SurfStitch CEO Justin Cameron has resigned in an apparent move to take the online retailer he co-founded private.
The surf and skateboard clothing company says it understands Cameron is pursuing a potential acquisition of the business in conjunction with private equity.
“The company stresses that it has not, to date, received any formal or informal proposal from, nor has it had any discussions with, private equity in relation to any potential acquisition,” Surfstitch said in a statement.
The Surfstitch shares have been see-sawing lately after the company backed away from providing full year guidance. Yesterday the shares were up 9.6% to $1.185 but were as low as 99 cents last month, just below the 2014 float price of $1.
Today the shares jumped 15% to $1.37 in early trade. Any takeover bid would have to be in the region $2 a share, near the $2.07 high and at the same level of a capital raising in November.
The private equity firm Cameron is working with hasn’t been named but the Australian Financial Review says a candidate is US-based TSG Consumer Partners which makes investments in middle-market consumer and retail companies.
Cameron tendered his resignation by email. He was still within his initial fixed two year appointment period and before his employment contract permits.
The chairman, Howard McDonald, is now monitoring the activities and day to day operations of the company.
SurfStitch has engaged UBS to act as its financial adviser and Herbert Smith Freehills to act as its legal adviser.
The company was formed by Cameron and Lex Pedersen eight years ago. Pedersen ran Surfection, the surfwear shops, and Cameron was an investment banker and research analyst at Credit Suisse.
SurfStitch is on a growth program, not paying dividends as it builds its market share and expands into content-related businesses.
In its latest half year results, revenue was up 40% to $144.9 million and profit $5.7 million as it reinvests its cash. Revenue from North America was up 63% to $24.1 million.
The company is forecasting continued strong double digit revenue growth.
However, it is no longer providing earnings growth, saying: “Given the pace of change and long term opportunities presented to the business, management and the board believe it is no longer prudent to focus on a defined EBITDA (earnings before interest, tax, depreciation and amortisation) range.”
Cameron and Pedersen are cashed up at the moment. They sold 10 million shares at $1.77 each in August.
As CEO, Cameron has been the heart and vision behind the business. Pedersen runs the US side of the business.
SurfStitch wants to be the Netflix and Amazon of extreme sports, the centre of a digital ecosystem around the surf and action sports lifestyle.
Itâ€™s all about the idea that owning content is good for business because it creates and audience which can be converted to sales.
In May last year, the retailer bought a surf weather site, Magicseaweed, and a global online news magazine, Stab Magazine, for $13.8 million cash and 4.8 million shares.
In November the company bought action and extreme sport video producer Garage Entertainment, a local Sydney company, for $15 million in cash and shares.
Garage, founded by Nick Cook and Mick Lawrence in 2009, has the largest library of action sports online with more 3,000 titles which it distributes through its own video-on-demand platform and dedicated TV channels.
Assets include the acclaimed Australian documentary Bra Boys, the TV series The Crew, and Missing, a top 5 download in the iTunes chart.