Converge Technology Solutions Corp T.CTS

RE:"Gift From The Investment Gods"....Jordan Zinberg

[AlwaysLong683]

Digger0144 wrote: I will post a link to the video @ BNN Market Call...timeline is late August, 2021.  I will post another link to the news release from CTS regarding the REDNET AG purchase as a reference to the timeline...August 5, 2021.

Jordan Zinberg's Top Picks - Video - BNN (bnnbloomberg.ca)

In my opinion Jordan Zinberg is much too optimistic in regards to his buyout price of $9.00 per share and I also very much disagree with the downside risk of just 15% if a deal is not made...my guess is 25%-30% downside from here if they fail to make a deal....there are far too many traders in here anticipating a possible sale...they will dump the stock in a heartbeat...to be sure!  Remember, the stock was at $3.60 before the strategic review announcement.

We must be vigilant and realistic...we were informed about possible interest from certain entities that were interested in a potential purchase of the company...that was on November 22, 2022....some 10 weeks ago.

They hired Houlihan Lokey Capital on December 12, 2022...that was almost two months ago...it has been 10 weeks since their first press release.  The market as a whole is much smarter then one bullish individual...we would be much closer to $9.00 if his comments are inline...we would be more then likely at $7.00 -$7.50 per share.

We have stalled at $6.00 and enough time has passed to give us some indication of how the talks are going...that is why I sold half of my position...I  reduced my risk at this point in time...I think it was prudent on my behalf.

Converge Technology Solutions Corp. Acquires REDNET AG - Converge Technology Solutions (convergetp.com)

Realistic and Vigilant.

All the Best!
Digger0144

A few points to add to Digger's post above:

CTS closed at 6.95 on October 25

By November 22, it has fallen to 3.99, a drop of 42% in just one month's time.

November 22 shortly after market close:
- CTS issues a press release indicating the initiation of a Strategic Review process.
- A trading halt is implemented right after the announcment that same everning
- The trading halt is then lifted before market open the following day (November 23).

The above series of events gives me the impression that CTS may have wanted to stop the bleeding in its rather rapid share price decline by initiating a Strategic Review hoping  the market will react by boosting the share price in anticipation of a company sale at a lucrative premium. The trading halt appears to be an additional tactic to get the market excited. Why announce a trading halt after market close only to lift it before market open the next day? Usually, trading halts are initiated during market hours so signficiant announcements can be made and allow for market players to digest them before a trade resumption. Similarly, if you initiate a trading halt after market hours, it typically remains in place for another one or two business days before it is lifted to allow market players ample time to consider the new (typically very impactful) information and react more rationally before the stock can once again be traded.

In the meantime, I suspect the Board / Management of a number of other Canadian small cap tech stocks have been contacted by other entities expressing interest in purchasing the company. However, those other potential takeout targets may have either rejected the overtures by telling the inquiring parties they are not interested in entertaining offers to purchase the company (or perhaps would consider such a takeout if it was ridiculously generous), or may be negotiating privately with them to see if an agreement can be reached. If a deal is struck, it would be made public with the BOD recommending shareholders vote in favour of the agreement.

Regardless, CTS's strategy appears to have worked.

On November 23 (the day after the Strategic Review announcement), CTS closed up 23% at 4.89.

By the end of tax loss selling season at the end of December, the share price stood at 4.50, a decline of only 8% from November 23.

The 2023 rally was also good to CTS as it closed today at 5.92, a gain of 32% so far this calendar year.

All else being equal, does anyone believe CTS would be trading anywhere close to 6.00 if the Strategic Review had not been announced....?

As far as financial advisor Houlihan Lokey Capital is concerned, they do appear to be very good at mergers, acquisitions, restructurings, etc. However, they won't be able to extract blood from a stone even if they put forth their best efforts, so at the end of the day, CTS will only be worth what another entity (public or private) is willing to pay for it on a per share basis, and at some point CTS's Special Committee will have to decide if such an offer is acceptable or recommend another option.

If the Committee announces they recommend the company not be sold, the share price will revert to what the investment community thinks it's worth as a going concern given the plan / strategy the company announces it will pursue, which in my view will likely be signficantly lower than what it is trading at just before this news is released.

My own personal view is I don't think CTS has a great future at least over the next couple of years as any given interest rate increase by the BOC or FED can take as long as 12 months or so to work its way through the entire economy, and the BOC and FED have been raising rates steadily since March 2022.