ANNOUNCES PRELIMINARY SIB RESULTS; ELLIOTT LOOKING TO EXIT?
THE TD COWEN INSIGHT
The SIB should help offset recent selling pressure. However, it appears pre-IPO investor Elliott tendered all of its shares and following proration will still own ~17.5mm SVS. We believe there could be further selling activity from Elliott but expect such activity to be orderly, as we believe it has been to date. Post-SIB, CVO still has a very strong balance sheet to help support the stock.
Impact: NEUTRAL
Key details. ~6.49mm shares (including ~45.3k MVS) will be repurchased (~6.24% of basic shares outstanding) with a take up price of C$7.70/share. This was at the bottom end of the SIB range of C$7.70-C$9.25, and is ~3% below yesterday's close but ~5% higher than the share price when the SIB was announced in early June, in conjunction with its Q4/F24 results.
The SIB aggregate purchase price is ~C$50mm (~$37mm) or ~22% of Coveo's ending Q4/ F24 cash balance. After giving effect to the SIB, Coveo expects to have ~53.81mm SVS and ~43.70mm MVS outstanding.
None of Coveo's directors or executive officers participated in the SIB.
Potential overhang from Elliott? Based on the Depositary's preliminary count, ~30.13mm shares were validly tendered and not withdrawn. To Coveo's knowledge, none of its shareholders owning 10% or more of the aggregate voting rights will have any shares bought back under the SIB.
However, we believe pre-IPO investor Elliott Management tendered all of its shares,
as ~23.67mm of the shares tendered were SVS tendered through a single tender (only ~6.5mm shares were tendered by other shareholders). Public records indicate no other investor owns close to as many shares. It appears as though Elliott tender drove the clearing price.
Shareholders who tendered their shares at C$7.70 (or below) are expected to have ~25.91% of their shares repurchased (excluding odd lots that are not subject to proration). This means that Elliott would have ~6.13mm shares repurchased and own ~17.5mm SVS post- SIB.
Given their SIB participation and some selling activity this year, we believe there could be further selling activity from Elliott but expect such activity to be orderly (i.e., have relatively modest impact to the share price), as we believe it has been to date.
Balance sheet remains strong. CVO had ~$167mm at the end of Q4/F24 and accounting for the SIB, it should have ~$130mm in cash. With CVO guiding to ~$10mm in operating cash flow this year, the company should have plenty of cash to support the stock through its NCIB should its shares come under pressure, in our view.