Shares of FTSE 100 tech giant ARM (LSE: ARM) closed last week at 1,189p but rocketed on Monday after the company announced a 1,700p cash offer from Japan’s SoftBank.
The intention is that the acquisition will be implemented via a court-sanctioned scheme of arrangement, and ARM’s directors are unanimously recommending that shareholders vote to approve the scheme, which should happen as soon as practicable in Q3.
With the shares trading at 1,675p, as I’m writing, there’s little upside for buyers today if the deal goes ahead: a mere 1.7% including the 3.78p interim dividend holders will receive on top of the 1,700p return.
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Analysts are divided on the likelihood of a counter-bid coming in. I wouldn’t buy today on the hope of such a bid, but if I already held the shares I’d be inclined to hang on just in case another suitor emerges with a higher offer.
Out with the old, in with the new
Shares of Stanley Gibbons (LSE: SGI) dived on a profit warning last autumn, and completely cratered earlier this year when it emerged that things were so dire an emergency fundraising was required.
The troubled stamps and collectibles group, whose shares had traded at 300p not much more than a year earlier, raised £13m at just 10p a share. However, following a corporate and audit update, and a boardroom clearout, announced last Friday, the shares have stormed up to 14.37p this week.
The good news is that the company has already exceeded the targeted annualised operating cost savings of £5m it set out in March and management has identified further savings. Past accounting was clearly over-aggressive, and there will be restatements and writedowns reducing net asset value. However, these won’t impact the cash position, and together with the departure of the executives who oversaw the destruction of shareholder value, a line seems to have been drawn under the inglorious past.
I like Stanley Gibbons’ new strategy of “realigning the business around predictable revenue streams, such that the company does not have to rely upon material one-off high value sales or major auction consignments to achieve profitability.” However, I believe prudent investors would be wise to wait for the company’s results and some visibility on future earnings.
Wheels up, or wheels off?
Fastjet (LSE: FJET) is another small-cap whose shares have collapsed from pounds to pence. Profit at the African budget airline has failed to get off the ground, and amid boardroom turmoil, the company was hurtling towards the end of the cash runway.
However, the shares rocketed from 23p to as high as 41p yesterday, following the announcement of a £15m fundraising. And a bizarre fundraising it was too. The price was set at 50p (a whopping 116% premium), in order — the company told us — for a number of fund managers “to satisfy their internal ownership limits”. What does that mean? Well, you’ll get a good idea if you can imagine a ‘Dragon’ on Dragon’s Den being offered, say, a 30% share in a business for £100,000, and saying: “No, but I’ll give you £100,000 for a 15% share“!
Good news though the funding is for Fastjet, potential profitability is both far off and uncertain, so, as with Stanley Gibbons, I think this is another case of ‘wait and see’.
