Best Idea Long GIL with news today that the company is exploring a sale. When the initial news was announced about Chamandy being removed from the CEO seat in December, we highlighted the rising probability of a sale of the company as a potential bullish catalyst. Chamandy created value in the stock in the early years of his tenure, but since 2014 the stock has done little to nothing, significantly underperforming both the S&P and XRT. A business with this moat and growth opportunity isn’t going to sit at depressed multiples forever. Perhaps a reason for the timing here is the pressure being applied on the board from long time shareholders with the constant drama around the CEO change ahead of the May shareholder vote. There has been news articles and official letters with accusations from the shareholders and justifications from the board seemingly every week since year end. Potential suitors might see an opportunity to get a decent price on a buyout.
Ultimately we think a price to get a deal done here is about $50/sh vs current $37 after today’s 10% rally. We’re still buyers here as we build to $70+ in value over a TAIL duration and a sale being a shorter term payday.
CLICK HERE for our quick take from CEO Transition Announcement December.
We held a call in December on the Activist Debate, CLICK HERE for full video replay.
