In today’s briefing:
- GoTo: Lock-Up Expiry and a Coordinated Secondary Offering – Further Downside to Share Price Likely
- SSE50 Index Rebalance Preview: Sector Shift as IT and Financials Drop
- Elmo Software Enters a SID with K1 at A$4.85
- MergerTalk:Market Turbulence/Wide Spreads-Spotlight On MaxLinear’s Acquisition Of Silicon Motion
- Spotify 3Q22: Another TikTok Victim?
- FactSet Research Systems: Alternative Data Services & Other Drivers
- Verizon Communications: Enterprise Intelligence Campaign & Other Drivers
GoTo: Lock-Up Expiry and a Coordinated Secondary Offering – Further Downside to Share Price Likely
- GoTo on Monday confirmed that it’s currently working with pre-IPO shareholders to explore a coordinated secondary offering of shares held by these shareholders when their lock-up expires on 30 November.
- Following IPO, most shareholders agreed to hold onto their shares for a period of 8-months, and the lock-up period for around 90% of outstanding shares will expire next month.
- As we continue to highlight in our previous insights, growth in top line does not necessarily mean profits for GoTo, and the company continues to burn cash to fuel growth.
SSE50 Index Rebalance Preview: Sector Shift as IT and Financials Drop
- The review period nearly complete, we see 7 potential adds and 9 potential deletes at the December rebalance. However, there can be a maximum of 5 changes at a rebalance.
- We estimate a one-way turnover of 4.28% at the December rebalance leading to a one-way trade of CNY 3.42bn. Index arb activity could add to the impact on the stocks.
- The potential adds have dropped over the last month while the potential deletes have moved higher over the last couple of weeks.
Elmo Software Enters a SID with K1 at A$4.85
- Elmo Software (ELO AU) entered a scheme implementation deed (SID) with K1 at A$4.85 per share, a 100.4% premium to the undisturbed price.
- The key conditions are a shareholder and regulatory (FIRB & US antitrust) approvals. The scheme meeting is likely in early 1Q23.
- While not a knockout bid, it is attractive in the context of current conditions. Key shareholders will vote in favour. At the last close, the gross spread is 4.8%.
MergerTalk:Market Turbulence/Wide Spreads-Spotlight On MaxLinear’s Acquisition Of Silicon Motion
- Turbulent markets can widen merger spreads arbitrarily creating attractive arb opportunities with the potential for outsized IRRs
- Among the several live transactions indicating unusually high spreads, none looks more alluring than the prospective MaxLinear (MX US) acquisition of Silicon Motion (SIMO US) in the semiconductor sector
- The combination of an exceptionally wide spread driven by unsupported skepticism that the merger will not pass muster with China’s SAMR and historically low valuations make SIMO’s risk-reward profile enticing
Spotify 3Q22: Another TikTok Victim?
- MAUs beat, margins miss, guidance weak. Where / when is the operating leverage?
- Podcasting business took a restructuring charge this quarter, not bullish for the business meant to expand gross margins.
- TikTok reportedly readying a new streaming music app… not good.
FactSet Research Systems: Alternative Data Services & Other Drivers
- After many quarters of consistently beating Wall Street expectations on all counts, FactSet delivered a mixed result in the last quarter exceeded revenue expectations of analysts but missing out on earnings.
- The company finished fiscal 2022 with organic ASV plus professional services growth of $158 million, accelerating by approximately 200 basis points year over year to over 9%.
- With private company coverage throughout their content refinery, workflow solutions for private equity and venture capital companies, and seamless linked workstation integration, the team is progressing with its private market strategy.
Verizon Communications: Enterprise Intelligence Campaign & Other Drivers
- Verizon ended the quarter with a wireless service revenue increase of 10% over the prior year and 2% over the previous quarter, surpassing Wall Street expectations.
- With consumers responding well to the company’s new offerings and thus increasing store traffic, its Consumer segment has begun to gather traction.
- Their Welcome plan also enhanced customers’ perceptions of cost, which helped to increase consumer phone gross adds year over year.
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