Sangoma Technologies Corp T.STC

TD

[retiredcf]

Continue to look for a double with a $9.50 target. GLTA

Sangoma Technologies Corp.

(STC-T) C$4.62

Star2Star Share Sale Details Revealed Event

Star2Star Holdings, LLC has filed a notice of intention to sell up to ~666k shares of Sangoma (~2% of issued and outstanding common shares).

Impact: NEUTRAL

Planned share sales to cover tax obligation. The previously announced share sales are related to the March 29, 2023 announcement that Sangoma amended the Star2Star purchase agreement. This new agreement resulted in an acceleration in the issuance of the remaining ~9.1mm shares owed to StarBlue Inc. shareholders. Previously, the remaining shares were to be issued on a quarterly basis through January 2026. The acceleration has resulted in a material tax obligation, which the net proceeds of the announced share sale is expected to cover.

Should Star2Star sell full amount under the filing (665,812 shares), the value of the sale would be ~US$2.3mm/~C$3.1mm based on yesterday's close. The sales are expected to be sold through the TSX or private transactions.

Interim Executive Chairman Norm Worthington will remain a major shareholder. Following the distribution of the ~9.1mm shares to StarBlue shareholders and proposed share sale to cover the related tax obligations, Mr. Worthington is expected to directly or indirectly own ~7.09mm shares, representing ~21.5% of the common shares outstanding. None of the shares to be sold are beneficially owned by Mr. Worthington.

Potential near-term overhang. We note that the planned share sale represents a few weeks of trading volume on Sangoma's TSX listing, so there could be a near-term overhang on the share price should these shares be mostly sold on the TSX. However, there could be less disruption should most of the share sales be conducted via private transactions, similar to past sales from vendors of Sangoma's prior acquisitions (e.g., VoIP Innovations). Following these transactions, we believe Sangoma's valuation could improve as the potential overhang is removed and there is a possible improvement in its trading liquidity.