Activist Shareholder Pushing For Sale Of Identiv
Scott Matusow | Dec 22, 2014 05:44AM ET
Identiv (NASDAQ:INVE) has been a company we have written a lot about over the last six months. Normally, we only trade small cap companies and rarely invest in them, but Identiv is one we believe is a worthy investment because of its undervaluation and growth potential. Well known activist investor David Callan first pointed out Identiv to us as a legitimate small cap investment and convinced us to do deeper due diligence on the company. We ended up agreeing with Dave, and took position in the stock.
In order to be fair with our coverage of Identiv, we want to present Callan’s current thoughts on Identiv, many of which we agree on.
While Identiv seems intent on improving investor relations as noted by company CEO Jason Hart, activist investor Dave Callan is nonetheless pushing for it to hire an investment banker to pursue a sale of the company.
On worth $400M , so this was not a future or forward looking opinion.
We also note that this was said in an earnings call months ago when the company was not as strong as it is today.
Also, another view not being considered (the one we take) is that the company being so quiet is because it has been shopping the company, and may be getting close to selling it. In fact, we believe this has been Harts’ intention from the moment he took over Identiv a little over a year ago.
We recently guided our subscribers that Volcano Corp (NASDAQ:VOLC) was very close to being acquired and we assigned a 70% probability for an acquisition to occur before the end of this year. On December 17th, Volcano was acquired by Phillips for $18 a share.
We believe based on our due diligence that Identiv is a lot closer to being acquired than many might think.Our recent research indicates that Samsung might be interested and could be one of the currently unrevealed partners Hart referred to in the last earnings call. An added benefit that a large and profitable company such as Samsung would gain from purchasing Identiv is in the form of accumulated deficit. For Identiv, the company has an accumulated deficit of about $332 million as of September, 2014.
A significant portion of this money would be able to offset future earnings or be written off. So, along with the technology, intellectual property rights, patents, and projected sales for next year of about $120 million, Identiv would have this additional leverage when negotiating with a potential suitor.
With current industry consolidation taking place, along with Identiv’s cleaned up balance sheet, the company seems groomed for a buyout.
We think that Identiv can certainly succeed on its own over time, but there are substantial risks for a small company like Identiv to take this route when an acquisition would remove these risks and bring a fair value now for the company’s shareholders.
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We think it’s a good thing when companies have activist investors such as David Callan owning a significant stock position. We agree with most of Callan’s views, but we also believe Harts’ intention all along has been to get the company to this point – groomed and ready for acquisition by a much larger company with the correct leverage to take Identiv to its full potential now rather than years down the road.
Therefore, we believe the company will be acquired in Q1 ’15, but it appears that Callan will not idly wait and see if this comes to fruition or not as he is taking activist action now.
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