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Feb 21 19 tweets 7 min read
Samhällsbyggnadsbolaget – Hard to pronounce, harder to justify value

viceroyresearch.org/2022/02/21/sam…

Viceroy's latest report is now live. We are short $SBB & its debt instruments.

Rampant insider dealing, textbook governance problems & a multitude of financial shenanigans #thread 1/
GOVERNANCE

Background checks on $SBB’s management & BOD reveals several undisclosed relationships between the board members and/or with SBB. It also reveals police raids & arrests, economic crimes investigations & unacceptable conflicts of interest. 2/
$SBB CEO Ilija Batljan was detained and investigated by Sweden’s Economic Crimes agency for insider trading, with focus on transactions between Nyfosa and SBB. 3/
Batljan was previously fired from his position as Deputy CEO of Rikshem for engaging in side-deals for personal gain. KPMG investigators also found that Batljan also used Rikshem’s expense account as his own piggy bank. 4/
$SBB Chairman Lennart Schuss & Audit Committee member Hans Runesten have both engaged in undisclosed related party transactions with SBB. 5/
Most directors appear to deal in property and/or invest heavily in competitors. With over 50% of the company’s voting share, this creates a textbook conflict of interest and precarious position for shareholders. $SBB 6/
$SBB’s head auditor & EY partner, Ingemar Rindstig, appears to have retired following an investigation by the Swedish Audit Inspectorate that found Mr Rindstig negligent in the audit of $SBB competitor, Oscar Properties, with whom SBB also transacted. 7/
Related Party Dealings & Systematic Overvaluation

Viceroy believes $SBB’s aggressive revaluations are unjustified. This is masked by SBB’s fast-paced acquisition roll-up strategy. 8/
Undisclosed related party transactions:
These transactions often feature extensive buyer support by $SBB. Outside of rampant roll-ups (many of which are also undisclosed related party transactions), SBB’s insider dealing is often a show of posturing. /9
Viceroy collated financial accounts of over 800 of SBB’s current and former subsidiaries. Our findings show stagnant revenues, booming operating costs, and immense fair value adjustments on SBB’s substantially rent-controlled property portfolio. 10/
$SBB appears to engage in round tripping of revenues through issue of SBB-D shares, which have a capped dividend. Owner-operators will offload fixed assets to SBB for consideration including SBB-D sweetners in order to subsidize rent (sometimes by >30%). 11/
Substantially all of $SBB’s properties are rent controlled and financial accounts show limited/no rental growth beyond CPI: Viceroy believe that SBB’s enormous unrealized gains come from acquisitions made in their respective accounting periods. 12/
CASH IS KING

$SBB's cash conversion is an outlier in this industry (in a bad way). Earnings and cash flow analysis support our thesis that SBB's unrealized property gains are unjustified. 13/
$SBB has “hacked” their LTV by issuing hybrid bonds in order to finance repayment of secured debt and bond loans. SBB classifies hybrid bonds as equity, therefore not included in the LTV calculation. Viceroy's adjusted LTV sits at ~70%: above debt covenants. 14/
Cash outflows from $SBB hybrid and D-Class dividends take the appearance of debt and should be reflected onearnings.

We believe this effectively means that SBB's structure is inherently loss making & not salvageable notside of a formal restructure (firesale) 15/
Since 2019, >80% (SEK 18,960m) of $SBB’s Net Profit Before Tax has been attributable to unrealized gains. We reiterate our opinion that these gains are unjustified. 16/
SBB’s capital structure does not support cash-conversion from its earnings. You can put lipstick on debt and call it equity but you still have to pay interest (or whatever else you want to call it). 17/
KEY TAKEAWAYS

Viceroy are of the opinion that $SBB is un-investable. Financial analysis is difficult due to rampant insider dealing and plagues of governance problems, which have resulted in a financial mess in a complex structure. 18/
We do not think it is unreasonable that SBB’s financial statements are retracted to reflect findings in this report, and believe there is significant downside potential to both the stocks and bonds as investors adapt to the inherent risk of $SBB. 19/19 #end

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More from @viceroyresearch

Dec 16, 2021
$SANT-a Flaws - Viceroy is short S&T AG. Our report is now live.

viceroyresearch.org/2021/12/16/san…

S&T’s labor-intensive, faux-tech rollup also operates numerous undisclosed, off-balance sheet entities plagued with fraud. #thread 1/
$SANT is a roll-up of low-quality, labor-intensive “IoT” assets, often acquired under fire-sale circumstances. Individual subsidiary performance shows flatlining & negative growth due to fraud & federal raids, insolvency, security breaches, & technical redundancy. 2/
$SANT appears to hide several subsidiaries in an off-balance sheet structure to conceal corporate fraud. Management have hidden these risks from shareholders and engaged in several undisclosed related-party transactions. 3/
Read 25 tweets
Oct 27, 2021
Viceroy is short PagSeguro $PAGS & StoneCo $STNE. Our brief is now live

viceroyresearch.org/2021/10/27/pag…

A raid by the @FBI in conjunction the @DHSgov on PAX's Florida offices gives serious concern for the operational integrity of both PagSeguro and StoneCo. #thread 1/
Both PagSeguro and StoneCo are dependent on Chinese company PAX Global Technology Limited for their POS terminals. $STNE $PAGS 2/
Yesterday, October 26, 2021, PAX Technology’s Florida locations were raided by the FBI with sources reporting that the machines have been used as malware droppers and command-and-control locations. $PAGS $STNE 3/

wokv.com/news/local/fbi…
Read 7 tweets
Oct 6, 2021
Adler has issued a weak "response" to our report to Bloomberg. Without a scrap of evidence, Adler "strongly rejects" our "evidently false" report. #thread 1/
Adler falls back to CBRE and NAI Apollo for its valuations, despite recognizing on an IR call that the valuers visited exactly none of the properties it was appraising, and ignoring systematic delays and reversals of major sales. $ADJ 2/
By our estimates, Adler has reversed more sales than it has made in the last 12 months. Sales it *has* made in the last 12 months are opaque, most have not been settled, and are likely to related parties. $ADJ 3/
Read 5 tweets
Oct 6, 2021
The Adler Group – Bond Villains.

Viceroy’s report is now live:

viceroyresearch.org/2021/10/06/adl…

Adler Group is a stitched together and overly indebted dumpster fire, operated for the sole benefit of a secretive, kleptocratic cabal. $ADJ $ADL #thread 1/
The Adler Group exists as a conduit for its shadow directors and associates to systematically enrich themselves to the detriment of bondholders, shareholders, and minority holders of various listed investments. $ADJ $ADL 2/
Properly accounted for: Adler has already triggered a default-event. Mismarked assets cannot support its crippling debt. Sales of Adler’s yielding portfolio will have a moot effect on Adler’s LTV - which we calculate to be in-excess of 85%. $ADJ $ADL 3/
Read 49 tweets
Jun 24, 2021
ReconAfrica – No Oil? Pump Stock. Viceroy's latest report is now live

@viceroyresearch is short Reconnaissance Energy, a oil junior specializing in stock promotion & insider enrichment. $RECO is a bad operator, on the ground & in the markets.
viceroyresearch.org/2021/06/24/rec…

#thread 1/
RECO’s mining assets are not highly speculative: they are borderline imaginary. Once it’s promotional veil has been pulled back, we believe $RECO will revert to trading as a speculative, but highly unimpressive, penny-stock. $RECAF $0XD:FRA 2/
$RECO consistently markets its exploration allotment as a potential shale (unconventional) play, highlights the drilling campaign is to confirm “organic rich shales”, showcases a scenario valuation based on shale, and commissions engineering reports on unconventional basis. 3/
Read 39 tweets
Jan 15, 2021
Viceroy’s report on Tyro is now live.

Over the last week, our research suggests $TYR has “bricked” (verb: to turn into a brick) ~50% of its terminals across the country, far more than numbers suggested by the company. $TYR #thread 1/n

viceroyresearch.org/2021/01/14/tyr…
It seems that @Tyro has no idea & no way to know how many of its terminals are functional. Viceroy’s extensive channel checks confirmed many customers had bricked terminals & received no communications from $TYR unless prompted. 2/n
Tyro have announced that the recall will be conducted by Amtek, a company with only 250 employees on the job in only 3 states, collecting (allegedly) 2,000 machines a day. Even if @Tyro’s assumption of only 30% bricked machines, collection alone would take 10 days. $TYR 3/n
Read 12 tweets

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