Redeye comments on the closing of the financing agreement with Pollen Street, securing SEK600m in institutional capital for Tessin’s platform. We argue that this is a game-changing agreement for Tessin, as we expect it to have the potential to generate more than SEK100m in sales for the company in the coming years.

Tessin Nordic Holding

* Lack of profitability in recent years, with negative cash flow, which may lead to dilution of shareholder value through fundraising.
* No clear sustainable competitive advantage that will last for decades, potentially limiting long-term value creation.
* Absence of outspoken environmental goals, which may become a concern as sustainability becomes increasingly important to investors and stakeholders.
* Limited track record of expanding into new geographic markets, potentially hindering future growth opportunities beyond the Swedish market.

* Strong growth potential with ample room for expansion in a large market, positioned to benefit from secular tailwinds in the property financing sector.
* Asset-light business model allows for scalable growth without significant reinvestment, potentially leading to high incremental returns.
* Market leader in its niche with a strong brand and track record, creating a competitive moat against potential entrants.
* Operates in a stable market with limited competition due to regulatory constraints on traditional banks, reducing the risk of disruption.

* Operating Margin (EBIT) below 20%, suggesting potential challenges in maintaining profitability.
* Return on Equity (ROE) and Return on Assets (ROA) underperforming industry averages, indicating inefficient use of shareholder capital and assets.

* Strong gross profit margin exceeding 40%, indicating profitable product mix and pricing power.
* Sufficient cash and short-term investments to cover expected cash burn for more than two years, indicating financial stability.
* Likely to become sustainably cash flow-positive in the near future, signaling potential for self-funded operations and growth.

* Limited track record of successful value creation, with share price underperformance in recent years
* Weak commitment to innovation due to recent cost control measures
* Limited insider ownership, with management and board members not holding significant stakes in the business
* Lack of gender diversity in leadership, with no female representation on the board

* Lean, decentralized organization with senior team tenure exceeding five years, promoting accountability and stability
* Transparent and consistent investor communication, focusing on long-term value creation and timely business updates
* Board leadership shows independence, with directors capable of challenging management and possessing relevant experience aligned with business strategy