Wednesday, Jun 23rd 2021

SharpSpring to be acquired (+77% gain)


Given we own ~3% of the company, we had the opportunity to discuss the transaction with Rick Carlson (the founder and CEO of SharpSpring) after the acquisition news release on behalf of our clients. He believes the innovation SharpSpring can provide combined with Constant Contact's scale with over 500K customers is a great outcome for their partners, their employees and their shareholders. He said the one pushback from other investors has been that they need to find another place to deploy capital!

On 6/22, Constant Contact (backed by Clearlake and Siris Capital) has agreed to acquire SHSP for $240mm including outstanding debt, a 21% premium over SHSP’s closing share price of $14.11 as of 6/21. Constant Contact expects the deal to close in 3Q21, pending shareholder approval.

For context, Constant Contact is a digital marketer for small businesses, and its acquisition will accelerate its product road map through SHSP’s rich suite of marketing automation software tools. This transaction highlights the accelerating demand for low cost automated SaaS providers, such as SHSP (in line with our prior thesis), which is exemplified by the company’s rollout and adoption of new products, low attrition rates, and increasing monthly recurring revenue (MRR).

Taking a step back, when a buyer looks to acquire a public company, they often need to gain approval of the majority of the target company's shareholders. Thus, once news broke of the acquisition, we analyzed each major SHSP shareholder across their position activity (have they been buying or selling at certain levels?), implied IRRs (how much money are they poised to make through this acquisition?) and prior actions (how have these shareholders reacted in similar situations?). Through this exercise, we believe that the majority of shareholders will vote in favor of the deal.

Although the transaction undervalues SHSP’s intrinsic value, we are pleased with the 77%+ gain our clients have received over the span of 10 months. We are actively working on new ideas, one of which, that has a very different business model and end customers vs. SHSP.

We will continue our mission of attempting to improve your portfolio’s compound growth rate by leveraging our growing resources and communicating our ideas along the way. Stay tuned for some exciting Opportunities portfolio changes coming soon as a result of this deal.

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