My main research area is IPO.
I love doing IPO research and I like to read prospectus. Yes, it is still complicated and gives me headaches but after reading few hundred+ You get used to it 😀
So today, ETrade recommended me to see Mauser NV. So I went to SEC EDGAR to see the prospectuses.
Before I go further, let me warn you that I did not do full due diligence given my time constraints and that I usually engage in more extensive diligence when I find a potential opportunity.
So let’s jump in.
First, I found that there are many amendments! 13 Amendments, the firm filed its first prospectus in 2015! Yeah, this is probably not good!
Then I opened up the latest prospectus amendment. Here are some problems that I noticed
- Overly complicated structure. There is a structure chart and it looked complicated. When ownership is complicated beware. It can be tax efficiency but when you can’t see who owns what then be wary.
- Not so clear financial tables. The financial tables of this company is unusual. There is predecessor, successor, the fiscal periods vary and even the items are not clear. If you can’t understand financial tables then this is not good. I would probably stopped here but I went on to see what else I can find.
- Adjusted EBITDA. The firm is in packaging (manufacturing) and excludes depreciation! Machines depreciate! Excluding depreciation is really fishy!
- Use of proceeds used to pay down debt and previous owners. Don’t expect much growth. All the proceeds are used to pay down people before you.
- Material weakness. Basically, don’t have too much confidence on the accounting numbers.
- Lots of acquisitions. Just remember that acquisitions provide lot of ground for funny accounting –
- Lot of leverage. One thing that can easily wipe out companies is overleverage. This firm will be still quite levered after the IPO.
In conclusion, I would pass this IPO.
I will closely follow how things go. I will see what the SEC comment letters say 😀
Time taken to go through the prospectus < 30 min