a couple of observations post this announcement (from someone v bullish this setup/situation over the last few months).
1) this is a massive deck-clearing, derisking event, basically it removes the 'wake up one morning and CBI has caused another random 40% drawdown in the stock' risk. this is not to be under-estimated. the CBI/PCSIL overhang here - going on 2 years - obliterated any investability for this name amongst real money pros; and, perhaps more importantly, would have cast a long shadow over any attempt to sell the business
2) the market's reaction here - to send the stock back to levels, barely where it was weeks ago, and nowehre close to the pre-derisking price before the last trading update ($1.10 or so) tells us two things - 1) fatigue here is real, a large number of legacy investors (First Sentier, etc) are probably still selling, right now, and are price insenstivie; and 2) it begs the question whether this listed small-cap entity will ever get something close to fair value in the public markets
3) the main new info from the release was that the strategic review is ongoing. that is quite important. they did not mention Sentennial by name (as they did last time) which suggests to me that a full company sale is very much on the table (obviously huge positive). in retrospect it is probable that no one was willing to consider a whole-company transaction without the PCSIL/CBI issue being resolved, given regulatory/compliance risk - but that has now been removed. it stands to reason that strategics or financial buyers would now be able to re-engage, cleanly, on a whole-company transaction.
4) given the lacklustre trading and Alta Fox's position size, it is likely they can only really exit at close to fair value through a sale (or partial sale and big div, etc). look at how long it has taken First Sentier to dribble out stock. If Alta Fox gets wholeco bids at $1.3-1.5, do you think they are going to stick around? I believe not. they specifically mentioned 'maximizing shareholder value' in the latest update - new language, this was not in the November update, and to my mind that connotes considering a full sale.
5) the $20mm cash cost to exit PCSIL was actually slightly lower than I was modeling - since I assumed they would be on the hook for more than 1yr worth of forward cash burn. it appears not, however - nice surprise.
6) catalysts: basically in the next six months you are quite likely to see at a minimum, a sale of Sentennial (positive); potentially a sale of the whole co at a big premium (huge positive); and even wihtout that, a continuation of earnings momentum as management focuses on taking out costs; returning core biz to growth; and as we cycle through higher interest income on the float. this is likely to drag fundamental real money investors back into the - now clean, investable - story.
i believe there is a huge degree of asymmetry here now, because this is largely self-reflexive. if the market doesnt value the equity reasonably closer to SoTP value - a number i think is still about $1.6, standalone, without any synergies for the acquirer if this were to be theoretically sold - then why wouldnt the board sell up? today's reaction only demonstrates (to me), this probably shouldnt be a listed entity. but if the market gets it together and rerates this to $1.3 or higher, ok, then they won't sell, that is fine. ie heads we win, tails we dont lose (hopefully).
either way - i am SHOCKED the stock is trading where it is, given the implications of the clean PCSIL exit - after two long years of purgatory - and the implications also of the language in the PR regarding ongoing strategic process. i bought a decent amount further in the 85-90c range.
GLTA.
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