Subject: Re: The Swatch Group Ltd (UHR.SW)
5 people at the meeting, all insiders. Not exactly the Woodstock of Capitalism!!
I asked why on earth they don't take the company private? Why not a special dividend? Any plans for acquisitions?

When looking at family firms like Gévelot - this one around 130m euro in market cap - the very first thing I go to is the history of shares outstanding, and who the main shareholders are. I couldn't readily find their history of shares outstanding but it looks like it has been stable for the last few years.

They might have had a history of doing public share issuances to raise cash when they had legitimate plans for expansion. This is usually paired with a marketing strategy to raise public confidence temporarily whilst the shares are being issued. Sometimes these marketing strategies are also done when insiders want to reduce their equity to diversify their wealth outside of the company.

In essence the family may view the company as "private in effect" and then take advantage of the publicly traded facility if/when it suits.

Of course, the flip side is that it is reasonably costly to stay public for such a small size, with the auditing and financial reporting effort saved by simply changing to being private.

The decision to stay public can be driven by the prestige from the visibility of the public listing (which in some cases could slightly enhance credibility with customers, suppliers, and partners). More likely the public status offers liquidity for family members or insiders to sell shares gradually, aiding in personal wealth diversification or estate planning, even whilst the trades are a fair bit below intrinsic value.

Trading below intrinsic value (IV) is one thing, but at least they can trade at all, as when buying shares from an individual director in a private firm, there can be a feeling of uncertainty on the correct value of the trade when it isn't on the open market - the open market can have nothing to do with the fair value at all, but it still has an excitement for people that gives at least gives some spectacle, even if an illusion, of fair price.

The option to raise capital in the future, if there is temporary euphoria once every decade or two, also might be kind of seduction, even if delusional, to remain public also.

They can also use stock for acquisitions (again, foolish at low prices, but as we know capital allocation is usually trumped by short-term or spur-of-the-moment ambition).

The public structure can also facilitate wealth transfer across generations through gifting undervalued shares, reducing estate taxes whilst preserving family dominance.

- Manlobbi