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The board of Melbourne-headquartered brokerage group Selfwealth (ASX: SWF) has rejected a $41.2 million takeover offer from multinational competitor Stake, claiming the proposal "did not offer appropriate value to shareholders" who have seen the stock price plummet 30 per cent since the start of 2023.
This morning the company confirmed it had received a confidential, non-binding, indicative proposal from Stake at 17.5 cents per share (cps), which is above the last closing price of 14cps but still well short of the 20cps level seen in January.
With 129,403 active customers as of June, Selfwealth's size is around a quarter that of Stake's 540,000 users.
Selfwealth reported a maiden profit for FY23 with an EBITDA of $4 million and net profit after tax (NPAT) of approximately $100,000; the latter in stark contrast to a $6.3 million statutory loss in FY22. In what the group's newly appointed chair Christine Christian AO described as a year of turnaround and change, operating revenue surged 45 per cent.
"Selfwealth’s maiden profit was supported by positive growth in key metrics. The Company’s compelling business model continued to differentiate it from peers and attract a growing and loyal customer base during the period," Christian said after the company's release of its FY23 results in August.
"The Company is in a solid financial position, as demonstrated by the end of year cash balance and three consecutive quarters of positive operating cashflow.
"This will support Selfwealth’s transformation program and enable it to adapt to shifting investment trends and preferences in the market."
But these positive numbers failed to allay investor concerns over the drastic shake-ups in leadership in recent times, including the resignation of CEO Catherine Whitaker in July after just over two years in the job.
Her immediate departure came within weeks of Selfwealth appointing a new CFO, while the company also had three directors resign early in the year, two of whom had only joined the board in the second half of 2022.
It is against this backdrop that the current board - comprising Christan, Emanuel Ajay Datt and Paul Clark - knocked back the takeover proposal, which Stake has confirmed was made on 17 September.
"The company regularly considers opportunities for industry consolidation as a means to optimise value for Selfwealth shareholders," the board stated in an announcement to the ASX.
"After careful assessment, the board of Selfwealth formed the view that Stake’s incomplete and conditional proposal did not offer appropriate value to Selfwealth shareholders.
"Accordingly, the board decided it was not in the best interests of SelfWealth shareholders to engage in substantive discussions with Stake."
They highlighted "meaningful growth opportunities" for the company, while also noting the recent commencement of a comprehensive cost optimisation programme that will be announced in more detail next Tuesday.
In a statement, Stake chairman Geoff Lloyd describes the proposal as "compelling", with a 40 per cent premium to yesterday's closing share price and representing an attractive opportunity for shareholders to receive immediate and certain value for their SWF shares.
"We strongly believe that a combined business can successfully compete in the current market and provide a superior and differentiated client offering to better serve customers," he says.
"By combining our data, resources and talent we can provide our combined customer base with a world class platform experience, and great access to financial opportunities."
At the time of writing, SWF shares have risen to the same level as Stake's offer - 17.5cps.
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