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From Monday, small investors will be able to become partners of Sławomir Mentzen. The company Mentzen SA founded by him, which controls a law firm providing tax, legal consulting and accounting services, is starting subscriptions for shares worth PLN 12.6 million. Half of these securities will be allocated to small investors. The company will be listed on the NewConnect stock exchange market. To enter into a partnership with Mentzen, all you need is PLN 5,000 in savings and a trusted profile. Could this be a good investment? How high is the risk?
You know Sławomir Mentzen best from his political activities, he is one of the leaders of the Confederation and a member of the Sejm. In addition, he is a social media star (including the most reachable politician on the TikTok platform) and a talented businessman. And at the age of 37, he could easily be a pensioner (if you also want to be a pensioner, then here you will find a practical guide on how to do it).
With his property declaration shows that last year he had real estate worth PLN 5 million, plus less than a million zlotys in financial investments (bank deposits, company shares, currencies) and 33.7 bitcoins (if nothing has changed, their value today is PLN 9 million zloty). In total, his “ownership” can be estimated at approximately PLN 15 million, not counting the market value of the companies he runs.
This includes: for the activity of a tax advisor, which Mentzen initially conducted as a sole proprietorship, and from the end of 2021 through a limited joint-stock partnership. His law firm is based in Toruń, employs over 120 people and – thanks to Mentzen’s political and marketing activities – is known throughout Poland. While at the beginning of 2019 it had several dozen customers (and PLN 1.1 million in annual revenues), two years later – almost a thousand (and PLN 11 million in annual revenues). Now – over 2,600, with revenues of PLN 21.6 million.
Eat your cake and have it too
And this is exactly what Sławomir Mentzen is looking for partners for. Or maybe not so much the partners, but rather the determination of the market valuation of the company and the possibility of “poking” some of the shares held. He put up for sale 35% of the ownership of Mentzen SA, which in turn controls 49.99% of the votes in the company Kancelaria Mentzen (i.e. the one that actually runs tax consultancy and accounting activities). The remaining ownership of the Mentzen Law Firm is controlled by the politician himself.
The deal is that you can buy 35% of something in which Sławomir Mentzen has the rest of the shares (through the Mentzen Family Foundation, which sells the shares, thanks to which the income from their sale will not be taxed at all), and this “something” has a minority stake in a tax office also controlled by Mentzen.
Sławomir Mentzen and his estates
From Sławomir Mentzen’s point of view, this is a golden deal, because the Mentzen Family Foundation – if everything goes well – will receive PLN 12.6 million of real cash from the sale of shares, which do not have much influence on the operations of the company, which is the core value of the entire venture. These PLN 12.6 million will be possible – as part of the Mentzen Family Foundation – to be invested, for example, in bonds and not pay any taxes on the profits from these investments.
Sławomir Mentzen performs a classic operation titled: “have it and eat it too”, which means it takes money from investors and does not give up control. But will the buyers of Mentzen SA shares make a similar profit? The biggest risk is that it will depend solely on Sławomir Mentzen whether the Mentzen Law Firm will pay a dividend, 81% of which (as I read in the information memorandum of the issue) is due to Mentzen SA
And then the Mentzen Family Foundation will have the deciding vote as to whether 35% of this money will be able to go to stock market investors through the payment of dividend by Mentzen SA. Lots of unknowns, all power in one hand.
Well, almost all of it, because the articles of association of Mentzen SA include a provision that certain corporate rights in subsidiaries (including the tax office) require the consent of the General Meeting of Mentzen SA adopted by a qualified majority of votes. The information memorandum states that this is intended to “increase transparency and control of the Issuer’s minority shareholders.”
Sławomir Mentzen and the tax eldorado
Even apart from the issue of limited influence on the company, potential buyers of Mentzen SA shares must also take another risk – related to the fact that Sławomir Mentzen is a politician and a public figure. And it may happen that at some point he will decide that political goals will turn out to be more important than those related to maximizing the office’s profits. Or that a controversial social media star will say something that will shake the value of a listed company.
It is already known that the price of Mentzen SA shares was set at the highest possible level of PLN 36 (the upper range from the information memorandum), which means that the demand from large investors (taking part in building the book of demand) is considerable. But registration for small investors starts only on March 18 and will last for 10 days. To sign up, you need to register at the INC brokerage office, fill out the form and sign electronically (that’s why it’s worth having a trusted profile).
If someone has already made up their mind, they should hurry, because the subscription mechanism is such that subscriptions may be closed before the deadline if it turns out that subscriptions for shares will be submitted that exceed the value of the securities available for purchase by 200%. At the price of PLN 36 and the minimum subscription amount of PLN 5,000, the minimum subscription amount is 139 shares. There are 175,000 securities available for purchase in the small investor tranche.
Could this be an attractive investment? Well, the activities of the Mentzen Law Firm (and 75% of its shares, 49.99% of the voting rights and 81% of the dividend rights are the main asset of Mentzen SA) are developing dynamically. Mainly thanks to the fact that Sławomir Mentzen came up with the idea to scale the business with a subscription model. The company offers three subscription packages, and subscription customers account for 80% of all (or approximately 2,100 out of 2,700).
In addition to subscription clients, there are also “project” clients, i.e. those who come with a specific matter or problem and want us to handle a transaction for them, as well as clients with permanent contracts for tax services. The law firm’s monthly recurring revenues have recently ranged between PLN 1.2 million and PLN 1.3 million. The revenue per subscription client of the law firm is now PLN 512 per month (two years ago it was only PLN 278).
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How much are Mentzen SA shares worth?
The total revenues of the Mentzen Law Firm last year amounted to PLN 21.6 million and have been growing by PLN 5 million annually in the last few years. In just five years, Sławomir Mentzen’s tax business has grown 20 times (from PLN 1.1 million in revenues per year in 2019). The net profit in 2022 was symbolic (only PLN 200,000), but in 2023 it was calculated at PLN 3 million, which gives a net profitability of approximately 14%.
Those willing to buy shares must answer the question of how they perceive the subscription model in the tax industry. One will say that it is not a stable source of income (because a customer can leave at any time), and the other will say that it is a more stable business model than “hanging” on a few large customers whose loss may collapse revenues. The model used by Mentzen’s law firm focuses on fragmentation and diversification (also between tax and accounting services, which generate approximately 25% of revenues).
Mentzen Law Firm – number of clients
The second issue is the risk regarding the quality of services. In the tax industry, expanding scale always means the risk that we will not be able to serve all clients. I heard complaints about Sławomir Mentzen’s law firm that sometimes young lawyers without much experience were hired to service subscription clients and that this discouraged some clients. Every company has dissatisfied customers, but Mentzen’s model is as scalable as it is reputationally risky.
The capital of Mentzen SA is divided into one million shares, which means that with a net profit of PLN 3 million for the Mentzen Law Firm, the profit for each share would be approximately PLN 3. This would be the case if the Mentzen Law Firm contributed 100% of the profits. But the share of Mentzen SA in the potential dividend of the Mentzen Law Firm is only 81%, which means that the profit per share is PLN 2.4. This means that with a share price of PLN 36, the P/E ratio is 15.
It’s not a dramatically high level, but you can’t say it’s cheap. If P/E was 7-8, it would be a bargain price, companies from the technology industry have a P/E ratio around 25-30, the average for the WIG-banki index is 17, and WIG-Energetyka – 8. But here we are talking about a tiny (from the stock exchange’s point of view) company with a short history, which only made a noticeable profit a year ago. So far, the business has grown rapidly, but there are many risk factors – also related to the main shareholder.
Do you believe in Mentzen’s future as a politician or a taxman?
The absurd thought hangs over the entire project that if Sławomir Mentzen ever implements his main demands, i.e. low and simple taxes, he will destroy his tax consulting business and, in the process, sink the money of Mentzen SA shareholders. The information memorandum clearly shows that it is a goldmine for The Mentzen Law Firm was the Polish Order and the establishment of the so-called IP Box. Thanks to this operation, Mentzen’s clients were to save PLN 100 million on taxes.
Mentzen Law Firm – revenues
Let’s imagine simple taxes without any relief. One may wonder whether potential purchasers of shares are faced with a choice – believe in Mentzen’s effectiveness as a politician and run away as far as possible from the shares of a company that earns money on complicated taxes, or count on the fact that he will turn out to be a political loser and taxes in Poland will be high and complicated. . That is, those from which Mentzen, as a tax payer, can earn money.
If the issue is successful, Sławomir Mentzen will be able to add another million zlotys to the value of his assets – not only with a pencil, but with a pen – as the market value verified by the stock exchange of the business he has started. If 35% of Mentzen SA was worth PLN 12.6 million, the remaining shares (65%) controlled by the Mentzen Family Foundation should be estimated at PLN 24 million.
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source of the cover photo: information memorandum of Mentzen SA/Kancelaria Mentzen
