no one cares, does the deal impact on value?" That's the variation on the old "If a tree falls in a forest..." thought experiment that came to mind following a couple of recent deals. Show More
If you're like me, you may not have the stomach for holding too many stocks trading on prices equal to more than 60 times analysts' consensus forecast earnings per share for the 2020 financial year. Show More
IT consulting group Empired (EPD) and brand design, distribution and retail player PAS Group (PGR) were two small companies that appeared not to receive the acclaim they deserved for their earnings results and guidance last month. Show More
Profit reporting season looked great from a distance but down in the trenches investors may not have felt that was quite the case. The data shows, on a stock-by-stock or even-weighted basis, that there has been a tempering of expectations across most sectors. Show More
Software group Reckon (RKN) demonstrated with the recent $180 million agreement to sell its Accounting Practice Management (APM) business how managers and directors who own significant equity are more likely to relentlessly pursue shareholder value. RKN is a stock the Equitable Investors Dragonfly Fund continues to own as we don't... Show More
"When your competitors go one way, do you follow them, or do you go the other way?" That question was asked of a room of close to 100 financial advisers by keynote speaker Geoff Ramm at Centrepoint Alliance's annual conference last week. The focus at the time was effective marketing... Show More
Markets are supposed to price in new information efficiently. But for the investor who has done their homework in advance, time is on their side. Stock prices can react gradually rather than instantly to new information. Information can sit in the public domain but not be widely known and understood. Show More
In some cases that would definitely be correct - the issue of discounted stock to fund an M&A deal may immediately result in a weaker market price. But if the deal is perceived to be value creating, the discount should be small and the stock should be in demand when trading recommences. What the stats presented don't show is what happens to value creation over the longer term. I'm biased to what consultants AT Kearney wrote on the EPS accretion approach: "In the same way a Ponzi scheme must eventually fail due to the lack of underlying value creation, the P/E multiple of the acquiring company must fall as it becomes increasingly evident to the market that no value is created."
I must say, I don't think either the Small Ordinaries or the Emerging Companies indices from S&P are great benchmarks for microcaps. Components of the Small Ords have an average market cap of $1.1 billion, with the largest up above $5 billion - and the weighting favouring the high end. The Emerging Companies index has an average market cap of $245m but a 25% weighting to resources means it is not aligned with many of the industrial-oriented funds and its trailing PE multiple is, according to S&P, -43 (yes minus 43), a figure that suggests to me a different stock composition from what you'd expect the type of funds listed above to be running with.
Hi Mark, Managerial Ownership, Board of Directors, Equity-based Compensation and Firm Performance: A Comparative Study Between France and the United States, by Bouras & Gallali