Storskogen's portfolio diversification - A strategy for prosperity?

Abstract: This case study provides an in-depth description of the fast-paced M&A compounder Storskogen which has received noticeable media attention since its IPO in October 2021. Through examining the market sentiment surrounding the public market entry, the underwriting process, and its business model, potential reasons for its volatile and relatively poor stock performance are put forward. First, the bullish investor attitude towards the market, in general, was extended to serial acquirers and Storskogen in particular. The strong investor interest in Storskogen culminated in a tangible premium valuation at the time of the IPO, which industry professionals believe was reasonable. Secondly, the consecutive share price descent does not resemble a normalization process due to the steepness of the fall, and the number of banks involved in the transaction, nine, does not seem unwarranted. Too many underwriters would conceivably dilute accountability, thus alleviating fears of setting a too high price, although no evidence in supporting this was found. Thirdly, the consensus is that the business model of compounders can sustainably create shareholder value, especially those with a narrower niche. However, Storskogen's upcoming years will be imperative for its future as it will either demonstrate its benefits or show its lack of competitive advantages. Ultimately, this paper details the emerging sphere of compounders by analyzing its different categories and digging deeper into their characteristics and merits.