I believe they want indeed to increase the public float, as the CEO sold recently part of his shares to get the public float over 20% (lower minimum share lot requirement and easier to buy by institutions). I think shareholder and management interests are well aligned as management compensation is not relevant in relation to their stake (CEO compensation around 200K vs 30M stake). Also, other shareholders (founding family) have around 36% of stake, so no risk of company being used as cash cow by CEO.
Risk of expropriation is not zero, I would keep an eye on the company holding big amounts of cash, as this would mean:
1 - No M&A opportunities for the services line (recurrent, possible multiple expansion).
2 - Easier to use cash to acquire company if shares are undervalued.
What do you think is the end game for the owners here? Will they exit by increasing the public float? How are they incentivized at the moment? What are their compensation arrangements? Do you think there is risk here for minority shareholder expropriation?
Hi! Thanks for your comment.
I believe they want indeed to increase the public float, as the CEO sold recently part of his shares to get the public float over 20% (lower minimum share lot requirement and easier to buy by institutions). I think shareholder and management interests are well aligned as management compensation is not relevant in relation to their stake (CEO compensation around 200K vs 30M stake). Also, other shareholders (founding family) have around 36% of stake, so no risk of company being used as cash cow by CEO.
Risk of expropriation is not zero, I would keep an eye on the company holding big amounts of cash, as this would mean:
1 - No M&A opportunities for the services line (recurrent, possible multiple expansion).
2 - Easier to use cash to acquire company if shares are undervalued.
Kind regards,
Dani
Hello Dani,
Thanks for the great write up!
What do you think is the end game for the owners here? Will they exit by increasing the public float? How are they incentivized at the moment? What are their compensation arrangements? Do you think there is risk here for minority shareholder expropriation?
Thanks again, keep up the good work.