There I was, sitting in my chair, going through my kanban list of companies to do further work on, when it hit me: one stock I’d written down more than a year ago was trading at just 0.9x earnings and 0.55x book. The company had earned more than its entire market cap in a single year. My curiosity lit up like fireworks.
Naturally, when you see something like that, you immediately assume it’s too good to be true. You assume it’s either a fleeting one-off gain or shady accounting.
But here’s the thing: this company is about to print another set of earnings that will amount to its entire market cap over the next twelve months. It’ll flow straight to the bottom line and inflate book value when the company releases its Q32025 numbers in a month’s time. Because only a little over half of this equity stake is reflected on the books so far, the market hasn’t connected the dots. By mid-November, this company — whose core business itself runs modestly profitable — will show a book value that puts the stock at 0.37x book. And 40% of its market cap is net cash.
This is one of the most asymmetrical setups I’ve seen in a while. It exists because the company holds a large equity stake in another company, unrelated to its core business, whose market price has gone vertical. For years, this equity stake sat buried in the footnotes at cost as a small, strategic side investment barely worth mentioning. Then it went public this year and promptly went parabolic, thrusting its value into the spotlight and forcing our company to take colossal fair-value adjustments. What makes this so wild is the speed and scale of it: the stake is now worth several times the company’s entire enterprise value.
“What the hell, Oliver… what’s the catch here?”, you ask, eerily.
And I’m glad you’re asking. Of course there are catches. The equity stake ain’t cheap, our company has signed a lockup, and you can’t hedge it out. But I’ll unpack details behind the paywall. I’ve done extensive work on this one (including reading a full 500-page foreign-language report section by section through Google Translate), so this writeup will have some meat. I’ll present my estimate of the value of our company, its equity stake, and the margin of safety.
Enjoy…