I was wondering why Macq Insto started selling out their position in the middle of last month, now it makes sense. Usually its just Bells. Ready up for a revised Bell Potter valuation target and a pump to distribute those 20c underwritten shares.
Couple of things I have had time to consider regarding this transaction from all the second-hand market info floating around:
1. With the added dilution, revised MC and increased SOI from placements, we will need to see the market really receive this deal well. If demand can wash through all the new supply then should bode well. However, usually placement shares hold the share price down after an initial interest period. Will take a few months for it to rise off a base and really kick off imo.
2. The biggest thing for penny dreadfuls is most stay at a certain level - revenues may rises but from a small base (or never rise), costs don't really reduce, CR for working capital "expansion" plans keep management paid. For me, EVS attracting this deal and looking for big money validates management have really turned a corner. It is a validation that they are able to scale a business through significant acquisitions. If you look at the graveyard of penny stocks on the ASX, not many management teams are able to do what EVS has done, or about to do. It really will be a transformational deal when it lands.
Ideally I would have liked them to really grow their core SaaS business and win at that (big, meaty China projects) but I feel this deal was opportunistic. It will give them much needed scale in new clients where they can augment the B+J offering with Envirosuite - increase revenue, increase margins through customer value.
I will be interested in how they restructure the business with the B+J acquisition.
EVS Price at posting:
26.0¢ Sentiment: Buy Disclosure: Held
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