Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

HK Type 4 license through Ballingal Investment Advisors Ltd. ("BIA" or "BIAL")

BACKGROUND
I have 20+yrs experience in Asia doing alternative strategies (i.e. non-delta1 non long-only) in fixed income, equity derivatives, and activist/catalyst/event-driven and long-short equity strategies with most of that time spent managing money. 

4 years in fixed income macro, 8 years running internal hedge fund and 4yrs investment banking at Citi in Japan, 3 years running an Asia multi-strat portfolio at a hedge fund, 4+yrs as an independent special situations analyst.

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Fox Corporation and <a href="https://www.smartkarma.com/entities/credible-labs-inc" target="_blank" data-smartkarma-citation="entities:26658:1" rel="noopener">Credible Labs (CRD AU)</a> yesterday announced a Merger Agreement between online finance/lending marketplace Credible and a newly formed entity of Fox Corporation designed to allow the CEO to roll over the bulk of his ownership stake in Credible (one-third of shares out) into a stake in the new company while taking A$55.25 cash for 1 million sharesThe Board of Directors of Credible - who together own 13% of shares out - unanimously backed the deal after a Special Committee of independent and disinterested directors evaluated and negotiated the deal and recommended it, receiving a Fairness Opinion saying the deal was "fair" from a financial point of view.The deal comes at A$2.21/CDI (CHESS Depository Interest), for a market cap of A$585mm which is not quite a double from the IPO just about two years ago. The A$2.21 price is a 12.4% premium to the VWAP since the 31 July 2019 quarterly report, a 20.8% premium to 6-day VWAP to 2 August, and a 55% premium to 90-day VWAP. Fox made the initial confidential proposal on 29 May 2019 and the price is a 30.8% premium to the price of that day. The deal comes at a 10x EV to trailing revenue multiple. It is said that the deal represents reduced uncertainty because Fox has pledged a commitment of a further US$75mm of equity funding going forward for growth. Several shareholders are on record as supporting the deal. According to the <a href="https://www.afr.com/chanticleer/credible-wins-big-in-murdoch-deal-20190805-p52dwn" target="_blank" rel="noopener">AFR</a>, VC firm Carthona Capital was Credible's first investor and remains one of the larger minority investors. They support the deal, though that is not surprising because they need to get out at some point and this gives them liquidity. Regal Funds led Credible's last pre-IPO capital raise and they support this deal. This too gives them a zero friction liquidity exit. According to the Australian and the <a href="https://www.ft.com/content/1818aee8-b740-11e9-8a88-aa6628ac896c" target="_blank" rel="noopener">FT</a>, Alceon Group also intends to support the deal. Alex Waislitz who runs Thorney Investments owns 4% of the company and thinks the bid is insufficient. He sees the move from student loan refinancing to mortgages (a market 80x the size) to be worth more than Fox is offering, and he said in a Sydney Morning Herald <a href="https://www.smh.com.au/business/companies/billionaire-alex-waislitz-hits-out-at-credible-labs-sale-to-the-murdochs-20190805-p52dus.html" target="_blank" rel="noopener">article</a> released yesterday that he intends to buy more at current prices. This honestly looks like a decent price - the 10x EV/TTM Revenue multiple offered is twice the multiple enjoyed by <a href="https://www.smartkarma.com/entities/lendingtree-inc" target="_blank" data-smartkarma-citation="entities:2802:1" rel="noopener">Lendingtree Inc (TREE US)</a> and <a href="https://www.smartkarma.com/entities/greensky-inc" target="_blank" data-smartkarma-citation="entities:27201:1" rel="noopener">GreenSky Inc (GSKY US)</a>.  The problem is that everyone hates to give up growth. And those who have bought into the idea of a growth asset growing in decent double digits forever could be reluctant to give up their hold on a business which they see as a future homerun. This deal has to be seen as a great deal for founder and CEO Stephen Dash. And from a synergies perspective, it looks like a great deal for both Credible Labs and Fox Corporation. But this deal may run into the problem that not enough people want to give up their shares.

Fox Corporation and Credible Labs (CRD AU) yesterday announced a Merger Agreement between online finance/lending marketplace Credible and a newly formed entity of Fox Corporation designed to allow the CEO to roll over the bulk of his ownership stake in Credible (one-third of shares out) into a stake in the new company while taking A$55.25 cash for 1 million sharesThe Board of Directors of Credible - who together own 13% of shares out - unanimously backed the deal after a Special Committee of independent and disinterested directors evaluated and negotiated the deal and recommended it, receiving a Fairness Opinion saying the deal was "fair" from a financial point of view.The deal comes at A$2.21/CDI (CHESS Depository Interest), for a market cap of A$585mm which is not quite a double from the IPO just about two years ago. The A$2.21 price is a 12.4% premium to the VWAP since the 31 July 2019 quarterly report, a 20.8% premium to 6-day VWAP to 2 August, and a 55% premium to 90-day VWAP. Fox made the initial confidential proposal on 29 May 2019 and the price is a 30.8% premium to the price of that day. The deal comes at a 10x EV to trailing revenue multiple. It is said that the deal represents reduced uncertainty because Fox has pledged a commitment of a further US$75mm of equity funding going forward for growth. Several shareholders are on record as supporting the deal. According to the AFR, VC firm Carthona Capital was Credible's first investor and remains one of the larger minority investors. They support the deal, though that is not surprising because they need to get out at some point and this gives them liquidity. Regal Funds led Credible's last pre-IPO capital raise and they support this deal. This too gives them a zero friction liquidity exit. According to the Australian and the FT, Alceon Group also intends to support the deal. Alex Waislitz who runs Thorney Investments owns 4% of the company and thinks the bid is insufficient. He sees the move from student loan refinancing to mortgages (a market 80x the size) to be worth more than Fox is offering, and he said in a Sydney Morning Herald article released yesterday that he intends to buy more at current prices. This honestly looks like a decent price - the 10x EV/TTM Revenue multiple offered is twice the multiple enjoyed by Lendingtree Inc (TREE US) and GreenSky Inc (GSKY US).  The problem is that everyone hates to give up growth. And those who have bought into the idea of a growth asset growing in decent double digits forever could be reluctant to give up their hold on a business which they see as a future homerun. This deal has to be seen as a great deal for founder and CEO Stephen Dash. And from a synergies perspective, it looks like a great deal for both Credible Labs and Fox Corporation. But this deal may run into the problem that not enough people want to give up their shares.

Fox Deal for Credible Labs Great For Fox & Founder. Will Someone Else Decide They Like It Better?