March 13, 2023
AcuityAds Holdings Inc
Regulators Backstop SVB Depositors
Our view: The U.S. Treasury, Federal Reserve, and FDIC released a joint statement on March 12th announcing actions to protect all SVB depositors. Factoring in a 100% recovery rate on AcuityAds' SVB deposits, our price target reverts to $3.50 (from $3.00).
Key points:
• Regulators backstop SVB depositors. In a swift turn of events following the company announcing material exposure to SVB on March 10th, the U.S. Treasury, Federal Reserve, and FDIC on March 12th released a joint statement announcing all SVB depositors will be fully protected with: (i) shareholders and certain unsecured debtholders unprotected; (ii) senior management having been removed; (iii) any losses to the Deposit Insurance Fund to support uninsured depositors to be recovered by a special assessment on banks as required by law; and (iv) the Federal Reserve Board making additional funding available to eligible depository institutions to help banks meet the needs of all depositors. Depositors will have access to funds starting March 13th.
• Price target reverts to $3.50. In response, the company confirmed that no financial losses are expected and that its cash situation will be resolved without any interruption to its operations. The company's SVB exposure comprises US$55MM on deposit and a US$8MM secured term loan. As of Q4/22, the company had cash on hand of $86MM and net cash of $75MM. With the company now gaining full access to its SVB deposits, our NAV assumes 100% recovery of these deposits returning our price target to $3.50 (from $3.00). Fundamentally, we continue to believe the company's 2023 outlook is constructive despite economic headwinds that are likely to weigh on growth, with management expecting positive YoY revenue growth in 2023, including positive revenue growth in Q1/23 which largely bucks the trend of many of the company's ad tech peers