Israeli gambling software maker Playtech made an audacious £459.6 million ($US702.05 million) bid for crisis-hit trading company Plus500 on Monday — but investors and analysts can’t decide if the price is right.
To recap, Plus500’s share price went into free fall just over two weeks ago after the UK’s regulator told the company its anti-money laundering checks weren’t up to scratch. The Israeli-headquartered company had to freeze thousands of UK accounts while it scrambled to fix the problems. Playtech then swooped in with a low-ball bid two days ago.
Plus500’s management, who hold 35% of the company’s stock, have backed the £4 ($US6) a share offer, despite the fact it’s way below the £7.50 ($US11.50) level Plus500 shares traded at before the crisis. The board say the deal will give the company the scale it needs to recover from this crisis and repair the business.
Everyone else, however, seems to think the price is wrong.
The Daily Mail reports that hedge fund giant Odey Asset Management is holding out for an offer above £4 a share, with talk in the City that the investor wants over £5 ($US7.50) a share.
Odey held 13% of the company prior to the account freezes and bought shares at pre-freeze prices. The fund also doubled down on its investment throughout the price crash, buying more stock perhaps on the hope of a price rebound.
Odey, Plus500’s largest single shareholder, now holds 25% of the company and could look to block the bid. The fund may not be able to, however, as the deal is governed by Israeli takeover law, which only requires 50.1% of shareholders to approve the deal.
Meanwhile, the hedge fund that kicked Plus500 while it was down is claiming Playtech’s bid is hugely overpriced.
Just days after Plus500’s account freezes, little known San Francisco investment house Cable Car Capital published a blog questioning the company’s business model and accounts. The fund said shares should be worth just 76 pence ($US1.10) — way below what it was worth even after a 66% drop.
Now Cable Car Capital is going even lower, saying Plus500 shares should be worth just 52 pence ($US0.80). The fund has kept up a steady flow of blogs attacking Plus500 since the original blast, although none have had the impact of the original. Portfolio manager Jacob Ma-Weaver is holding a call with press and investors on Friday to convince them of his case.
Numis’ Jonathan Goslin, one of the two analysts that cover London-listed Plus500, thinks any future bid for Plus500 is more likely to be lower rather than higher.
Goslin says in a note published today that there are “significant number of uncertainties that could trigger the material adverse effect clause”. That means Playtech has written it into the deal that if things get any worse with Plus500 it can simply walk away. If that happens then rivals could make an even lower offer for Plus500.
For his part, Goslin isn’t giving any target price for the company. Numis suspended both its rating and target price for Plus500, saying they “have been unable to contact management since the review was announced” — a very unusual admission from an analyst.