A bit of simple arithmetic tells you that if the stock market values the new little acquisition vehicle at £40m and all it contains is £24m in cash, then £16m must be the value of the four people who run it. And they haven’t even done anything yet.
The first shares were offered at 60p and there was an intention to sell enough to raise between £5m and £15m. When the bidding outweighed availability, the team pressed on and raised £25m.
The shares are now 87p – making a tidy 45% gain for those who did nothing other than buy at the beginning and sell at the top.
If there has not been an acquisition announced by the end of the first quarter, investors might get just a little restless.
All the senior people needed new jobs after the Pendragon acquisition of Reg Vardy plc. Now they are the hunted turned hunters with a mission to accelerate consolidation in the UK motor retail sector.
Brokers reckon that the share price has probably gone far enough for the time being. But then if the first acquisition is deemed to be a good one, the shortage of stock could send the price flying again.
Small company shares are not for the faint-hearted, but there are two more in the automotive sector worth consideration.
Nationwide Accident Repair Services is an £85m company that only listed in October. Since then the shares have run up 30p to 187p – provoked mostly by another small acquisition.
For the cars that the insurers don’t want to mend there is Universal Salvage, which auctions, dismantles and scraps stolen or broken vehicles. Six years ago, Universal fleetingly justified a share price of £5 but through bad luck and wrong thinking that was converted to 60p within two years. Under new management – notably that of chief executive Avril Palmer-Baunack – it has crept back up to 187p. Some interesting institutional buying of the £52m company has made the shares worth watching.