There is a controlling shareholder here who owns 67.1% of the shares and has offered to buy in the rest at a fixed price. That price looked like a floor in June. By December, on the current run rate, it will sit below the company’s own net cash per share.
That is the whole setup. The balance sheet added roughly $0.43 per share of net cash this quarter on essentially zero capital expenditure, and it will keep doing so. At some point in the next two quarters, the parent’s offer implies acquiring a business earning $155M of annual EBITDA for less than nothing, with the minority paying for the privilege. That is a hard fairness opinion to write, and the deal requires a majority of the unaffiliated holders to vote yes.
The quarter itself cooperated. Direct-to-consumer crossed 50% of social casino revenue, cost of revenue improved 350bps year over year, and the rate of organic decline is getting better, not worse. The stock now trades 8.5% above the bid. My discounted cash flow, assuming free cash flow declines 5% per year forever, says $28.72.
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