Sławomir Mentzen debuts on NewConnect. Questions about ethical issues, comments

On Tuesday, the Confederation MP Sławomir Mentzen made his debut on the NewConnect market with a bang. He introduced his capital group, which operates in the area of ​​providing tax and legal advisory services and accounting services for micro, small and medium-sized enterprises based on a subscription model, to the stock exchange.

On the first day of trading on the NewConnect market, the Mentzen share price rose by 22.5% at the opening, to PLN 44.10. The reference price for the company's shares was PLN 36. However, the impressive growth did not end there – around 16.10, the price was already growing by 69.44% to PLN 61.00, and the turnover exceeded PLN 15.5 million and was the highest among all companies listed on NewConnect. For comparison, the turnover on the entire NewConnect market amounted to PLN 20.7 million at the same time.

On Wednesday, Mentzen continued to grow, climbing to a record level of PLN 71.94 per share. At closing, however, the company's share price had already fallen to PLN 63.

When asked about the reasons for such great popularity of MP Mentzen's company, Paweł Biedrzycki, editor-in-chief of the StrefaInwstorów.pl portal, said in an interview with the business section of the tvn24.pl portal that “it is a combination of two factors – Mentzen's popularity itself, but also the IPO share offering (initial public offering – the first public offering of specific securities – ed.)”.

– You have to be aware that this IPO share offer took place some time ago, four months ago. At that time, the market conditions, especially on the IPO market, were very weak. So the company went to investors with a relatively attractive valuation, at that time. On the other hand, there is the effect of fans who follow the actions of the company's president. Here, the president even clearly announced that he wants the company to be the first Polish “meme” company, even the ticker is supposed to suggest this – “XDD”.

Konrad Ryczko from BOŚ Bank Brokerage House is convinced that “the market is speculating and playing with Mentzen, not his business”. – At the moment, the indicators do not match the business, and the valuation is detached from the foundation, so they are playing primarily with the image – he said. Like Biedrzycki, he draws attention to the word “meme” used by Mentzen for promotion.

– Let's agree that the tax office and IP BOX business is not the most fascinating business or one with great growth prospects like the technology sector. It's more about the environment around this company at the moment – he explains.

However, questions arise about the ethical dimension of Mentzen's business moves, as in addition to his role as a businessman and Internet celebrity, he still plays the most important role – that of an active politician, one of the leaders of a political party whose support is still growing.

Professor Bolesław Rok from the Department of Entrepreneurship and Business Ethics at the Kozminski University in an interview with the Polish Press Agency, although he stated that the debut of an active politician's company on the stock exchange is completely legal, it may raise ethical doubts. – The very fact that we are considering it means that something is wrong. Because we elected someone (to the Sejm – ed.) to deal with matters important to the state and citizens. Now we see that this person is using this potential to earn money in business – he said. – In my opinion, it is morally reprehensible and it is evident that this person is earning money on his popularity, which we – citizens – gave him in the democratic process. This is the reason why he has disappointed our expectations and this raises contradictory feelings and we recognize that something strange is happening and that it should not be like this – he said. According to the professor, “this is using his popularity, which this person owes to democratic elections and being a politician, for material and financial purposes”.

– Of course, one can always ask oneself questions about ethical issues. However, such practices are also carried out on other markets. This is not the only company in which an active Polish politician has shares. I think that on the Polish stock exchange one could also mention examples from the past, where politics mixed with the stock exchange. Questions are always asked, but the practice is such that such companies enter the stock exchange and there are no legal restrictions that would prohibit this. So it is carried out if there is interest in the shares – says Paweł Biedrzycki in an interview with the business editorial office of the tvn24.pl portal.

Konrad Ryczko from BOŚ Bank points out that although this is mainly a cashing in of one's own popularity, “it is still reasonable to ask about the future, if it turned out that Sławomir Mentzen became, for example, prime minister”. – It would then be necessary from an ethical point of view for someone to take over the power in the company or to re-park this stake. At the moment, however, I do not see a conflict, there is some potential here, but now it is rather using one's popularity as an internet celebrity, and not one's legislative influence – he emphasized.

The popularity of one of the Confederation's leaders may bring him both success and serious business problems. – It's a double-edged sword, it works both ways, so any image crises or Mentzen's successes may also have a negative or positive impact on the company's stock market situation – says Konrad Ryczko.

– It is often the case that if a given person is the face of a company or is image-related to a given entity on the stock exchange, then some events, e.g. political ones, result in large fluctuations in the exchange rate. Let me remind you that there was the whole market situation related to Leszek Czarnecki – Ryczko points out.

Paweł Biedrzycki emphasizes, however, that “it is difficult to assess how the company will cope in the future”. – The market will verify all this. The growth since the debut has certainly been spectacular, I think we are already approaching one hundred percent. We need to separate two groups of investors – experienced, aware of the market, who can potentially buy and sell shares. And the second group of fans, for whom the valuation does not matter, because they buy these shares for other reasons. The clash of these two groups will be the target effect, which will show what the company's valuation will be. I think these are these two elements and, of course, the financial results – he emphasized.

According to Paweł Biedrzycki, it is not only the popularity of the CEO that is responsible for the company's valuation. – Whatever we say about so-called influencer companies, here we are talking about a real entity that has clients, employees, a long history of activity, its achievements, a dividend policy. The valuation of Mentzen SA is largely based on fundamentals, it is not just a so-called “hype” – judges.

– Mentzen himself said at a conference, at the stock exchange, that his company is to “be meme-like”, this fits into the convention of various types of volatility, sometimes for irrational reasons. On the other hand, there is the company's business, which is quite independent of political issues. We have a large fragmentation of clients, the company is focused on legal and accounting services for small entities. It seems that from a purely operational point of view, this should not have a strong impact on financial results, rather on a certain sentiment – says the expert.

He also points out that “after listing his company on the stock exchange, Sławomir Mentzen became the richest MP in the current Sejm already during the second session.”

– There is a nuance – Mentzen's law firm conducts accounting and legal activities. The regulations therefore oblige him to hold his own shares, as a person with a tax advisor's license. Sławomir Mentzen also has shares in Kancaleria Mentzen SP zoo, giving him the right to 18% of the company's profit. Their valuation is about 20%. XDD. I think that at the current price of the game, the price of Mentzen SA is growing by 19.5%, and the value of Sławomir Mentzen's assets oscillates around PLN 100 million – calculates Paweł Biedrzycki.