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BCA marketplace – Utterly bizarre bid or non bid from Apax

By Tom Winnifrith | Monday 11 June 2018

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

We know that BCA Marketplace (BCA) is highly operationally and financially geared. It has too much debt. Its chairman dumped over a million quid's worth of shares at 188p – and Avril is no fool. The car market is struggling so there must be questions over earnings visibility . and yet from left field there may be a bid. Bizarre.

Avril knows what the business is worth and was a seller at 188p. Yet this morning we discover from BCA that venture capitalists Apax pitched a bid early last month at 200p a share. BCA rejected that. Apax itself says it is at the early stages of considering an offer.

The shares are now 231.5p-232p valuing this business at £1.865 billion. I stand by my analysis of The Big Short (written at 221p in the autumn) and argue that the stock is hugely overvalued as Apax may well discover to its cost if it goes ahead with a formal offer.

But we are in the late, frothy, stages of a bull market and at that point with money still cheap anything can happen and thus I would not be short here in case Apax is rash enough to actually launch a bid.  It is one of the features of a late bull market that daft multi-billion pound takeovers proliferate. We have not seen that many yet but maybe Apax wants to get the ball rolling.

I stand by my analysis but we live in crazy times.

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