Sep 11, 2026 · 58 min
UK boards leave cheap stocks trapped in a valuation gap
UK stocks are dirt cheap. Why won't the boards act? $ZIG $CRW | Undervalued-Shares
The episode argues that low UK valuations reflect not only market sentiment but also governance, ownership, and capital-allocation failures that investors can challenge.
- 1Weak board accountability and institutional outflows help keep UK-listed companies undervalued despite takeover interest.
- 2Activists can assess potential targets through capital allocation, governance, communication, ownership structure, and executive incentives.
- 3ZigUp and Craneware show the practical stakes: create value before a lowball bid, or accept a premium and redeploy capital.
Don't miss
The Craneware discussion contrasts its rejected premium Bain offer with the subsequent share-price decline, making the opportunity cost of holding out concrete.
The brief
Sven Larsen of Undervalued Shares joins Andrew Walker to examine why UK-listed companies remain cheap, and whether takeover interest signals opportunity rather than decline.
Their argument is structural: fund outflows, dividend preferences, weak board accountability, and limited activism can leave cheap stocks waiting indefinitely for a revaluation.
Larsen’s activist checklist focuses on capital allocation, governance, communication, ownership, structural blockers, and executive pay, while Walker adds screens for size and institutional support.
ZigUp becomes the test case, with its management incentive plan offering a route to value creation—but also raising the risk of an unsolicited bid at too low a price.
Craneware sharpens the debate: after rejecting Bain’s premium offer, its share price declined, prompting a case for taking attractive bids and redeploying capital elsewhere.
The conclusion is cautiously constructive: UK undervaluation is an opportunity if boards and shareholders use their influence instead of treating the discount as permanent.
What was said on this episode
25 statements · 18 positive · 6 negative · 1 neutral
A quarter of London main-board companies disappeared through takeovers or privatizations since 2022.
“since '22, 25% of the companies listed there have disappeared, going private, takeovers.”
Listen at 5:29
UK takeover premiums often reach 40–50% or more, indicating severe market undervaluation.
“in the UK, it's often 40%, 50%, sometimes even more than that. I've seen triple-digit premiums for takeovers. And that's just an indication that the market is severely undervalued.”
Listen at 5:50
The UK stock market is severely undervalued.
“The UK market is dirt cheap.”
Listen at 6:05
Companies trading at four times earnings with low leverage should begin share buybacks.
“If your share is trading at 4 times earnings and you have a, you know, relatively low debt leverage, the obvious thing is to start buyback shares.”
Listen at 8:57
UK corporate governance and capital allocation remain stuck in the past.
“UK is just stuck in the past. That's what it boils down to.”
Listen at 10:14
Shareholders ultimately control company boards.
“ultimately the boards are controlled by the shareholders.”
Listen at 12:50
Large UK fund managers could readily replace boards by coordinating their votes.
“if a bunch of them, you know, came to the same conclusions, then boards could easily be replaced.”
Listen at 13:25
UK fund outflows have pushed companies toward dividends despite poor capital allocation.
“they've often been pushing companies towards paying dividends, even if that was a very bad decision in terms of optimizing your capital allocation.”
Listen at 13:57
Foreign activists can help drive change in UK companies.
“foreign activists can also play a role.”
Listen at 18:31
Management at a small UK real-estate company was allegedly exploiting shareholders extensively.
“management was stealing everything that wasn't nailed down.”
Listen at 20:10
Capital-allocation reforms can be implemented without mass layoffs.
“implementing change when it comes to capital allocation doesn't require you to fire 10,000 employees”
Listen at 25:23
Shareholders should require company board members to own stock.
“Why is any board member allowed to not own any stock in the company? You know, I just simply wouldn't allow that as a shareholder.”
Listen at 29:41
Activist investors should assess capital allocation, governance, communication, blockers, and compensation.
“Factors that we like to look at is very much capital allocation, governance, investor communication, removing structural blockers— slightly more complex subject, but you know, there's a lot of that— and then executive compensation.”
Listen at 31:08
UK mergers and acquisitions and shareholder activism are about to accelerate sharply.
“the dam is about to break for M&A and activism in the UK”
Listen at 32:55
ZigUp should conduct substantial share buybacks.
“it's just screaming out for a share buyback.”
Listen at 36:20
ZigUp’s seven senior managers can receive £69 million in bonus shares.
“these 7 management members can earn a total of £69 million in bonus shares.”
Listen at 37:54
ZigUp targets free cash flow above £200 million by 2028.
“Last year, free cash flow rose from £17 million to £96 million, and they're now looking at getting this above £200 million by '28.”
Listen at 39:20
ZigUp will likely receive a takeover bid within two or three years.
“I don't think in 2 or 3 years this will still be an independent company. I think someone will have made a bid for it.”
Listen at 39:42
ZigUp faces a major risk of an unsolicited takeover at an inadequate price.
“the risk of being bought and being taken over by, you know, through an unsolicited bid, even at way too low a price, that is a major risk that boards need to consider as well.”
Listen at 43:59
A significant corporate event at ZigUp is likely soon.
“I think it's only a matter of time before something happens at Ziggo.”
Listen at 48:41
Craneware software is installed in 40% of US hospitals and leads its market.
“they're now installed in 40% of the United States hospitals. Number one leader in this field by far.”
Listen at 50:27
Craneware will probably receive another takeover bid.
“it's probably a matter of time before another bid comes in.”
Listen at 52:24
UK companies and boards can create substantial shareholder value through available reforms.
“there are so many levers that UK companies and their boards and their executives can pull to create additional value for shareholders”
Listen at 54:50
The UK market may revalue rapidly within two years as undervalued opportunities gain attention.
“in 2 years' time, we'll look back at this conversation and say, it's just incredible. We had all these undervalued opportunities. And then the whole UK market suddenly woke up and things changed overnight.”
Listen at 55:23
Relisting UK companies in the US does not reliably produce valuation reratings.
“The track record for doing this sort of thing is very mixed. So it's not like you just relist and then suddenly, you know, you get rerated. It just doesn't work like that.”
Listen at 56:45
Statements are attributed to the speaker as said on the episode and reflect their view at the time, not PodLume's. They are not advice.
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