Mr Deep-Value

I used to acquire SME businesses in the real world. Negotiations, due diligence, managing people. It didn’t scale. Now I buy businesses with a click. I focus on deep value and special situations full time, compounding my own capital. UK nano caps, off-market deals, controlling stakes where possible. I’m looking to connect with investors doing the same. There’s a lot of neglected opportunity in the small end of the market.

The UK nano-cap market is one of the few remaining places where you can still make money primarily from reading documents nobody else reads. Some of the best opportunities are sitting inside Aquis filings uploaded at 7:02am by companies with £12m market caps and websites that look like they were built by a regional carpet warehouse in 2009. Public markets become wildly inefficient once social prestige disappears from the process.

@StoicInvestor42 I didn't know that. Thank you

@mr_deepvalue Fun fact: That’s because EBITDA is a made-up metric created by John Malone in the 70s to convince investors to buy stock in a loss-making cable company.

My younger brother left school at 16 and has spent the last decade running small businesses. The other day I mentioned a conversation I’d had with a private equity guy. At one point I had to stop and explain EBITDA. He stared at me for a second. Then burst out laughing. “So… earnings before the actual business expenses?” He genuinely thought I was joking. The funny thing is that people who have actually operated businesses tend to instinctively understand which numbers matter and which ones mainly exist to help investment bankers remain employed.

@logiclinvestor That's another good model. I'm not aware they ever sold or share any valuation framework for selling. My gut feeling is that they wouldn't sell tho (I wouldn't if it was my business)

@mr_deepvalue Or alternatively, if someone else (like Berkshire) offer to buy all of Constellation at current price, would they accept?

One of the more interesting ways to value Constellation Software $CSU is simply asking: “Would Constellation itself buy Constellation at today’s valuation?” Given their acquisition discipline over the years, that feels like a more useful framework than most sell-side models. I did a very rough pass and my impression was: Probably not. At least not anywhere near the current market cap. Something materially lower, perhaps closer to $30 b, started feeling more like the sort of valuation range they themselves historically look for when allocating capital. Could easily be missing nuances here as I didn’t spend long on it, but I’d be curious whether anyone has done a deeper version of this exercise. It feels logically consistent to value a serial acquirer using the hurdle rates it applies to every other business it buys.

@ohcapideas Fair enough. I just really like a good deal 😂

@mr_deepvalue But I don’t need the same returns they underwrite at - the stock is probably priced for 12% or so forward returns despite them still underwriting at closer to 20%. And that’s ok because my opportunity cost is not their direct deal flow.

@ohcapideas You can literally buy into their deal flow via the stock...

@mr_deepvalue If that was my opportunity cost, sure. But I don’t have access to their deal flow so it’s not my opportunity cost.

@leevalueroach This is an invasion of my privacy. I did not consent to you using my photo here.

Live shot of the original deep value net net investor who bought Emerson Radio in 1912 and is still waiting for it to re-rate.

One of the strongest deep-value signals in Japan is when the investor relations website looks like it was last updated during the George W. Bush administration. Nobody can buy the stock because nobody can physically navigate the website. This is what a real moat looks like.

There’s a software business trading like its largest contract is about to disappear and the entire company is heading for terminal decline. 25M enterprise value. 8M owner-FCF. That’s just 3.1x EV/FCF for a business with 99% recurring revenue, 96% retention rates and contracts embedded directly into public healthcare systems. NCAV 2.2. TBV 2.2. Meanwhile cash alone equals 46% of the entire market cap and there’s zero debt. The market sees customer concentration risk and slowing growth. The reports show a sticky, mission-critical platform compounding ARR, generating 80% look-through ROE and saving customers up to $12 for every $1 spent. You’re basically buying the cash pile and getting a highly scalable software platform for free.

@mr_deepvalue It has the look decent bet. Very a Pabrai "heads I win, tails I don't lose much" one

I’ll be in London (the City and Mayfair) on 27th-28th May. My primary interest is in deep-value and special-situation opportunities involving: Controlling blocks in listed nano caps Distressed or dormant listed vehicles Restructurings and recapitalisations Situations where a listed vehicle can become a strategic asset Partnerships with private capital looking for deal flow I approach public markets from the perspective of acquiring and improving businesses rather than trading securities. If that overlaps with your area of interest, feel free to contact me. info@mrdeepvalue.com

@capitaloptimism Yeah. It's the activist presence that makes it juicy imo

@capitaloptimism Correct. Capricorn confirmed that.

@mr_deepvalue I'm assuming that the PUSU being pushed out twice means that they are actually in the data room

Doesn't mean it can't be found. Might just mean they haven't decided on the exact structure. That might be because they need to figure out the exact price first. My guess is that this is why they have extended all the deadlines to the max. Seems unlikely that Capricorn would let them in for DD unless they believed the cash was there somewhere.

@mr_deepvalue Stand you a pint if you can explain why the funding for the Capricorn deal can't seem to be found

@valuedontlie Run, as fast as you can, up really steep hills, regularly.

Working on some fitness goals for first time in a while Anyone have training suggestions specifically for VO2 max?

@safe_our_souls Bowim flying too

🇵🇱 SPYROSOFT SPR.WA Insder is buying.

Same

Found a 100-year old UK business a couple of years ago trading below net-cash. 30m revenue 2m average FCF 12m net-cash Sentiment soured and the stock price fell to just 3m. The largest shareholder had previously loaned the business 5m, and now offered to buy the whole thing for 6m (double the stock price). His total risk was 11m but he got 12m in net-cash immediately and a 30m business for free, even after offering a 100% premium on top of the prevailing market rate. He can now enjoy the 2m per year for the next decade or two as a free bonus. Deals like this are happening all the time in quiet little corners of the stock market. It’s why I stopped chasing SME deals in the real-world to focus exclusively on listed businesses.

@Martyn_Lockhart Thanks, will take a look.

@mr_deepvalue Bond yields but their do t affect the company.

@Martyn_Lockhart Very cool. Why is sentiment so negative?

@mr_deepvalue UKs biggest landlord. NAV 290p vs a current share price of 152p.