Jacob's commentary on OVRL and ANY Overland Storage (Nasdaq: OVRL, not rated) provided an update on its proposed merger with Sphere 3D (TSXV: ANY, target: C$16, BUY rating, HIGH risk), along with other operational and financing matters.
Key highlights:
· Draft registration statement filed with SEC: Overland/Sphere 3D filed a draft registration statement this morning pertaining to their proposed merger. The filing of this document indicates that Nasdaq approval for the merger has been obtained. Moreover, the document states that Peter Tassiopoulos (current Sphere 3D CEO) will move to President, while Eric Kelly (current Sphere 3D Chairman and Overland CEO) will become the new CEO of the combined entity. We do not view this move as altering the current level of involvement of Mr. Tassiopoulos, and believe that Eric Kelly, with a long track record as IT industry executive, suits the role of CEO well.
· Overland on track to exceed Tandberg related cost focused restructuring: Overland now expects to exceed the US$20M cost savings resulting from restructuring post-Tandberg acquisition by 10% to 15%.
· Merger related class action lawsuits have been settled.
· Overland has secured US$5M in debt financing from Cyrus Capital to fund working capital.
Key takeaway:
· We view the current C$7-$8/share trading range as providing a good opportunity to trade into Sphere 3D ahead of catalysts, including: (1) likely strong CYQ3 results from both OVRL (strong cost containment as per today’s announcement) and ANY (Novarad and other distribution partners now into commercial delivery of Sphere 3D products); (2) the imminent closing of the ANY-OVRL merger; and (3) potential add-on announcements that may be pending official closing of the merger, such as new technology partnerships, distribution agreements, or strategic relationships.
And a note to the bears, even analysts can be wrong short term on entry prices. The general market conditiona are not helping either. IMO