Good article, this is a businesses I have been researching over the last few weeks. One thing I can't work out is why are they listed in the UK rather than the USA where they are based and have most of their business at present. Even if they moved now they are large enough for a proper listing and would likely have a much higher valuation?
In 2006, prior to IPO, Somero was owned by a private equity company called The Gores Group, out of California in the US. They had brought other companies public on the AIM (Alternative Investment Market) market in London, and they thought that that would be the best fit for Somero, given the size of the company at that time. So that is how they listed on AIM and they see no reason to change. Listing in the US is far more onerous in terms of overhead. For a smallish company, having to devote precious resource to reporting every quarter carries an opportunity cost. In the UK, especially on the AIM there is a light touch regime in place.
So that answers your "why" question. As to whether they would achieve a better valuation if they moved their listing to the US, I am not sure that they would. I covered the divergence in valuations between the US and UK with reference to ARM Holdings last week. In my opinion, while the average valuation in the US is higher than the UK, that is more a product of the industry mixes and corporate cultures. On an individual basis I believe that a single company will be valued at the same level regardless of where it lists. Have a read and see what you think: https://rockandturner.substack.com/p/why-is-uks-arm-holdings-listing-in
Given the age of the founders and the low valuation for in reality a US business seems likely that this gets sold to PE or a strategic before they step down as the way to crystalize their investments at attractive valuations
Hi James, This is a business I like. On the international expansion, I wouldn't get overly excited about India and China. They've been at it for ~10 years in China and it's just never taken off for them, especially when you compare it to what they've done in Aus in relatively short order.
Might just be a language thing but I'd also speculate that as only relatively high spec jobs would require machines like Somero's, demand in China, India etc. is weaker as construction standards on car parks, warehouses etc. are likely materially less exacting than in the US or UK, for example.
Good article, this is a businesses I have been researching over the last few weeks. One thing I can't work out is why are they listed in the UK rather than the USA where they are based and have most of their business at present. Even if they moved now they are large enough for a proper listing and would likely have a much higher valuation?
In 2006, prior to IPO, Somero was owned by a private equity company called The Gores Group, out of California in the US. They had brought other companies public on the AIM (Alternative Investment Market) market in London, and they thought that that would be the best fit for Somero, given the size of the company at that time. So that is how they listed on AIM and they see no reason to change. Listing in the US is far more onerous in terms of overhead. For a smallish company, having to devote precious resource to reporting every quarter carries an opportunity cost. In the UK, especially on the AIM there is a light touch regime in place.
So that answers your "why" question. As to whether they would achieve a better valuation if they moved their listing to the US, I am not sure that they would. I covered the divergence in valuations between the US and UK with reference to ARM Holdings last week. In my opinion, while the average valuation in the US is higher than the UK, that is more a product of the industry mixes and corporate cultures. On an individual basis I believe that a single company will be valued at the same level regardless of where it lists. Have a read and see what you think: https://rockandturner.substack.com/p/why-is-uks-arm-holdings-listing-in
Thanks great reply.
Wednesday, 6 September 2023, 3:00pm UK Time
An interim results webinar will be given by Chief Executive Officer Jack Cooney, President John Yuncza and Chief Financial Officer Vincenzo LiCausi.
https://www.research-tree.com/events/piworld-co-uk/somero-som-interim-results-webinar-br-/1621
I put a notice at 250gbx per share.
Given the age of the founders and the low valuation for in reality a US business seems likely that this gets sold to PE or a strategic before they step down as the way to crystalize their investments at attractive valuations
It's ripe for acquisition. There's a lot of value locked up here
Hi James, This is a business I like. On the international expansion, I wouldn't get overly excited about India and China. They've been at it for ~10 years in China and it's just never taken off for them, especially when you compare it to what they've done in Aus in relatively short order.
Might just be a language thing but I'd also speculate that as only relatively high spec jobs would require machines like Somero's, demand in China, India etc. is weaker as construction standards on car parks, warehouses etc. are likely materially less exacting than in the US or UK, for example.
Fair point. Thank you for your input, it is greatly appreciated.