A couple of weeks ago we saw a company that was trading at a deep discount to its net current assets lever up to buy a company for more than the acquirer’s own market cap! A reader alerted me to another net-net that just did the same thing!
SigmaTron (SGMA) had net current assets of $25 million, and trades for around $15 million. But it recently purchased one of its customers for $16 million (plus some pay-out provisions based on profitability).
Just like Blonder-Tongue, SigmaTron has not released the financials of the target. So, shareholders know they have just spent the equivalent of the company’s entire market cap…they just don’t know what they got in return! I asked SigmaTron if they would be willing to disclose this info, but haven’t heard from them in a week now.
A worrying trend!
Disclosure: No position
