Disclaimer: This is not Investment advice. The stock discussed is very illiquid and trades at the unregulated market (Freiverkehr). If you want to buy this stock, work very carefully with strict limits. The author owns the stock and might buy/sell it without giving prior notice. And as always: PLEASE DO YOUR OWN RESEARCH !!
After having two (relatively) exciting stocks in the last two weeks with Rocket Internet and Innoscripta, I decided to tune down the exitement a little bit and focus on a very boring, family run German small cap this time. In order to not fall asleep, you might want to listen to the Soundtrack while reading:
Elevator Pitch:
This write-up is special in two ways. For one, I have privately bought the stock already a few months ago. Secondly, I base this write-up on another write-up from my friend Jon from abilitato.de. So please read that one before you read my “mini-writeup” where I only focus on a few specific aspects.
In a nutshell, Frosta is a boring, under-the-rader German family owned and run frozen Food company that does not do a lot of investor relations but runs a very convincing strategy focusing on additive-free ready made frozen meals. Inventing this category more than 20 years ago, the main Frosta brand is now growing with solid “mid teens” percentage rates p.a., has succesfully managed to enter and grow in neighbouring countries and with profitability that is steadily increasing. For the quality of the company and the potential growth prospects, the stock is still relatively cheap in my opinion at around 12×2025 P/E (ex net cash).
Here ist the write-up. Best read it after having a decent “Chicken Paella” from Frosta đ
My timing of my Innoscripta write-up was a little bit unfortunate. Just a day later, Innoscripta held a conference call explaining the 2025 numbers. I think I need to better check the calenders of the companies I write about in the futureâŠ.
I listened to the Call on Quartr. My main (and of course subjective) take-aways:
as a relatively new initiative, they develop a âsafe storageâ for R&D data
the arguments about LLMs and their limitations did not overly convince me. The arguments rely on todayâs abilities of LLMs, but the question is how this will develop in 1,3 or 5 years. Especially I do not see that the LLM in the hand of a client itself is the competitor but competitors (especially other consultants) using AI to rapidly develop (cheaper) alternatives
Cash conversion (to EBIT) is currently around ~60% but they try to improve cash collection
They are bullish on the Government increasing the programs in general (regulatory tailwinds)
They claim that they see increasing revenue from the same clients which I find quite surprising. They didnât however provide any concrete numbers
The clarified that the overall proces from application to cash collection is 9-12 months (3 months for innovation approval, 6-9 months for tax credits)
They claim that the âfront loadingâ of 4 year applications seems not so significant
There is a clear seasonality that companies hand in filings mostly in Q4 in order not to lose credits for T-4 projects
Revenue in Q1 2026 should look good (whatever that means, not sure if they compare this to Q4 2025 or Q1 2025)
The currently do not consider M&A for international expansion but try to grow organically in 4 different countries (UK & US was mentioned)
The question if the 40% growth for 2026 is relevant was somehow confirmed but very indirectly. A ârealâ guidance should be expected for the AGM in April
Interestingly, the overall growth in the German Tax Credit market was +60% in 2025 which means Innoscriptaâs growth is in line with the market and they want to grow with the market. More details again shall be provided at the AGM. The analyst mentioned that the market will grow less than 40% in 2026
The question how big the â4 year front loading effectâ actually is, they were quite evasive. They mentioned that there will be growth internationally and through âSoftwareâ and Tax Credits is described as a âMilestoneâ or âtrojan horseâ to get other business.
Cash usage: No additional cash is needed for growth. Buy backs limited due to limited liquidity but rather distributions.
Overall my impression is that at least 2026 should look pretty Ok, but further out it gets a little bit vague. International expansion is clearly more risky than increasing market share in Germany.
But overall it remains a very interesting and dynmaic company and I am looking forward to the Annual Shareholder Meeting which I hopefully can attend.
Innoscripta, a young German âSaaS companyâ which IPOed in 2025 came to my attention because it is extremely profitable (EBIT margin 60%) and growing like crazy (10x in sales since 2020). However, because of the unique revenue model (success fee instead of software fees) and a rapid decrease in quarterly growth in 2025, I am currently not investing, although the stock is not super expensive at 21x trailing P/E. But I will keep a close watch.
The 2025 IPO
Innoscripta was one of the few âofficialâ IPOs in Germany in 2025. If we look at the share price, it was not a very successful one:
HEALTH WARNING & DISCLAIMER This is not Investment Advice. The stock discussed in this post is a âPink Sheetâ 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 âRocket Manâ 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 âdarkâ 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 âlow ballingâ of accounting numbers. Diving a little bit deeper, some true gems are hidden in Rocket Internetâs 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 âcatalystâ 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 đ
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 âasymmetricâ 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 âSecondariesâ 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 âscale economicsâ 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 Fundsâ.
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 âflavoursâ of this:
Secondary LP Fund stakes
Here, existing investors want to sell their Fund stakes (âLimited Partnerâ, 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 (âGeneral Partnerâ, 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 âprimaryâ 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 ârepackaging themâ 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 âday one profitâ.
The higher the discount, the better and the better the âperformanceâ of the Secondary fund.
Interestingly, in the current environment, both Private Equity Managers and investors love it.
The PE managers obviously because they can ârecycleâ 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 itâs absolutely brilliant:
But can it last ?
The main argument and the âstoryâ of the PE industry is that those discounts are purely âliquidity discountsâ, i.e. the sacrifice that âforced sellersâ of these stakes have to endure and therefore presents more or less a âfree lunchâ 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 âstructural changesâ at the PE firm.
Personally, I do think that âtrueâ 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 âValueâ and âOld Economyâ 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 âDay one gameâ only works as long as âfresh moneyâ is coming into a product. Once the fresh money stops, there are no new âday one gainsâ.
Whatâs 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 âsmartâ 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 âone day gainsâ and what is generated through actual performance.
Especially those secondary funds that contain the most overvalued PE funds might see a very ârude awakeningâ in the coming months/quarters when those NAVs might be revised downwards and those âday one gainsâ disappear.
Until then, the music is still playingâŠ..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.
value and opportunity 