AVI Partners has been active at YuMe (NASDAQ: YUME) since the start of the year [previous Activist Strategy thoughts here]. Vertex Capital has gone active with a 5.3% stake.
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Vertex calls YuMe undervalued – at less than 2x EBITDA. The stock if off 70% from its 2013 IPO and the board is to blame. A focus on strategic alternatives (the anwser to everything, no?) and better capital allocation is the anwser.
Vertex wants to see EBITDA margins enhanced through more disciplined management of operating expenses and use its cash balance to make a self-tender offer – i.e. YuMe can buy 30% of its stock at $3.50 a share for a cool $35 million, which could be funded entirely from its $67 million cash box.
That $35 million tender would boost EBITDA by 40% per share. That tender would be more advantageous to shareholders than the company’s current plan to xpand internationally.
If Vertex doesn’t see some progress, it has said it’ll look to get some board respresentation who “think and act like true owners” of the company.
Shares are down 40 percent year-to-date.
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