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BCA Marketplace - Apax walks, Avril talks horse

By Tom Winnifrith | Friday 6 July 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.

It seems that some venture capitalists, specifically Apax partners, do have more sense than money after all for this morning Apax has walked away from a bid from hugely overvalued second hand car dealer BCA Marketplace (BCA). BCA chairperson Avril Palmer-Baunack has responded with A grade horse…

Apax says it is not making an offer. Full stop. BCA spins it rather differently. It says that two preliminary approaches were received and rejected and that therefore it is delighted to go on.

But those approaches were at c200p. So are we saying that Apax baulked because

a) BCA was holding out for a much higher price which it deemed excessive
b) because it kicked the tyres for due diligence and did not like what it found when it checked under the bonnet?

You may note that before rejecting a bid at c200p for all shareholders, Avril herself, a bird drowning in cash, had trousered $1.129 million dumping shares at 188p. Why did she sell if she thought 200p was a giveaway?

Going forward we are told by Avril et al:

The new financial year has started well, with performance since the year end in line with our expectations. Across all of our markets there remains significant addressable volume to capture, where our business and consumer solutions can bring efficiency and value to new customers during the time a vehicle changes ownership. We are excited by and committed to the opportunities ahead for BCA."

Right. So excited that you dumped a stack of shares at just 188p?

If I was running BCA Id be terrified given its high operational and financial gearing of the very evident slowdown in consumer spending. And I suspect Apax shares those fears which is why it walked.

The shares are now 229p, marginally above the level at which I penned The Big Short last Autumn. Read it again,. The underlying thesis is unchanged. Follow the smart money and do what Avril does not what she says and sell.

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