High Fives and Back Slaps for Recent Deals Leave Investors Empty Handed
Playtika’s deals and Splitit’s private equity fire sale prove once again that the bankers and lawyers are the only ones who always get paid
There’s a scene in the film “Pulp Fiction” where Mr. Wolf (Harvey Keitel) puts a damper on the pride of work well done by Jules Winnfield (Samuel L. Jackson) and Vincent Vega (John Travolta) for their cleaning up a car interior apres’ a gun mishap.
Yes, the blood-soaked seats are hidden, but “...let's not start sucking each others d****s quite yet,” The Wolf chides.
('Pulp Fiction' screen grab used in accordance with Clause 27a of the Israel Copyright Act.)
I’ve been tempted to advise the same to the flurry of congratulatory posts on social media, primarily LinkedIn, by various individuals who were party to the recent acquisitions announced by Playtika (PLTK) as well as the go-private deal executed last month by Splitit Payments (SPT).
On these deals, the bankers and lawyers always get paid, while the equity shareholders are either holding dead money (Nasdaq-listed Playtika) or were already so far under water (Australia-listed Splitit) that their ears popped.
Do-Nothing Deals
In the last 12 months, Playtika stock has declined about 2%. During that time, management announced a premium, all-cash offer to acquire Rovio Entertainment for EUR 9.05 per share, on Jan. 19. It abandoned that plan three months later.
News that the deal was off and that Rovio would conduct a “strategic review” sent the Helsinki-traded shares of that company soaring and they still haven’t come back to earth.
What has PLTK stock done since “preliminary discussions” ended on March 22? They’ve slipped more than 2%.
Since the Aug. 1 announcement of the Youda Games portfolio from Azerion Group, Playtika investors are down 11%.
And despite a bump from its latest announcement, on Sept. 15, to acquire Innplay Labs, that news only trimmed the shares’ six-month decline to 5.4%, as of Monday morning’s trading.
While PLTK stock declined over the last year, the Wedbush ETFMG Video Game Tech ETF (GAMR) gained 1.13%. That exchange-traded fund has Playtika as its eighth-biggest holding, at 2.59% of the 92-stock portfolio.
Among the Israel-focused ETFs, ARK Israel Innovative Technology ETF (IZRL) has the shares at number 35 of 47 stocks in the holdings, or 1.93% weight.
Way Down, Under
Buy now, pay later platform Splitit had the unfortunate luck to debut on the Australian Securities Exchange (ASX) in January 2019, a couple of weeks before Covid caught fire.
From a March 8, 2019 high of AUD 1.57 a share, it eventually fell to AUD 0.26 a year later. Within six months, SPT stock had recovered to AUD 1.51, a level never to be seen again.
On Aug. 17, Splitit announced that it secured a $60 million “capital commitment” from an investment group that includes Motive Partners, Thorney Investment Group and Parea Capital and Motive Partners.
Motive will fork over $50 million ($0.20 per preferred share) in two equal tranches. But there’s a catch.
For the initial tranche, Splitit will delist from the Sydney bourse and re-incorporate as a private company based in the… (wait for it)... Cayman Islands.
If shareholders approve the delisting, they will be faced with a choice of retaining ownership in Splitit as a private entity or selling their shares via the ASX ahead of the exit. The ASX share price is down another 30% since the deal announcement, to less than AUD 0.04 a piece.
“The Board considers that the ASX-listed enterprise value of Splitit undervalues the business. This is primarily due to a lack of liquidity and a lack of appreciation of the Company’s differentiated value proposition and prospects,” read the company’s announcement of the deal.
For those shareholders who opt not to sell, management said it expects “to have a partnership with PrimaryMarkets, a private share trading platform, to facilitate periodic trading in Splitit shares during the period subsequent to the completion of the delisting.
Imagine if the bankers and lawyers were paid with those delisted shares.