@stu1101 -- You’re worrying about the wrong thing atm. The risk of being acquired is relatively low and even if there’s an offer shareholders can vote against it and vote it down. Not sure when people get this in their head – we shareholders have a voice re what’s going on at the company with regards to major decisions and can express that via our vote on a host of issues from this to executive compensation, dilution, etc. Think the current SP level doesn’t represent FV and is short changing shareholders in an offer?!? Well, then vote against it like any other reasonable shareholder should!
I don’t believe there’s a big risk of mgmt. being enticed to sell out as an acquisition by someone like EDV would effectively spell the end for DT at the firm (i.e. if they don’t let him go as part of the deal he will get managed out), so he’s going to vote against it. Doubt the ex Kaddy guys will be too happy either as it cuts off their upside and locks in a paper losses they’d otherwise could recover as the work hard to reach their earn outs. Any deal would reflect these little items in a manner that wouldn't result in the windfall people think it may be for the team. EDV also isn't able to offer the share upside convexity using their own shares and most of the guys know that and the big upside is shares, not cash comp.
At a hypothetical 4-5c acquisition price range that was floated in an earlier comment this would present a 54% to 94% premium vs. the prior close, but would mean major new holders who came on via the Kaddy acquisition would crystalize 11.8%-29.5% in losses on their shares. Any deal EDV would offer would cut off LT potential for owner/operators removing the primary incentives to even stay and any deal would definitely be accompanied with a set of handcuffs for key staff.
So roughly 20-25% of the voting shares associated with owner/operators would already likely vote against the deal. Not very exciting for a tech guy to work for the dinosaur on the block when they can’t offer incentive structures even remotely to what they got in place atm at a tech venture. Also not sure if this is what EDV is after tbh. Just ‘buying it because we can’ isn’t a business strategy and they already got systems in place to engage with on/off premise venues. Would be a ton cheaper to just throw a little bit of money at that to optimize it then take over a whole new business and all the hassle and risks (!!) that come with that.
The Kaddy team has most of their transaction value still tied up in the business via shares and most of these guys are fairly young so they’re trying to shoot it out of the park, not trying to settle for a semi cushy corporate gig they can still get in 5-15 years down the line. If that was the priority they’d never have joined Kaddy in the first place. It’s simply unlikely that the majority of the owner/operator team would consider a deal atm unless there’s a binary outcome in terms of the firm’s going concern, and I simply don’t believe that’s the case either. The team basically knows they have only one real option:
work themselves out of this situation (aka the flagging company valuation) by growing revenue, improving margins and pushing the firm towards profitability to give them more resources to reinvest into the company to generate additional growth which eventually will be reflected in the company's valuation. That's a very clear alignment of risk/incentives with the common shareholders.
Not sure if we are yet at peak fear, but it certainly feels like a lot of folks here are reaching or have already reached the capitulation phase. We've gone from focusing on how there's no limit but the sky to perceiving any conceivable risk factors as a potential mortal risk to the firm and investor upside. Maybe time to be a bit more rational and level headed.
(20min delay)