Calamos Asset Management (NASDAQ:CLMS) went public at $18.00 on October 27, 2004. Raising $360 million before underwriting fees. On December 19, 2016, company insiders planned at $8.25 offer for the remaining shares. Shareholders have little choice as insiders control the votes.
The more recent 10-Q for the period ending September 2016, states that during the past nine months Treasury shares were purchased at an average price of $8.95. The go private offer is priced at a discount to the price paid for Treasury stock during the past nine months.
During the nine months ended September 30, 2016, Calamos Investments repurchased 525,328 shares of Class A common stock, at an average purchase price of $8.95 and a total cost of $4.7 million under this repurchase program.
The balance sheet shows 8,934,490 shares of Treasury stock with a cost of $117,806,000 or $13.19 per share. The go private price is a discount of over 37% to the price paid for Treasury stock on the balance sheet.
CLMS data by YCharts
The price performance of Calamos has lagged that of the S&P 500 ETF (NYSEARCA:SPY) and the long term U.S. Treasury ETF (NYSEARCA:TLT). Cash would have performed better than the stock price of Calamos.
Calamos has seen asset under management stagnate. Part of the reason for this might be the complex ownership structure, the other part might be the poor performance of managements repurchases of its shares. Investors may have questioned the logic of placing funds with a firm that has over paid for its own shares. A firm that insiders should understand better than any other public firm.
CLMS Return on Assets (TTM) data by YCharts
The return on assets has been declining of late.
It is disappointing that the special committee of the board would consider $8.25 a fair price, after approving share repurchases where the average price paid was $8.95 during the prior nine months and $13.19 for the Treasury stock on the September 2016 balance sheet. If the $8.25 is a fair price, then it would appear that the board destroyed shareholder value with its share repurchase plan.
Valuations in the markets can change quickly, maybe the board can negotiate a better price given the lift in financial stocks since the election. Though, the odds could be against that outcome.
A stock issued with a complex capital and ownership structure may trade at a discount to its peers for a reason. Calamos $8.25 offer clearly shows one reason. Insiders control the votes and there is little outside shareowners can do. It shall be interesting to see if the board can garner a better price than $8.25. By accepting the $8.25 price it would appear that the board acknowledges that it over paid for the Treasury stock.
Can someone explain how the share repurchases added value? It sure looks like the share repurchases destroyed value, IPO at $18.00 to go offer to go private at $8.25.
May 2017 be a very good for all!
Disclosure: I am/we are long CLMS.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: May exit the position shortly as there is little reason to hold given the vast voting power of the insiders.