Telepizza: A Reason to Be Careful with Spanish Initial Public Offerings

Initial Public Offerings may be a very good opportunity to make profits in the stock market. It is well-known that in the long term the stock market tends to rise; so when a new stock appears, it is logical to believe that it will go up with time.

On the other hand, Initial Public Offerings also have their downsides. As they are just starting to be traded in the markets, there are no charts available, so technical analysis is not possible. This leaves the investor with a lack of information. It is true that we have the data that the company shares with the public, but is this data trustful?

In principle, we should answer yes. The entity that regulates the stock market in each country should guarantee that the information is reliable, but in practice, this is something very difficult to implement.

Investors in Spain have had a good example of it with Telepizza stocks. Telepizza is a company that sells pizzas to customers in their own houses, though they also have restaurants in the main cities.

It was listed in the Spanish stock market in 2016. At that time, the main shareholders were Pedro Ballvé, Permira, and the fund KKR. At the end of 2018, the fund KKR made a takeover bid for 100% of stocks worth 24% less than what they got barely two years ago. During this time, both Ballvé and Permira diminished their participation in the company.

If we stick to the facts, this movement is absolutely normal. The stock market varies the prices, and the chance of a 24% change is perfectly reasonable. Nevertheless, if there is a suspicion that always follows the stock markets, it is manipulation.

Considering that KKR was one of the main shareholders in the company, meaning they have much more information than the average investor, is it reasonable to accept that they can buy assets they valued at 24% more expensive with such a discount in just 2 years? Can a company be worth a quarter less in two years? Doesn’t this mean the valorisation wasn’t real? At least it doesn’t sound good.

With the chance to suffer movements like this, we would stay apart from Initial Public Offerings even when that could mean losing some opportunities. It seems that the lack of information is too important. Considering that if the company is de-listed from the stock market, the chances to convert the stocks in money will lower dramatically.

As these are not US companies the Medallion Signature Stamp will not be required in order to buy or sell this stock.

29th January 2019
//Spanish Probate Matters