Whoever thought Spark would be interesting?

1 October 2024

NZ

Hearing rumbles from multiple places regarding Spark, the once-boring telco that has fallen at least 30% this year. There are a few assertions and murmurs that there is selling on the short side as Infratil replaces Spark on the MSCI rebalance. Of course Spark can’t maintain its dividend, but if you value it at the multiples paid for Vodaphone (now One) — 7.3x EBITDA — then you end up with value of +$12bn. Spark is currently valued just below $6bn. Even if you use the most crude back of the envelope math (I’d rather be vaguely right than precisely wrong…) there’s a lot of rope to be wrong with there. Even if you adjust Spark’s EBITDA down some (and on the back of poor earnings, why not?) and you reduce the multiple Infratil was willing to pay, you end up with a good price for a company that still makes plenty of money.

I don’t have any special knowledge about Spark. I never thought I would be particularly interested in Spark. But here we are. Either Infratil overpaid for a similar business or there is some value in Spark.

I think, basically, Spark made a mistake selling its tower business — perhaps it looked like a smart move short-term but as Kanye once said “what’s a king to a god?” — the question I ask is, “what as telco without a tower business?” (And the answer is, well, just a telco).

NBR has the new SmartShares CEO saying “The Wise invest Smart”, defending SmartShares rebrand to just “Smart”. I think the bigger issue is competitors, who have cheaper fees for the same product. At the end of the day, if you are offering a product which is exactly the same as Vanguard’s, or Kernel’s, or whoever else, then the issue is fees, not branding. I often wonder why the NZX seems so pleased with themselves when the actual exchange is forever shrinking — without the funds management biz the company would be a shrinking violet.

I’d like to see a more vigorous capital market. But, you know, this ain’t it, cap’n.


Aus

‘Zempy effect — ResMed, which has previously done very well (if you look at the chart, it’s like a rocket going off), is projecting high single digits growth for the next 5 years. This is mostly due to Ozempic. I think there is obvious read-through to our own Fisher & Paykel Healthcare… the ‘Zempy is all-powerful, all hail the ‘Zempy…


Pretend to be a gambling addict if you are a professional gambler

Per Bloomberg

Pro bettors have recently added a wrinkle to their priming routines: They’re acting like gambling addicts. Isaac Rose-Berman recently described the practice in his How Gambling Works newsletter:

“One pro bettor I know set up a bot which logs in to his accounts every day between 2 and 4 a.m., to make it seem like he can’t get through the night without checking his bets. Another withdraws money and then reverses those withdrawals so it looks like he can’t resist gambling.”

Simulating addictive behavior, says [professional bettor Rufus] Peabody, is an effective way to get online sportsbooks to send you bonus money and keep your accounts open. This isn’t necessarily because operators are targeting problem bettors, he says; they’re simply looking to identify and encourage customers who are likely to spend—and lose—the most. This just happens to be a good way to find and enable addicts, too. 

I just think — this is sort of hilarious? I mean, if you are a professional gambler and you log in at 2am being like “I need to check my bets!” Then you are probably tricking the algorithm that tries to identify professional gamblers. I mean, it’s funny. What professional gambler checks their account at 2am! I guess a lot are.


A story about Whisky

I was reading about the sale of Famous Grouse, which was owned by Edrington and sold to William Grant and Sons (imagine my dismay that I can’t own either, as they’re both privately owned).

During my investigation, I read about “Babs” Robertson, one of the driving forces behind Edrington (one of three sisters — they also put all shares into charitable trust, where they remain today). I particularly enjoyed this story:

Then, in 1947, Miss Babs received a visit from ‘an American gentleman’.

When they were privately installed in the Board Room at 106 West Nile Street, Glasgow, the visitor came directly to the point. ‘Miss Robertson,’ he said. ‘I should like to buy your holding in Robertson & Baxter. In short, I want to buy the company.’

‘The shares and the company are not for sale,’ was the reply.

‘You have not asked me how much I would be prepared to pay,’ came the rejoinder.

‘The shares are not for sale at any price.’ 

The American gentleman was Samuel Bronfman (you’ll recall that his grandson, Edgar Jr, is perhaps the worst heir in history — he managed to collapse the Bronfam empire and sell Warner Music at far too low a price. What a Midas touch). Bronfam was intent on acquiring the company, and eventually the sisters put the company into trust — Bronfman died in 1971.

Rolex has a similar structure which protects the company — it is owned by the Hans Wilsdorf Foundation. Hermes, too owns it shares via a holding company, H51 (albeit not a charitable trust). The Hermes structure means that no member of that holding company can sell there shares for at least 20 years. It’s useful to think about these structures — especially if you are a family business — while Bronfman’s company, Seagrams, eventually ended up in Pernod and Diageo, Edrington carries on as one of the largest employers in Scotland. Sláinte!

Source post: Blackbull Research - Substack

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