Los Angeles, CA -- (ReleaseWire) -- 07/06/2018 -- Street Innovators, a news and research portal which researches and highlights Wall Street's Newsmakers has issued a report covering shares of Micronet Enertec Technologies whose shares rose 31% to $1.65 after BNN Technology- the Chinese technology, content and services company- acquired a 14.89% stake in the company.
BNN, which formerly traded in Europe on the AIM market of the London Stock Exchange at low equivalent to roughly £42 (U.S. $55 per share in February of 2018, also announced that it will seek to acquire, through a third-party cash tender offer at a price of at least $1.65, an additional 35% stake in MICT.
The move, which appears to have been quarterbacked by US investment bank, Maxim Group, will allow BNN to own, in aggregate, at least 50.1% of the company's issued shares. The innovative plan will then result in MICT acquiring BNN and an unrelated third party PaaS company in exchange for cash and shares.
In late May, the company's Chief Executive Officer David Lucatz hinted that the firm was seeking to make acquisitions. "With a fortified balance sheet, we believe that MICT is well positioned for both organic growth and expansion through acquisitions".
The timing, it seems, matched perfectly with BNN's own plans. Since coming under the direction of new leadership, at the beginning of 2018, BNN has been focused on progressing a listing in the U.S. capital markets on the NASDAQ. Folding into the MICT entity appears to be a smart and efficient way to do it, yet it doesn't seem that investors holding already undervalued MICT shares have fully been able to appreciate or digest the implications of this news. In fact, the last two sessions have seen shares soar as high as $1.94 and as low as $1.43 in what paints indecision on the part of some MICT longs.
This caused head scratching among observers who noted that the official press release itself touted a much higher valuation to come:
"As a result of the contemplated transactions, MICT, a publicly traded NASDAQ company, would own BNN and the Third Party, and would have a sizable valuation that offers shareholders in each entity an attractive opportunity for the future."
Granted, it is not uncommon for shareholders who hold stock before such tender offers are announced at a premium, to wake up to suddenly significantly higher share prices and rush to take profits- thereby "selling on the news." It seems improbable, however, that anyone would want to sell shares of this low-float stock (9.14M shares outstanding with only 7.71M in the float) at any price lower than the offered premium, yet that is exactly what appears to have happened.
Seasoned investors who have seen these types of transactions in the past, often hold out and refuse to sell at tendered offer prices, driving valuations and share prices even higher.
Perhaps at play here also is the idea that investors couldn't readily find information about the China based BNN firm, which among other activities holds a 10% stake in its strategic partner Xinhuatong- a software development company with exclusive rights for payment processing and other key services on mobile apps for Xinhua News Agency, the official state-run press agency of the People's Republic of China. This partnership allows BNN to ride the rapidly growing mobile payments sector in the Chinese smartphone user market.
As of September 25, 2017, audited bank rolls by Ernst & Young LLP, confirmed the cash positions of BNN's bank accounts in the UK, Hong Kong and China amounted to £27.9 million (approximately $36.8M).
Given the current valuation $15M valuation of MICT, and comparing to the value of the firms it is set to acquire, some traders feel that the casual spectator is incorrectly looking at that tender amount as a calculated valuation. "Why pay $2 for the stock if this group is only willing to pay $1.65," says one trader who has been following the company for about 9 months. "I think it is psychological. Without the tender I think the stock would be much higher."
Then there is the idea that MICT shares were already undervalued before all of this news. Company shares have been on the rise since October of 2017, but are still considered to be trading at greater than 50% discount vs Future cash flow value of $5.27.
A big stake of 46.53% in MICT is held by the general public while MICT's 38.63% institutional ownership seems enough to guard against significant share sell-offs like we saw in the market on Thursday. Shares rejected lower prices and rallied a furious comeback in the second half of the trading day, closing strong into the close.
Technically and fundamentally speaking, shares may be ready to rise now that "weak hands" are out of the stock, especially since there is a low level of public shares available on the market to trade.
We'll keep an eye on Micronet Enertec Technologies and see how it all plays out. Perhaps retail investors will finally figure this opportunity out.
The full version of this report including technical analysis of each stock can be found here:
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