Ha, last week I listened to a 1h44min long podcast with the founder Niklas Pålsson. Super interesting guy, and Cedergrenska is a great company, and is a big positive for education in Sweden. Recommended listening (in Swedish but there are AI tools to translate) https://open.spotify.com/episode/5OoL4R8h1jIn6QZ4rNT5zY
However, my problem here is that the left is leading in the polls, and there is an election next year, and the left hates that private companies can make a profit running schools. Even a centre right party that used to champion independent schools, wants to stop allowing stock companies to run schools, and transform them into some other form that cant make a profit. See https://www.liberalerna.se/nyheter/forbjud-vinstintresset-i-skolan
Im afraid the political tide is really turning against all private companies running schools in Sweden.
Thanks Martin for your point. Margins are thin as they are right now and it is a risk if left wins. Will probably skip that one even thought it is really cheap.
Thanks, Martin! Yeah, really like Palsson. I think the government regulation risks are real but overstated given that the private schools, which meanwhile include 22% of students, just run better than public schools. There are some smaller single school players that overly focus on profit making though, which should be better regulated. So I see it as a risk as mentioned, but a nicely uncorrelated one at a very nice price.
I mean the social democrats, the left and the green party are campaigning on an outright ban on profit making for private companies running schools. Social democrat leader Magdalena Andersson has stated: “Profit withdrawals in schools will be stopped by 2026” if they win.
Current polls indicate that these three parties would get an outright majority. If they need support from some other party to get a majority, then we could get some sort of profit limit instead, but even in this scenario it would be unlikely that the current situation continues unchanged.
Try asking some AI about the Risk of a Ban on Profits in Schools if the Left Wins the Next Election in Sweden!
Excerpt of grok's take on it:
"Probability Assessment
High Risk (70–90%): If the left-wing bloc secures a majority, a profit ban is highly likely, as it’s a core issue with strong voter support.
Moderate Risk (40–60%): With a weak majority (e.g., relying on Center Party or Liberal support), compromises like a profit cap rather than a total ban may emerge.
Low Risk (below 30%): Only if the Tidö bloc retains power or public opinion shifts significantly. Current trends suggest otherwise.
In summary, this is one of the hottest issues for the 2026 election, driven by concerns over segregation and school quality. The left-wing bloc is leveraging it to mobilize voters, while the right warns of threats to school choice."
Correction: current polls actually indicate that the left block plus the centre party would form a majority, but it's close that just the Social democrats, the left and the green can get a majority. See https://www.svt.se/special/valjarbarometern/
I should add though, that even if the left wins, I dont think a ban will be implemented in 2026, it's going to take a bit longer, passing through parliamentary investigations and stuff. But I agree with Grok's probability assessment (putting aside that the numbers add up to more than 100%).
Hey Martin thank you for sharing. I think the proposal is on limiting profit withdrawals for private schools that don't meet certain benchmarks and would mainly affect small less professional players
Cedergrenska's founders think this will actually benefit them, and I tend to agree that the risk of them being affected is real but is smaller than many think.
I think the idea of "limiting" profits was part of earlier proposals (e.g., the 2017 Reepalu inquiry, which suggested a profit cap based on invested capital). Current rhetoric and proposals, especially from the social democrats and the left party (ex communist party), sound like a total ban rather than just limitations.
The left-wing proposals are broad and target all profit-driven schools, not just those failing to meet specific benchmarks. The focus is on the principle that public funds should not be used for private profit, not on punishing underperforming schools.
And Im going to be lazy here and use grok for the last point:
"Accuracy of "Mainly Affect Small Less Professional Players"
Incorrect: The proposed bans or restrictions would primarily affect large, profit-driven school chains, not just small, less professional players. Here’s why:
Large Players Dominate: Around 75% of free school students attend schools run by aktiebolag [stock companies], many of which are large chains like Internationella Engelska Skolan (IES) or Academedia. These companies often generate significant profits, making them the primary targets of the left-wing bloc’s reforms.
Impact on Small Players: Smaller schools, especially non-profit or cooperative-run ones, would be less affected, as they don’t typically distribute profits. However, small for-profit schools could face challenges if forced to convert to non-profit models, but they are not the main focus.
Data Point: According to a 2023 report from the School Authority, large school chains account for the majority of profit withdrawals, with some chains reporting profit margins of 5–10% annually. The left-wing bloc’s rhetoric (e.g., the social democrat's 2025 congress) explicitly criticizes these large players for prioritizing profits over education quality."
Thanks Martin for sharing your thoughts! Cedergrenska's reported net profit is aimed at 1% for this reason.
I think regulations will increase, but schools will keep doing great work and investors mainly in large schools will benefit from the regulatory burdens.
Mmh, about the amortization of goodwill hiding the true performance : it looks like part of the business, and a rerate from the market on this aspect is unlikely?
That's right the way it adds value is they consistently get a large amount of cash which they use for buybacks and acquisitions. Like in the past 6 months, bought back 10% and added 8% more students through an acquisition.
Ha, last week I listened to a 1h44min long podcast with the founder Niklas Pålsson. Super interesting guy, and Cedergrenska is a great company, and is a big positive for education in Sweden. Recommended listening (in Swedish but there are AI tools to translate) https://open.spotify.com/episode/5OoL4R8h1jIn6QZ4rNT5zY
However, my problem here is that the left is leading in the polls, and there is an election next year, and the left hates that private companies can make a profit running schools. Even a centre right party that used to champion independent schools, wants to stop allowing stock companies to run schools, and transform them into some other form that cant make a profit. See https://www.liberalerna.se/nyheter/forbjud-vinstintresset-i-skolan
Im afraid the political tide is really turning against all private companies running schools in Sweden.
Thanks Martin for your point. Margins are thin as they are right now and it is a risk if left wins. Will probably skip that one even thought it is really cheap.
Thanks, Martin! Yeah, really like Palsson. I think the government regulation risks are real but overstated given that the private schools, which meanwhile include 22% of students, just run better than public schools. There are some smaller single school players that overly focus on profit making though, which should be better regulated. So I see it as a risk as mentioned, but a nicely uncorrelated one at a very nice price.
I mean the social democrats, the left and the green party are campaigning on an outright ban on profit making for private companies running schools. Social democrat leader Magdalena Andersson has stated: “Profit withdrawals in schools will be stopped by 2026” if they win.
Current polls indicate that these three parties would get an outright majority. If they need support from some other party to get a majority, then we could get some sort of profit limit instead, but even in this scenario it would be unlikely that the current situation continues unchanged.
Try asking some AI about the Risk of a Ban on Profits in Schools if the Left Wins the Next Election in Sweden!
Excerpt of grok's take on it:
"Probability Assessment
High Risk (70–90%): If the left-wing bloc secures a majority, a profit ban is highly likely, as it’s a core issue with strong voter support.
Moderate Risk (40–60%): With a weak majority (e.g., relying on Center Party or Liberal support), compromises like a profit cap rather than a total ban may emerge.
Low Risk (below 30%): Only if the Tidö bloc retains power or public opinion shifts significantly. Current trends suggest otherwise.
In summary, this is one of the hottest issues for the 2026 election, driven by concerns over segregation and school quality. The left-wing bloc is leveraging it to mobilize voters, while the right warns of threats to school choice."
Correction: current polls actually indicate that the left block plus the centre party would form a majority, but it's close that just the Social democrats, the left and the green can get a majority. See https://www.svt.se/special/valjarbarometern/
I should add though, that even if the left wins, I dont think a ban will be implemented in 2026, it's going to take a bit longer, passing through parliamentary investigations and stuff. But I agree with Grok's probability assessment (putting aside that the numbers add up to more than 100%).
Hey Martin thank you for sharing. I think the proposal is on limiting profit withdrawals for private schools that don't meet certain benchmarks and would mainly affect small less professional players
Cedergrenska's founders think this will actually benefit them, and I tend to agree that the risk of them being affected is real but is smaller than many think.
Hope you are right! And thanks for responding!
I think the idea of "limiting" profits was part of earlier proposals (e.g., the 2017 Reepalu inquiry, which suggested a profit cap based on invested capital). Current rhetoric and proposals, especially from the social democrats and the left party (ex communist party), sound like a total ban rather than just limitations.
The left-wing proposals are broad and target all profit-driven schools, not just those failing to meet specific benchmarks. The focus is on the principle that public funds should not be used for private profit, not on punishing underperforming schools.
And Im going to be lazy here and use grok for the last point:
"Accuracy of "Mainly Affect Small Less Professional Players"
Incorrect: The proposed bans or restrictions would primarily affect large, profit-driven school chains, not just small, less professional players. Here’s why:
Large Players Dominate: Around 75% of free school students attend schools run by aktiebolag [stock companies], many of which are large chains like Internationella Engelska Skolan (IES) or Academedia. These companies often generate significant profits, making them the primary targets of the left-wing bloc’s reforms.
Impact on Small Players: Smaller schools, especially non-profit or cooperative-run ones, would be less affected, as they don’t typically distribute profits. However, small for-profit schools could face challenges if forced to convert to non-profit models, but they are not the main focus.
Data Point: According to a 2023 report from the School Authority, large school chains account for the majority of profit withdrawals, with some chains reporting profit margins of 5–10% annually. The left-wing bloc’s rhetoric (e.g., the social democrat's 2025 congress) explicitly criticizes these large players for prioritizing profits over education quality."
Thanks Martin for sharing your thoughts! Cedergrenska's reported net profit is aimed at 1% for this reason.
I think regulations will increase, but schools will keep doing great work and investors mainly in large schools will benefit from the regulatory burdens.
And I happen to have been involved in Swedish politics for about 10 years, so I guess this is within my circle of competence.
Kind of wish I had spent those 10 years focusing on Singaporean construction companies instead...
Alot to digest here. I'm sure you Swedes will do this more sensibly than the Chinese? :)
Mmh, about the amortization of goodwill hiding the true performance : it looks like part of the business, and a rerate from the market on this aspect is unlikely?
That's right the way it adds value is they consistently get a large amount of cash which they use for buybacks and acquisitions. Like in the past 6 months, bought back 10% and added 8% more students through an acquisition.
Do you think current margins and profitability is long term sustainable?
I think so although it will depend on inflation. From the different risks mentioned, I think that is the one to watch.
Wow, this is great.
Yes, I'm invested.