Small Cap Value Report (2 Feb 2016) - INTQ

Good evening from Vienna.

Unfortunately I seem to have had a dodgy schnitzel or bratwurst yesterday, so spent this morning in bed, hence no report by the usual 1pm email deadline - profuse apologies. To prevent any gaps in the sequence, I'll have a quick catchup now.

Here's me taking a selfie outside the Rathaus in Vienna today:

InternetQ (LON:INTQ)

Share price: 143p (up 75% today)
No. shares: 40.1m
Market cap: £57.3m

Statement re possible offer - in previous articles here, I've highlighted the fact that Tosca (a major shareholder) seemed to have confidence in this Greek software company, injecting funds directly for one of its products, and for that reason I declined to open a short position in the company. It's way too risky to short small caps in my view, because the unexpected can - and today has - happened.

Tosca and InternetQ's management have jointly stuffed the shorters by putting out an announcement today saying that they are considering making a bid for the whole company. That's enough to trigger a short squeeze, which is clearly what's happened today, with the shares up 75%, and short sellers will have been scrambling to buy the shares at any price, to square their short positions. Tough luck! Shorting is a dangerous business, and people who do so know what they're getting into, and will sometimes get badly burned. So no sympathy from me.

Whether a bid happens or not, who knows? Certainly it seems a good exit point for anyone daft enough to be long of this Greek AIM company with no real profits - the accounts look dreadful, with all the profit coming from capitalising costs into intangible assets.

Anyway, Tosca has deep pockets, so can stick 2 fingers up at the shorters, and force them to buy back. Glad I steered clear of this one. There's no reason to take silly risks. Personally I rarely short anything with a market cap of under £200m - it's too dangerous - the borrow can be recalled at any time, and the price can be manipulated by anyone who can corner the stock - one of AIM's biggest (of many) failings is that there is no minimum free float - so it's very easy for stock prices to be manipulated by the unscrupulous.

There's no point in InternetQ remaining a listed company - its accounts look too similar to Globo's, so nobody (apart from Tosca) is going to take it seriously.

I've had a quick look at accounts published today from Low & Bonar (LON:LWB) , Alumasc (LON:ALU) , and NWF (LON:NWF), but none of them look very interesting.

Bit of a half-hearted report today, sorry about that. I'll be back with a vengeance in the morning! Flying back to the UK tomorrow (Weds).

Regards, Paul.