HEALTH WARNING & DISCLAIMER This is not Investment Advice. The stock discussed in this post is a “Pink Sheet” OTC stock with limited liquidity and almost no reporting. The author may own, buy or sell shares in this company without pre-warning. DO YOUR OWN RESEARCH !!
As a change to previous write-ups, I will start with the sound track for this write-up. And of course it is “Rocket Man” from Elton John. It fits in more than one way to this Special situation and you maybe want to listen to it while reading the write-up.
As again, this write-up became a little bit longer, I’ll just show the “elevator pitch” here but will embed the PDF document.
0. Elevator Pitch
Rocket Internet AG, a former German Venture Capital super star company run by the Samwer brothers has gone “dark” and delisted in 2020. Since then, the stock price languished until more recently, when a German activist sent an open letter to Management and the auditors criticizing the “low balling” of accounting numbers. Diving a little bit deeper, some true gems are hidden in Rocket Internet’s portfolio, especially a participation in SpaceX and prediction market superstar Decacorn Kalshi. The current share price reflects most likely less than 50% the current NAV. In my opinion, the upcoming SpaceX IPO and further positive development of Kalshi could maybe act as a “catalyst” and lead to a higher share price. In addition there is a (low) chance that Rocket Internet might distribute another special dividend as they did in 2024.
As often on this blog, no one has asked for it but I will post it anyway.
Some of my readers might have noticed, that I started to link to songs in some of my write-ups. This has now become quite a collection and I tought it might make sense to offer my readers some different entertainment.
So I have assembled a playlist of all the songs that I had linked to plus some songs that I think fit well to some of the stocks I own or did in the past. You can either listen to the playlist or use the PDF below and read the write-ups while the song is playing 😉
Here is the Link to the Spotify Playlist , and here another link to the Youtube Playlist and below is a pdf where you can click the links sorted by the name of the write-up. Even if you have only half as much fun as I do listening to this, I would consider it a success.
But be warned: Spotify estimated my age to be more than 10 years older than I am anyway. And this despite all the children songs my son is listening to on my account all the time.
As a final note: Although a catchy tune obviously doesn’t guarantee a positive outcome from my write-ups (Amadeus, Hermle), finding one early in the process does motivate me a lot and helps me focusing. And it’s fun.
And as a sneak preview, my next write-up will feature the song “Rocket Man”.
Maybe a quick word why I am doing this series on Private Equity:
I have to admit that I am fascinated by the PE industry as such and whatever happens there has a definite impact on the stock market, either through take-privates or IPOs or other more indirect developments (Private Credit boom etc.).
In addition, as Private Equity is now targeting more and more retail investors, I want to provide some background information as currently these products are sold on a very “asymmetric” basis. There is very little objective information available about these products besides the glossy sales pitches.
I am very much afraid that many retail investors will regret putting money into Retail structures in a few years from now.
What are PE “Secondaries” anyway ?
There are two things that I really do really admire from the Private Equity industry: First, that they managed to keep their 2/20 fee schedule since their beginnings in the 1980s and never shared any “scale economics” with investors. And second, that they are very creative in finding new ways to sell their product.
I have been discussing the relatively new retail products already but a similar big trend in Private Equity are socalled “Secondary Funds”.
Secondary funds come in many flavors but the main one is to buy Private Equity assets from unhappy investors and sell them to new investors. There are two different “flavours” of this:
Secondary LP Fund stakes
Here, existing investors want to sell their Fund stakes (“Limited Partner”, LP) for one reason or the other. As these are illiquid and often intransparent vehicles, buyers will only buy them for a certain discount.
GP Led secondaries / Continuation vehicles
In those cases, the PE manager (“General Partner”, GP) cannot exit an investment inside a fund via the normal route of an IPO or M&A transaction and is looking for new LPs to which he can sell these company stakes to, also often at a discount to the last valuation in the fund..
The article speculates that in 2026, the total volume of secondary deals could be up to 50% higher:
This is even more remarkable as fundraising for “primary” i.e. new funds has declined significantly in 2025. So secondaries are the only bright spot for PE firms at the moment.
The big question is of course: Who is selling all these stakes and who is buying it ? The first question is rather difficult to answer, as those transactions are mostly private.
The second question is much easier to answer: The Private Equity industry is buying all these stakes and “repackaging them” as Secondary funds and selling them again to institutional investors, quite often to those who were selling those primary stakes in the first place.
But why would institutional investors do this ? The answer is surprisingly simple:
So just to compare this with a listed stock fund. Italian Holding company Exor SPA (famous for its stake in Ferrari) has currently an NAV of around 180 EUR per share but only a share price of 70 EUR.
If a portfolio manager buys a share of Exor, he might think that the share is worth more than 70 EUR, but the share will be valued at 70 EUR in his portfolio. The actual share price will need to rise in order to be able to show a positive performance.
If he would be a PE guy and Exor would be a secondary stake in an unlisted portfolio company,, he could mark up that share immediately from 70 to 180 EUR and show more than 150% profit without the market price moving a cent. This sounds crazy, right ?
But this is exactly what Private Equity is doing with secondaries:
You buy the asset as a discount and (almost always) on day one, you can actually write-up the asset to the NAV stated by the Fund Manager and show a so-called “day one profit”.
The higher the discount, the better and the better the “performance” of the Secondary fund.
Interestingly, in the current environment, both Private Equity Managers and investors love it.
The PE managers obviously because they can “recycle” their old stuff and in many cases can earn an additional fee layer on top of the existing fees in the underlying funds.
Investors love it because the performance looks so good right from (and especially from) the start. In traditional PE, you normally have to wait a few years until you see significant positive performance as a lot of the initial costs drag down Fund performance (J Curve).
So buying into these secondary funds looks like a brilliant investment decision despite the double layer of Private Equity fees that these investors are often paying.
This is wath Gemini Nano Banana came up with when I asked it to illustrate the mechanics and I think it’s absolutely brilliant:
But can it last ?
The main argument and the “story” of the PE industry is that those discounts are purely “liquidity discounts”, i.e. the sacrifice that “forced sellers” of these stakes have to endure and therefore presents more or less a “free lunch” for buyers.
On the other hand, it is no secret that many market participants think that stated NAVs and valuations of most PE funds are not realistic.
I have personally witnessed a situation where the valuation of a PE fund dropped from 130% of invested capital to 60% (i.e. -50%) in 9 months due to “structural changes” at the PE firm.
Personally, I do think that “true” liquidity discounts only represent a small minority of the deals and that a much larger share of those discounts are more realistic assumptions on the actual values of PE funds and their constituents.
Many of the sellers are rather sophisticated addresses that will not sell a really good fund at a large discount.
Maybe a big rebound for “Value” and “Old Economy” stocks will narrow the over-valuations. On the other hand, the current carnage in Saas stocks creates new problems for funds exposed to that sector (Thomas Bravo for instance) which used to be one of the few bright spots.
In any case, the “Day one game” only works as long as “fresh money” is coming into a product. Once the fresh money stops, there are no new “day one gains”.
What’s the take away for private investors ?
As those secondary transactions are also quite popular to juice up returns in the short run for retail PE structures (ELTIFS etc.), this is one more reason to stay away from those fee laden, intransparent structures.
This is for instance from the July report of the EQT ELTIF (sold by Trade republic):
Boosting the “performance” just by buying a new asset is a great thing to have if you are a Private Equity retail fund.
And of course, some “smart” people are trying to play this game in public markets, too. Swiss liste company Matador for instance does exactly the same. Buying secondary stakes at a discount and then marking them up right away.
If you are an institutional investor, you should check if the fund prospectus contains information on what percentage of the performance is generated through “one day gains” and what is generated through actual performance.
Especially those secondary funds that contain the most overvalued PE funds might see a very “rude awakening” in the coming months/quarters when those NAVs might be revised downwards and those “day one gains” disappear.
Until then, the music is still playing…..again illustrated nicely by Nano Banana:
Disclaimer: This is not Investment advice. PLEASE DO YOU OWN RESEARCH:
Management summary (Spoiler):
After selling Biontechs a few years ago, I reviewed Biontech once again by using LLMs to evaluate the development pipeline. Although this was an extremely interesting exercise, it is not an investment for me for the time being.
Background:
Biontech is a company I have owned in the past and written about. It became famous because they were the first to develop a MRNA based vaccine against Covid which they sold worldwide together with Pfizer.
Sales down ~-25%, net profit down -33%. The only positive aspect is that the operating leverage (i.e. how much more profit declines than sales) is surprisingly modest.
Last year for instance, a -9% decline in sales led to a -40% decline in profits as we can see in the respective report form last year:
As this review became a little bit longer (too much time on my hands ?), I decided to publish is as a PDF version. Have fun.
Summary:
There is no way around it: 2025 was another bad year in relative terms (the third in the row). The Value & Opportunity portfolio gained +9,4 % (including dividends, no taxes, AOC fund as of 30.09.2025) against +21,5% for the Benchmark (Eurostoxx50 (25%), Eurostoxx small 200 (25%), DAX (30%), MDAX (20%), all performance indices including Dividends). Links to previous Performance reviews can be found on the Performance Page of the blog.
Over the 15 years from 12/31/2010 to 12/31/2025, the portfolio gained +429% against +225% for the Benchmark (before taxes). In CAGR numbers this translates into 11,7% p.a. for the portfolio vs. 8,2% p.a. for the Benchmark.
Following an annual tradition since 2013, by the end of the year, I review my portfolio by writing/updating very short summaries for each individual position. 17 of the 23 positions from last year are still in the portfolio and I have added 6 new positions. That turnover has been mostly driven by reviews and/or disappointing fundamental developments.
I sold Fuchs, Amadeus Fire, Hermle, Royal Unibrew, Sto and Energiekontor.
A more comprehensive Performance review will follow in early January 2025.
A short user guide: My preferred style of investing is a bottom up approach, focusing on 20-30 “Steady Eddy” small/midcap stocks that in my opinion have a good return/risk profile over the next 3-5 (or more) years. Many of these stocks are not household names and are unlikely to make spectacular gains in any single year. Many of them look interesting only after the second or third glance and are rather boring, which is exactly what I am looking for. So if you are looking for a “Hot stock for 2025”, this post won’t help you much.
At the end of each “short pitch” I summarize my current assessment for the coming year(s).
And always remember: THIS IS NOT INVESTMENT ADVICE. PLEASE DO YOUR OWN RESEARCH.
value and opportunity 