Comment by brookst 10 months ago
To complete the data, the company is trading at $0.34/share, so while $0.40 is a bit lower than the typical 20% premium (~$0.41), I'm not sure it counts as "lowball". It's a typical premium over market cap.
Is there any reason to think the company is worth $4.7B or whatever ($9.30/share)? If so the stock is a steal at its current price and we should all buy lots. But can the market be THAT wrong?
If someone wants to delist and have equity/executive control -- there is little minority shareholders can do to prevent it in practice
The controlling interest can just hire incompetent ops heads and side-line competent ones for a few quarters ... slowwalk any events that could increase value
The board resigning likely helps the plan
Fair chance future offers will get worse the longer it goes on
if that is the case, isnt paying stockholders 20% over value a pretty good deal, and not a ripoff?
It seems like there are contradictory facts being claimed: that the price to go private is a lowball, and that the current price is accurate.
If the one offering 20% over listed price is the one causing the listed price to be far more than 20% below what the company could be worth if they were running it properly, most people would consider that to be a ripoff.
That seems like conspiracy thinking. The stockholders own part of the company with current management, not some hypothetical alternative.
If they sell, they are selling a stake in the real company as it exists, not the alternate reality one.
Think of a more relatable example. . A rental house with crazy tenants sells for less than a vacant one.
If you buy or own a stake in a business that is controlled by poor managers, you are lucky to sell for a 20% premium.
That would completely be fraud, but seems pretty far fetched.
They have been (miss)managing the company about the same for 18 years, so it would have to be one of the most epic cons of all time.
On the other hand, partial owners and management take companies private all the time. It is an extremely common occurrence. It and PE buyout are probably the two most common ways.
The resignation implication is that the CEO is running the company to the ground.
The comment further implies this is on purpose in order to buy the company cheaply.
Since CEOs typically own a lot of stock and are compensated for performance, doesn’t that seem like a strange theory? Intentionally destroying a company you run and own shares in so you can buy more shares seems like a really complicated and high risk strategy compared to just running it well, making a fortune, and getting an even bigger CEO gig.
I don't think you're properly modeling a truly ambitious person whose basic needs are already fully-met for life.
Anne Wojicki is already sufficiently wealthy – net worth $150m+? – that maybe what really interests her is playing hardball for (say) $10B+ instead of just a few hundred million more? Or for the control & glory of shepherding forward some breakthrough cancer treatments that the other investors might simply treat as financial options to sell early?
And, perhaps she's got the votes & de facto IP control & legal budget to think she's got a good chance of winning, and even a loss can't cut her out?
Isn't this just bare-knuckle "founder mode"?
The viability and profitability of the strategy depend critically on the ownership and control position of the CEO. Many CEOs do not have all that much stock, in percentage terms. If they have access to resources and sufficient board control they could privatize, reset the cap table, and reorganize.
If they were to reorganize first and produce a company worth as much as its competitors, they only get eg 5% of eg 30B, which after taxes makes them maybe a billionaire. Reorg and do the same thing and they could be looking at control and $10-20B.
Where tens of billions of dollars are involved, “really complicated” and “high risk” plays are basically table stakes.
Was that not a strategy successfully employed by Ford to edge out other investors?
Honestly, it would be more surprising to me if this sort of thing never happened. In politics it happens fairly regularly (entryism, agent provocateurs etc.) so why wouldn't it happen in business? It would take even less coordination, all it would take is a bit of personal loyalty between top leaders which - shock and horror! - didn't disappear when one of them changed company.
I don't know the first thing wrt how 23andMe has its governance and voting setup, but the letter seems to imply the CEO has majority power or, at least, a large enough plurality that it is a one-person-show:
> Because of that difference and because of your concentrated voting power, we believe that it is in the best interests of the Company’s shareholders that we resign
EDIT: But that brings up a different question: If you have majority voting power, why try to take the company private (as it has been suggested by others here)?
> EDIT: But that brings up a different question: If you have majority voting power, why try to take the company private (as it has been suggested by others here)?
1. Less legal oversight and paperwork.
2. I don’t know the terms of the buyout, but if this means the CEO, family, friends, etc (“insiders”) become the new shareholders, then any future upside will be distributed to insiders not the open market.
> If you have majority voting power, why try to take the company private (as it has been suggested by others here)?
I don't know their governance structure, but the CEO may have a majority of votes, but not own a majority of the actual shares. Being able to take the company private would give her (and her other investors) full economic control as well as voting control.
This is risky ground, of course. Even with voting control, legally the CEO cannot screw over the minority shareholders.
>But that brings up a different question: If you have majority voting power, why try to take the company private (as it has been suggested by others here)?
voting power dictates control. Ownership dictates rights to profits. you can have full control with 51% ownership, but you still only get 51% of profits.
The CEO owns 49% of the voting power so the board is pretty much toothless. Facing a direct conflict with her, loudly resigning is probably about the best they could do.
Yes. The market can be THAT wrong, not just wrong but also corrupt and broken (on purpose).
Hint: regulatory crisis, Suzanne Trimbath, failure to deliver shares, naked shorting, Tesla shortsqueeze, VW shortsqueeze, UBS's and Swiss gov's 50 year secret, etc.
You’re kinda all over the place with your “hints”. Naked shorting and failure to deliver shares have zero relationship to setting a bid price people are willing to buy at.
Shortsqueezes are cases of driving prices up because shares are hard to get and shorts need to cover. Again, not related to the best offer being too low.
Secrets are also dumb examples because that’s hidden information.
What we’re talking about here is the valuation with all of the public information available now. Nobody of any relevant market size seems to agree that it should be $9/share.
There is no "setting a bid price" when your order doesn't hit a lit market (hint: it doesn't, it gets routed straight to dark markets).
I'm willing to grant some leeway on a shortsqueeze.
If one is willing to grant that the stock "price" for a liquid listing, is the price for a stock at any given time, then you could argue the markets are "wrong" insofar that the price quoted in the open market, is absolutely not the correct price - regardless of the excuse of a short squeeze.
They are not the same because without available shares to short its very easy to recognize there is stuff overpriced in the market and the open market can’t do anything about it because the sellers are limited and they control the ask.
This is absolutely not true of a price that’s “too low”. Anyone, including you, can go hit those asking prices and start to load up. There is also capped downsize risk (as opposed to uncontrolled risk in a short).
This is all to say that it’s possible that company could be worth $9-10/share, but based on all of the information publicly available today, there are effectively tens of thousands of people each swinging billions in capital than are parking it in stuff providing 5% return rather than the 20000% you suggest is there.
So this tells me that you are just much more hopeful for the future of the company than the current financial projections and prospects support.
You actually think people are familiar with most, if any, of your hints? You mention Susanne Trimbath like most people have any idea who she is. If you construct an argument instead of throwing out a buzzword salad of ideas, people are more likely to listen to you.
My take on their comment was that it should be worth many billions if it was being run effectively but that it's not.
That doesn't mean the market is wrong, it means the market thinks it will continue to be run ineffectively.