Good morning!
FDM Group (Holdings)
This morning sees the return of this Brighton-based IT company, which trains and hires out IT consultants. It's a fantastic business in my opinion, and one that I am familiar with because it has previously been stock market listed in the UK. The IPO has been priced at 287p per share, and the proceeds are being used to cash out for the Private Equity backer of the MBO a few years ago.
When the seller is PE, you can be virtually certain (in my opinion) that the offering will be significantly over-priced, and that you'll probably end up regretting having funded their profitable exit. After all, if it was great value, they wouldn't be selling!
Things are further complicated in this case, in that the founder/CEO, Rod Flavell, who is still in situ, conducted what I considered to be an opportunistic and unethical buyout of the company in 2010 for just £28m. We woz robbed at the time - from memory the buyout price was a PER of about 6, which was ludicrously under-priced for a decent growth company. Minority shareholders (a number of large ones I liaised with at the time) were left in no doubt that if they didn't accept the buyout offer, then there would be trouble - management effectively put a gun to shareholders' heads and implied - sell up or else we'll walk.
Here we are just four years later, and they are bringing it back to market at a valuation of more than 10 times the buyout price, confirming what we shareholders knew at the time, that we were having an exciting growth company snatched from our hands at a disgracefully low price, with undue pressure being put on shareholders to sell.
Therefore I consider this company uninvestable, as having been shafted once by this management team, there's no way I'll be letting them do that again. Who's to say they won't do exactly the same thing again (i.e. buy it out at a depressed price) if the share price tanks in the future? So, lovely company, but horrible management, in my personal opinion.
Software Radio Technology (LON:SRT)
Results for the year ended 31 Mar 2014 have come in as expected, with £6.1m turnover and a loss before tax of £1.5m. Although forecasts were guided much lower…
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