Short seller Carson Block of Muddy Waters Research just released a new short idea — Ströer, a German media company.
The stock fell over 26% on Thursday’s trading day on the news.
Ströer went public as a billboard company back in 2010. Then in 2013 it moved into digital, picking up online media assets right and left.
Ströer has since acquired content companies, Deutsche Telekom’s online portal, an education software company, mobile advertising companies, a statistical analysis company, gaming companies, a company aiming to make the yellow pages obsolete, and a location-based advertising firm. Since 2012, Ströer has bought stakes in at least 29 companies, spending what we calculate is €142 million in cash, and increasing the share count by 32%. Ströer says its digital businesses grew organically by 34.3% in 2014, and 23.5% in 2015. Why should anybody be sceptical?
That’s right ladies and gentlemen. Block thinks this is a good old fashioned rollup. That’s a company that needs to use acquisitions to show that it’s growing, otherwise it wouldn’t be profitable. Historic examples of failed rollups include Enron, Tyco, and WorldCom.
Here’s Muddy Waters’ full report, and here’s your chart: