I really like TIPT, but I would be shocked if this sold for more than 15x EPS. 15x $150m = $2.25bn * 70% fully diluted ownership = $1.575bn to TIPT. This has zero tax basis, so 21% corporate tax burden would yield $1.244bn in cash to TIPT. IMHO, 100% of the value of TIPT is Fortegra. This would have at least a 20% holdco discount = $1bn valuation proforma for a divestiture at 15x EPS after tax after assuming a very modest 20% holdco discount. I've seen 30-40% holdco discount frequently in these types of situations. A 20% holdco discount implies a $27 PT. If Fortegra was sold for 12.5x, that would imply a $22.50 stock.
Thanks for the thoughtful points. I think there's some value outside Fortegra, maybe $4/shr ish. I also think they are going to print pretty great numbers tmr, so the EPS mught be more on like 175m than 150. Hold co discount is a good point, but I would just mention that they released a special divvy recently which I thought interesting. There's a chance they choose to be good stewards of the capital. Also it's not currently a holdco, if it's really just Fortegra, right?
Insurers, rightly or wrongly, trade on trailing earnings. Hard to give credit for 2025 growth with a relatively recent increase in TIPT's willingness to take cat risk + MGA distribution network. Unfortunately for TIPT shareholders, this would still be a holdco for the reason that you point out the BV of the non-Fortegra businesses. I personally would not be willing to give TIPT's management 100 cents on the dollar for its cash after monetizing its crown jewel asset to hold onto super marginal assets. The only way to avoid the holdco discount is to sell the entire company. I've thought this is tough to accomplish because who wants to own a growth insurer + an asset manager + a mortgage originator. I still hope that Fortegra IPOs because thats the best opportunity for TIPT to create outsized valued for TIPT shareholders. Praying for the tiny Fortegra IPO to get out the door and start the process of earning the 15-20x EPS multiples that you cite.
I don't know this situation at all, but I'm immediately skeptical when you say the market has missed news about an $800m company that was published in a major industry publication. I don't think you're giving the market's information efficiency nearly enough credit - and if I were to guess, I'd say the market already knew this before the leak, or knew something like this was almost definitely going on, even if the specific timing was not known.
I get the skepticism. We are all taught the EMH after all.
But this was not on Bloomberg, CapIq, or Reuters feed. There is not a single analyst covering stock. And no questions on past earnings call. Additionally, the stock has immediately responded to press releases—so people do care, but this time there was no PD!
Not me, I study engineering! My skepticism comes instead from a few years of following markets - almost every time I’ve seen people say the market isn’t pricing in this very obvious thing or reacted wrong to earnings, when I check it turns out the person claiming that was the one missing something.
But you’re right - the stock has jumped 10% today. Then again, i can’t seem to find any press releases or news about a sale - am I just missing it?
Wow - how does it feel to have just moved a company’s valuation by $80m? Mad.
But in that case, i don’t think the move provides any evidence that the market was wrong here.
I note that this announcement back on Jan 7 was just of the company being marketed for a sale, rather than an IPO as with the previous two announcements; and that the stock was higher than the other two times pre-announcement.
Also, if I look up “fortegra the insurer”, literally the second result is the article you mentioned. I just find it so hard to believe it hasn’t been priced in in the 6 weeks since.
The fact that the stock moved following this blog post, which was written on the basis of what he argues everybody else missed, makes EXACTLY his point.
No, it doesn’t. All it says is that enough people were excited by the claim that this stock is being mispriced and immediately bought it to push the price up. Whether or not it is being mispriced is not part of the equation.
I understand your thinking - he has revealed something he says people didn’t know, and the price has gone up - hence, people didn’t know it. That would make sense if it was all the people on Wall Street that “decide” the price that were the audience of this post. But that’s not the case. It’s a pretty much entirely new group of people who had mostly never heard of the stock before. It’s completely possible that Wall Street had already priced this in (likely, rather - it HAS been 6 weeks and it WAS published in one of the largest industry trade journals…), and the price could still be pushed up by this group of new people discovering the stock and falsely believing they know something Wall St doesn’t.
You speak as though “Wall Street” is a know it all. It isn’t. They get pricing wrong often. And they ignore good/bad signs all the time…especially if not covered and smallcap. But hey…I get your points too.
We’ll see when they report…or potentially at some later point when/if the company announces a strategic alternative.
In my mind there are 3 types of edge. Informational, analytical, behavioural. Wall St gets the analysis wrong all the time - but the world is a very complex place so it's usually (not always) very hard to get an analytical edge. Small underfollowed companies are much more likely to allow an analytical edge, as you say.
Behavioural only tends to come into it at market extremes, where emotions take over. Groupthink replaces the wisdom of crowds and Wall St becomes very dumb in a very big way. If you have good control of your emotions, this is the easiest way to gain an edge, though doesn't come about all too often.
But information, Wall St prices in VERY quickly, in my experience. Not always to the right extent, not always even in the right direction - but rarely does Wall St simply not know an objective fact that you do know. It can happen, certainly - but more in the kind of stocks DirtCheapStocks writes about - $15m 60 year old family owned businesses where you have to email the chairman's grandson for a copy of the annual report. Not in $800m insurers for stories published in major publications.
There is simply no way the financial world doesn't know about this $800m company searching for a buyout. Most likely everyone knew before the story even dropped. Perhaps that's what the massive volume a few days before was.
I really like TIPT, but I would be shocked if this sold for more than 15x EPS. 15x $150m = $2.25bn * 70% fully diluted ownership = $1.575bn to TIPT. This has zero tax basis, so 21% corporate tax burden would yield $1.244bn in cash to TIPT. IMHO, 100% of the value of TIPT is Fortegra. This would have at least a 20% holdco discount = $1bn valuation proforma for a divestiture at 15x EPS after tax after assuming a very modest 20% holdco discount. I've seen 30-40% holdco discount frequently in these types of situations. A 20% holdco discount implies a $27 PT. If Fortegra was sold for 12.5x, that would imply a $22.50 stock.
Thanks for the thoughtful points. I think there's some value outside Fortegra, maybe $4/shr ish. I also think they are going to print pretty great numbers tmr, so the EPS mught be more on like 175m than 150. Hold co discount is a good point, but I would just mention that they released a special divvy recently which I thought interesting. There's a chance they choose to be good stewards of the capital. Also it's not currently a holdco, if it's really just Fortegra, right?
Insurers, rightly or wrongly, trade on trailing earnings. Hard to give credit for 2025 growth with a relatively recent increase in TIPT's willingness to take cat risk + MGA distribution network. Unfortunately for TIPT shareholders, this would still be a holdco for the reason that you point out the BV of the non-Fortegra businesses. I personally would not be willing to give TIPT's management 100 cents on the dollar for its cash after monetizing its crown jewel asset to hold onto super marginal assets. The only way to avoid the holdco discount is to sell the entire company. I've thought this is tough to accomplish because who wants to own a growth insurer + an asset manager + a mortgage originator. I still hope that Fortegra IPOs because thats the best opportunity for TIPT to create outsized valued for TIPT shareholders. Praying for the tiny Fortegra IPO to get out the door and start the process of earning the 15-20x EPS multiples that you cite.
Where is the TIPT call happening? I don't see it anywhere
Do they report BMO or AMC?
The company typically announces the date of their quarterly releases a week or two prior to the release. Didn't do that this time...
I am realizing that 2/26 is the Nasdaq estimated date, but not a date confirmed by company. Will update the post.
I don't know this situation at all, but I'm immediately skeptical when you say the market has missed news about an $800m company that was published in a major industry publication. I don't think you're giving the market's information efficiency nearly enough credit - and if I were to guess, I'd say the market already knew this before the leak, or knew something like this was almost definitely going on, even if the specific timing was not known.
I get the skepticism. We are all taught the EMH after all.
But this was not on Bloomberg, CapIq, or Reuters feed. There is not a single analyst covering stock. And no questions on past earnings call. Additionally, the stock has immediately responded to press releases—so people do care, but this time there was no PD!
So, yeah. Just my 2c.
Not me, I study engineering! My skepticism comes instead from a few years of following markets - almost every time I’ve seen people say the market isn’t pricing in this very obvious thing or reacted wrong to earnings, when I check it turns out the person claiming that was the one missing something.
But you’re right - the stock has jumped 10% today. Then again, i can’t seem to find any press releases or news about a sale - am I just missing it?
I think it is the fact that people saw this news via this blog haha
Wow - how does it feel to have just moved a company’s valuation by $80m? Mad.
But in that case, i don’t think the move provides any evidence that the market was wrong here.
I note that this announcement back on Jan 7 was just of the company being marketed for a sale, rather than an IPO as with the previous two announcements; and that the stock was higher than the other two times pre-announcement.
Also, if I look up “fortegra the insurer”, literally the second result is the article you mentioned. I just find it so hard to believe it hasn’t been priced in in the 6 weeks since.
The fact that the stock moved following this blog post, which was written on the basis of what he argues everybody else missed, makes EXACTLY his point.
No, it doesn’t. All it says is that enough people were excited by the claim that this stock is being mispriced and immediately bought it to push the price up. Whether or not it is being mispriced is not part of the equation.
I understand your thinking - he has revealed something he says people didn’t know, and the price has gone up - hence, people didn’t know it. That would make sense if it was all the people on Wall Street that “decide” the price that were the audience of this post. But that’s not the case. It’s a pretty much entirely new group of people who had mostly never heard of the stock before. It’s completely possible that Wall Street had already priced this in (likely, rather - it HAS been 6 weeks and it WAS published in one of the largest industry trade journals…), and the price could still be pushed up by this group of new people discovering the stock and falsely believing they know something Wall St doesn’t.
You speak as though “Wall Street” is a know it all. It isn’t. They get pricing wrong often. And they ignore good/bad signs all the time…especially if not covered and smallcap. But hey…I get your points too.
We’ll see when they report…or potentially at some later point when/if the company announces a strategic alternative.
In my mind there are 3 types of edge. Informational, analytical, behavioural. Wall St gets the analysis wrong all the time - but the world is a very complex place so it's usually (not always) very hard to get an analytical edge. Small underfollowed companies are much more likely to allow an analytical edge, as you say.
Behavioural only tends to come into it at market extremes, where emotions take over. Groupthink replaces the wisdom of crowds and Wall St becomes very dumb in a very big way. If you have good control of your emotions, this is the easiest way to gain an edge, though doesn't come about all too often.
But information, Wall St prices in VERY quickly, in my experience. Not always to the right extent, not always even in the right direction - but rarely does Wall St simply not know an objective fact that you do know. It can happen, certainly - but more in the kind of stocks DirtCheapStocks writes about - $15m 60 year old family owned businesses where you have to email the chairman's grandson for a copy of the annual report. Not in $800m insurers for stories published in major publications.
There is simply no way the financial world doesn't know about this $800m company searching for a buyout. Most likely everyone knew before the story even dropped. Perhaps that's what the massive volume a few days before was.