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  "documentTitle": "Stroer SE & Co. KGaA (SAX)",
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  "authorName": "Carson C. Block",
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  "presentationDate": "2016-04-21 00:00:00",
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      "kind": "callout",
      "text": "The potential for Müller and Dirk Ströer to have made unjustified profits contributes to our belief that the entire digital strategy lacks substance.",
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      "text": "Investors should note that Ströer's purchase of these assets from Media Ventures was one of three pillars upon which Ströer launched its digital strategy. (It appears that one of the other pillars almost immediately became highly troubled, which Ströer has yet to own up to. The company treats the least questionable pillar, Adscale GmbH as barely relevant today – its top line showed zero growth the year after Ströer acquired it. Ströer's internal investor relations representative said “looking back now, we don't really need [ad exchanges]. It's not a core part of the business,” when we spoke with her.) The potential for Müller and Dirk Ströer to have made unjustified profits contributes to our belief that the entire digital strategy lacks substance.",
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      "text": "freeXmedia Conclusion",
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      "text": "Media Ventures reported in 2014 receiving €10.7 million in earn outs. As far as we are aware, Ströer never explained why the earn out increased.",
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      "text": "One way of estimating by how much Müller and Dirk Ströer personally profited on the transaction is to try to put multiples on the other two operating businesses Ströer acquired in the bundle, SIG and Business Advertising. SIG generated EBITDA in 2012 of €3.0 million. Placing a 10x multiple on it would therefore yield implied consideration of €30 million. Business Advertising only published net income in its annual report, so we cannot back into EBITDA. Its 2012 net income was €774,000. At a 20x multiple, the implied valuation for Business Advertising would have been €15.5 million – because Media Ventures only owned 50.4%, it would have received €7.8 million. With the €10.7 million earn out, consideration totaled €60.2 million. Under these assumptions, Müller and Dirk Ströer's company would have earned a profit of €22.4 million on its €2.0 million cash investment. An 11-bagger wouldn't have been too shabby for six months of work – it's probably enough to earn the respect of FMCN chairman Jiang Nanchun.",
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      "text": "We believe that freeXmedia is more significant than an egregious series of transactions. We view it as a window into the inner motivations of those who run Ströer, formulate its strategies, and are its public face. As our report shows, there are many other issues with Ströer; but, there are also numerous questions that are unanswerable due to a scarcity of information. The freeXmedia self-dealing makes a strong case that insiders should not be given the benefit of the doubt when such questions arise.",
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      "kind": "paragraph",
      "text": "Attempting to Estimate Media Ventures's Profit on freeXmedia",
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      "text": "We believe that insiders' self-dealing goes well beyond freeXmedia. The synergies Müller and Dirk Ströer generate from transacting with Ströer are more obvious to us than the synergies Ströer claims in its digital strategy. There is a circular flow of money between Ströer on one hand, and Müller and Dirk Ströer on the other. Müller and Dirk Ströer appear to have sold at",
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      "kind": "quote",
      "text": "“looking back now, we don’t really need [ad exchanges]. It’s not a core part of the business,” when we spoke with her. — Ströer's internal investor relations representative",
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      "text": "66 Media Ventures 2014 Annual Report, note VII.5. 67 ADScale GmbH 2014 Annual Report 68 Call with Ströer Investor Relations representative March 2016.",
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      "text": "IX. Ströer Insiders' Self-Dealing Goes Beyond freeXmedia",
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