Here’s what you need to know today

• It’s been a tough start to the week for ASX-listed, founder-led businesses. WiseTech saw shares fall 15% as its founder Richard White manages a personal scandal. Nick Scali, led by the son-of-founder Anthony Scali, issued a profit warning and shares fell 7%. And Mineral Resources fell 14% as founder Chris Ellison stands accused of operating an offshore tax evasion scheme (SMH | The Australian | AFR)
  
  

• The Chris Ellison tax evasion scandal was revealed after the billionaire self-reported undeclared revenue to the Australian Tax Office on the condition the ATO would cut any penalty by 80%. Reports are, Ellison had used offshore companies registered in the British Virgin Islands to carry out this scheme. (Capital Brief)
  
  

• Remember when we had to wait years for regulators to approve a Bitcoin ETF? Well that regulatory restraint is long gone with the US Securities and Exchange Commission accelerating the approval of 11 Bitcoin option ETFs. These ETFs will trade options tied to the spot price of Bitcoin, allowing investors to hedge or leverage their exposure to the price of the cryptocurrency. (Reuters)
  
  

• Further evidence of the fall of Australia’s two major political parties was on show in the ACT election over the weekend. Labor will lead for its 7th consecutive term, but will need to form minority government after a strong showing by Independents and The Greens. (The Daily Aus)
  
  

• Indonesia’s new leader, Prabowo Subianto, was sworn in as the country’s 8th President. It is a notable return for Subianto, a General accused of human rights absuses under the dictator Suharto to an democratically elected leader of the world’s 3rd largest democracy. In his first speech the 73-year-old leader promised to tackle corruption, boost economic growth and achieve food and energy self-sufficiency within 5 years. (Capital Brief)
  
  

• Amazon has given a pretty blunt response to employees asking for the company to reconsider it’s return-to-office mandate. To employees asking for an alternative to 5-days-in-office, Amazon Web Services boss Matt Garman has told workers they can quit instead. (Quartz)

What the…?

On 17 September 2024, all 7 board members of Nasdaq-listed 23andMe resigned on the same day. In her first interview since that mass resignation, founder and CEO Susan Wojcicki told Fortune “I think we can navigate and land this plane”.

The gene-testing company is down 98% from its IPO price in 2021 but Wojcicki still believes and has proposed buying out all existing shareholders herself and taking the company private. If she is able to save 23andMe, it will be one of the most impressive business stories of our time. (Fortune)

Investing is a lifelong journey

Here’s what you can learn today.

This is an excerpt from our conversation with Claude Walker on Equity Mates Investing titled ‘Expert Investor: Claude Walker | Assessing Management & Analysing Small Caps’ (Apple | Spotify | Website)

Bryce: Small caps are an exciting space for the Equity Mates community, and you've spent a lot of time there. Why are small caps attractive to you?

Claude: Small caps are appealing because having a smaller amount of investment can be advantageous in this space. This advantage persists until you manage around ten million dollars. Since I don’t have that yet, it’s great to focus on small caps.

Bryce: Can you explain why that makes a difference?

Claude: Sure. Many small companies, especially those with management owning a significant portion of shares, can have limited trading volume. For instance, a company valued at around one hundred million dollars might have management holding fifty million dollars of shares. The available shares in the market could be quite low, making it difficult for larger funds to accumulate a meaningful position without impacting the share price. For a fund managing one hundred million dollars, it could take days or months to build even a small position, making them less likely to invest in these companies.

Consequently, many funds avoid these stocks, eliminating a substantial source of capital from competition. If you identify a small, profitable company with a solid business strategy, traditional investors might ignore it due to its size, providing an opportunity for you. Over time, if the company grows and increases its liquidity, it may attract larger investors once it becomes more established.

The optimal scenario occurs when such a company enters the ASX 200. This transition can lead to forced buying from ETFs tracking the index. If the share register remains tight, this can create a liquidity squeeze that drives up the share price, particularly if the company has grown without significant dilution.

When this happens, it’s a good time to consider taking profits or holding on; however, I generally wouldn’t buy at that point since it tends to be a peak moment. Overall, investing in small caps can be very rewarding if you have a solid entry point.

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