Hey Darin - that's a great idea. We've got a post going up shortly and we'll put an SPB update in there, it's an interesting story where a follow-up would be useful. Thanks!
"Post-Q3 enterprise value is $4.739 billion; pro forma for the termination fee it’s about $4.4 billion. That’s 8.4x our $525 million FY22 estimate"........."8x multiple for SPB doesn’t seem out of line. That admittedly still suggests potential for some real downside: 8x $525 million in EBITDA gets SPB all the way down to $29." How does .4 on 525m or 210m or `$5/share move the stock down from low 40's to $29? Something doesn't add up?
bleepity bleep you're right - didn't account for the termination fee in the $29 calculation. Assume 10% cash tax and that's an extra $7-plus, so should be $36.
My apologies - this is a complicated story but that was a lazy error. We'll correct.
So essentially a watch and wait strategy for more clarity on whether the deal will close? Merger arb isn't my thing, but TWTR seems like a better risk reward today in the low $50s after Musk told the judge that he would close at the end of the month vs. in the low $40s two weeks ago? Patience wins?
This was one where the idea is intriguing but we're not *quite* sure downside valuation is where we would like it to be. For me personally, it's on the watchlist if the market takes another leg down and brings SPB with it.
But in the meantime it's an interesting story with enough to it that we thought readers would find the idea useful. And it has enough uncertainty in terms of valuation that some may well be much more bullish than we are, either bc of greater optimism toward cyclical effects on the business and/or a belief that Assa's actions suggest the odds of the sale being done are much higher than we modeled here.
I'm not a big merger arb guy, either, which explains a bit of my reticence to pound the table too fiercely. That also explains why I personally never pulled the trigger on TWTR despite it looking like the right trade to me in the low $40s.
In the low 50s, given what downside is if something crazy happens (what if the debt doesn't sell? What if Musk reverses field again?), the trade looks OK, but not something I would really consider. I did consider it at $42 and unfortunately thought it was just a step too far beyond my core competence (to the extent that exists).
Vince, would love to see an update on this one based on current events.
Hey Darin - that's a great idea. We've got a post going up shortly and we'll put an SPB update in there, it's an interesting story where a follow-up would be useful. Thanks!
"Post-Q3 enterprise value is $4.739 billion; pro forma for the termination fee it’s about $4.4 billion. That’s 8.4x our $525 million FY22 estimate"........."8x multiple for SPB doesn’t seem out of line. That admittedly still suggests potential for some real downside: 8x $525 million in EBITDA gets SPB all the way down to $29." How does .4 on 525m or 210m or `$5/share move the stock down from low 40's to $29? Something doesn't add up?
bleepity bleep you're right - didn't account for the termination fee in the $29 calculation. Assume 10% cash tax and that's an extra $7-plus, so should be $36.
My apologies - this is a complicated story but that was a lazy error. We'll correct.
So essentially a watch and wait strategy for more clarity on whether the deal will close? Merger arb isn't my thing, but TWTR seems like a better risk reward today in the low $50s after Musk told the judge that he would close at the end of the month vs. in the low $40s two weeks ago? Patience wins?
This was one where the idea is intriguing but we're not *quite* sure downside valuation is where we would like it to be. For me personally, it's on the watchlist if the market takes another leg down and brings SPB with it.
But in the meantime it's an interesting story with enough to it that we thought readers would find the idea useful. And it has enough uncertainty in terms of valuation that some may well be much more bullish than we are, either bc of greater optimism toward cyclical effects on the business and/or a belief that Assa's actions suggest the odds of the sale being done are much higher than we modeled here.
I'm not a big merger arb guy, either, which explains a bit of my reticence to pound the table too fiercely. That also explains why I personally never pulled the trigger on TWTR despite it looking like the right trade to me in the low $40s.
In the low 50s, given what downside is if something crazy happens (what if the debt doesn't sell? What if Musk reverses field again?), the trade looks OK, but not something I would really consider. I did consider it at $42 and unfortunately thought it was just a step too far beyond my core competence (to the extent that exists).
SPB is an intriguing situation. I also tend to avoid companies with this many moving parts.