RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:Q1 FY2015 Valuation Updatelogical_thought wrote: @nkbourbaki
Again, you've made fair points, although despite the software capitalization cash generation was still almost a million bucks last year. But I do think we're on the same page here, in that if this company were growing at 20%/year with these margins we'd be talking about selling it at 2.5x revenue, and instead I'm only aiming for 1x. So yes it comes down to the fact that it's REALLY CHEAP even after accounting for the negatives and yet because of those negatives, as a free-standing company the share price may not climb appropriately which is why the board and management HAVE TO hire a banker and put this company up for sale while we still have a favorable world environment for M&A.
I have no idea if this is true or not, but I imagine Mandelstam's stake will hold back the type of transaction that you have in mind, unless is the only option.
Back in 2010, under his tenure as CEO, the board had to make a decision. They knew growth had stalled. My guess (pure speculation) was that Mandelstam had been running the company since 1984, was ready to get out, but didn't want to put the company up for auction for a few reasons: 1) shares had come down from much higher levels, 2) they had an even more cash-rich balance sheet so could buy some time, 3) nobody was expecting the TDM sales to drop as quickly as they did, and 4) he employed of a bunch of people and my guess is he's a loyal employer. So they brought in new management to try to regain some growth, figuring that if that didn't work then they could just put it in orderly runoff, milk the cash, and everyone would have time to find something else. I assume the reason they went for a guy like Wignall is because the plan all along was to get some growth going as quickly as possible and then sell while the stock was on the rise.
Mandelstam historically wasn't a guy to sit on his thumbs. Read what he wrote in the 2001 annual report:
The year 2000-2001 has been our first full year of operations as a public company. The year has seen both progress and some adversity. This letter looks back on the past year and forward to our new opportunities.The reverse takeover brought with it new management with aggressive ideas for marketing and growing the business in the new ‘dot com’ paradigm, based on marketing initiatives that may have produced results in other, less technical industries. This did not prove to be an entirely successful strategy in the business environment of 2000-2001. While not all the expenditures and marketing efforts were inappropriate, the accelerating decline in sales combined with rapidly increasing expenses was obviously unsustainable.
Fortunately, Sangoma.com is not a start up. We have an established business and an existing, loyal customer base. With the support of holders of a majority of the shares, the founders of the business regained control of the Company in March 2001, with a mandate to return Sangoma to profitability and then to growth. Having returned the Company to a positive cash flow position, our focus is now moving to growth of the business."
My guess is that Mandelstam thinks about the share price a lot differently than you or I. A buyout at the levels we're talking about will give you and I a quick double and net him some nice retirement cash. But it won't make long-time employees wealthy. So for them it may be better to remain independent and try to keep the music playing. It's not like they're close to going bankrupt or anything.
Pure speculation.