@deeplyinvestedNice summary, thanks for sharing your thoughts....

@deeplyinvested

Nice summary, thanks for sharing your thoughts. On valuing RPM, the very shorthand & dirty way i think it about it is:

1) You need to dilute for options outstanding - they're all in the money - to get an accurate fully diluted market cap & EV. $25m cash at 12-31-19 goes to ~$32m, market cap is 235m SOI * $0.99 = $233M, so today's fully diluted EV is about $200M.

2) RPM's corporate overhead is mostly covered by the earnings from the advisory & geogas division, so for simplicity i ignore earnings from these two divisions as well as the overhead such that essentially the entirety of the company's value is in the software division alone.

3) So you have to come to a view as to whether the software division is worth more or less than $200M. It did $47M revenue last year and will do about that again in FY20, so it's selling for around 4x revenue today. If they pull off the subscription transition (progress seems very encouraging) and customer take-up of their new products continues to grow, then the software division would likely be worth well in excess of 4x revenue - recurring revenue enterprise software businesses that sell 3-year average contracts (as RPM does) with long growth runways and diversified customer & product bases can trade near double-digit revenue multiples, because at scale (>$100M revenue) they can typically generate ~30% EBITDA margins. Given the CEO's history here (look up Mincom), i am almost certain his goal is to try to get the software division's revenue >$100M over the next 2-3 years (much easier to cross-sell products and ramp pricing on an enterprise SaaS sales model, which they're nearly done transitioning to), then he'll sell it for a high price.

@JayWin

Agree, that's an important consideration - as relates to RPM's CEO, Richard Matthews, most of his stake was acquired on-market (i.e. with real money of his own) years ago when he was on the board as an independent, prior to becoming CEO in 2012.