The software company’s shares plunge 40%. Although negotiations for a sale are ongoing, there is no longer any satisfactory solution in sight.
Dear reader, valued reader
SoftwareOne has completely lost their trust. The immediate departure of CEO Brian Duffy announced today as well as the repeated lowering of financial targets have been the last straw.
Since going public in October 2019, the Swiss software reseller has excelled at one thing in particular: repeatedly overpromising and then disappointing.
The share price is like a rollercoaster ride – and today it crashes by 40% in a single day:
The last rise in shares to date began in June 2023. At that time, the founding shareholders of SoftwareOne – Daniel von Stockar, B. Curti Holding and René Gilli – announced that they had formed a shareholder group with the private equity company Bain Capital.
Their goal: to take SoftwareOne off the stock exchange at a non-binding proposed takeover price of 18.50 francs per share – at a premium of 22% compared to the previous day’s closing price.
The proposed takeover price corresponded exactly to the closing price on the first day that SoftwareOne was on the stock exchange. The company should have returned to private hands at this point.
It would have been a five-year zero-sum game for the public shareholders – but they would probably have tendered given their frustration with the company’s poor performance.
Resistance from the board of directors
But it never came to that: SoftwareOne’s board of directors was reluctant to take over and announced in January:
“Following a comprehensive due diligence review, the Board of Directors of Bain Capital received a non-binding value indication of CHF 18.80 per share.” And further: “The board of directors has carefully examined the proposal and is […] “We unanimously believe that the non-binding value indication neither provides sufficient certainty nor adequately reflects the underlying value of SoftwareOne and is therefore not in the best interests of the company and all stakeholders.”
The deal was dead, but the bickering continued: The founding shareholders demanded that an extraordinary general meeting be called at which the committee should be completely voted out and their own people should be installed instead – with Daniel von Stockar as president.
Clear the way to the deal
Now their goal was: Once the old board of directors is gone, the path is clear for a takeover – with Bain as the most likely bidder.
But things have been quiet since then, although SoftwareOne, with a completely renewed board of directors, has repeatedly asserted: “Discussions with interested parties regarding a possible going-private transaction are ongoing.” This is repeated in today’s communication.
However, the question increasingly emerged: Is Bain actually still interested in a takeover – and if so, at what price?
The numbers that SoftwareOne presented in the period of more than a year since the private equity house’s first expression of interest were clearly pointing downwards – and today the management has also adjusted its targets to this fact – in other words: lowered them once again.
Question of price
It had long been rumored behind closed doors that private equity houses would continue to express interest in taking over SoftwareOne, but given the operational development, not at a price at the level that Bain had quoted.
An investment banker suspects that today’s communication step was intended to dampen the stock market price to such an extent that a transaction would still be within the realm of possibility: a lower stock market price should allow a bidder to offer a premium without overpaying.
The founders have returned to power explicitly and for the good of the company with the aim of making a deal: “The founding shareholders are still convinced that the best conditions for SoftwareOne’s next growth phase exist in a private environment,” they wrote before the extraordinary general meeting.
The conclusion today is: you have failed.
Operationally, the company has lost its way – or has still not found it after five years on the stock exchange and the return of the founders. CEO Duffy has left – it will be announced this evening that he is moving to a US company ten times his size: the stock market price has crashed.
Today’s price drop of 40% to around 8 francs could actually spark new interest in a takeover. At this level, however, it is illusory that even a premium of 50% would still satisfy public shareholders.
It was precisely in their alleged interest that the former board of directors rejected Bain’s offer of 18.50 francs – because it “does not adequately reflect the underlying value of SoftwareOne”.
That was obviously a complete misjudgment.
Many investors agree: SoftwareOne has no place on the stock market due to operational weaknesses and repeated management failures. But it is precisely for these two reasons that the company is unlikely to disappear in the foreseeable future, at least not at a price that would be acceptable to public shareholders.
Kind regards on behalf of Mr Market
Ruedi Keller
