The Tender Offer - Tier1 Technologies

DISCLAIMER:

Tender offers and the delisting process in Spain are a new situation for me, and after doing some research on the topic and speaking with several investors, I believe I have a general understanding of the circumstances. However, please note that nothing I say here should be taken as fact or financial advice. Before making any decisions, I strongly recommend consulting a qualified financial advisor or a lawyer familiar with delisting matters.

What happened?

On November 15, Retex announced a tender offer at €3 per share , aiming to acquire at least 50.01% of the shares, the threshold needed to proceed with a delisting. Currently, 31% of the shares have already been pledged by the CEO, who has also committed to pledging his remaining 11% if necessary to reach the 50.01% threshold. In addition, 18% of shares are excluded from the tender, these are held by associates of the company, the president of tier1 and the employees trust, based on my understanding.

If Retex secures the required shares, the next steps would be: (1) A special shareholder meeting, (2) Voting to approve the delisting, and (3) launching a final tender offer.

Retex essentially needs 8% of shares to go through with its plan. The Free-Float is c.45% and Institutional Investors in most cases cant or don't want to hold shares in private companies and Retex knows this. These considerations lead me to believe that Retex is unlikely to increase their bid for the second tender if they achieve their target of 50.01%, which I also consider highly probable.

Another potential reason for Retex to increase their bid, even if they secure 50.01% of the shares, could be a desire to further reduce the number of minority shareholders. However, since they are aware that most investors either cannot or prefer not to hold shares in private companies, it is unlikely they would raise the offer price for the final tender after the special general meeting.

The main challenge for shareholders who choose to retain their shares after the delisting is the significant drawbacks that come with it: increased complexity in holding private shares, a high likelihood of no further dividends from TR1, and the absence of liquidity, making it extremely difficult/impossible to trade or sell the shares.

If we consider the hyper conservative guidance of Tier1's management, 5-6EUR a share is would be the rough fair value. So 3EUR a share is definitely way to cheap.

My learnings:

In hindsight, I don’t believe I made any significant mistakes around my thesis.
The only misstep was overestimating the mental capacity of Javier, the CEO, who sold most of his shares at what I consider an absurdly undervalued price. I never imagined someone would act so contrary to their own interests and incentives. Why settle for €9M today when waiting a year or two could yield €18M?

The famous Charlie Munger quote, “Show me the incentives and I’ll show you the outcome,” unfortunately didn’t hold true in this case.

My main takeaway from the situation is the importance of recognizing that nothing is certain and that the world is inherently random, and people often act in ways that defy logic or rational expectations.

How it affected me:

Over the past 10 months, I’ve invested an extraordinary amount of effort into researching this company. It began with 2–3 months of intensive initial research and was followed by 7 months of consistent, maintenance research. This included tracking contracts, building comprehensive customer lists, analyzing competitors and competing products, engaging with Investor Relations multiple times, speaking with customers, having ongoing discussions with fellow investors in the company or people familiar with the industry.

This was, by far, my largest position, making up roughly 50% of my portfolio.. I was quite disciplined in my buying and had an avg. price of c.2,7EUR. Yet, generating only a 10% return after such an immense amount of work—especially when I firmly believe the conservative fair value lies between €5 and €6—is incredibly frustrating. That said, I must acknowledge the significant learning experience and relationships I gained during the research.

What weighs on me even more is the public nature of my conviction. I spoke openly about this stock, and many people became aware of it because of me. While I firmly believe that investment decisions are ultimately a personal responsibility, I still feel partially responsible for any losses incurred by family, friends, or readers who were introduced to the idea through me.

To this day, I believe the company has a promising future. Unfortunately, the actions of Francisco Javier Rubio Gonzalez, Tier1s CEO, robbed us of the opportunity to participate in it.

What am I doing with my shares?

To be completely transparent, I have already sold a significant portion of my position and don’t plan to hold my shares in a delisted Tier1. While I believe there is a chance for a higher price, and I view the risks of holding shares and waiting for the tender as relatively low, I am currently finding many highly undervalued opportunities elsewhere. From an opportunity cost perspective it therefore doesn’t make sense for me to hold my entire position.

That said, this might turn out to be the wrong decision. As noted in my disclaimer, I am not deeply familiar with the intricacies of the delisting process. Despite consulting a range of other investors and speaking multiple times with the broker, the possibility of misunderstanding or misrepresenting facts is not negligible. As always, I strongly encourage everyone to conduct their own due diligence and seek advice from a qualified professional before making any decisions.