U.S. Global Investors says $5.30/share takeover offer undervalues company

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• U.S. Global Investors (NASDAQ:GROW) said that Echo Lake Capital and Deerhaven Capital's offer to purchase the company for $5.30/share undervalues the investment advisory firm.
• "The Company does not believe the proposal provides the company’s shareholders with appropriate value for their securities and therefore is not interested in pursuing the Proposal based on the terms submitted," U.S. Global said in a statement late Friday.
• The company added that it has been been building up its cash position in anticipation of a potential recession.
• “In a recession, cash is king,” Frank Holmes, U.S. Global CEO and Chief Investment Officer. “We have raised the limit to our share buyback program and increased our dividend twice, and now we are building up our cash position, which we believe is wise and prudent to weather this bear market and what could be a challenging recession."
• Echo Lake Capital and Deerhaven Capital on Monday offered $5.30/share including $2.65 per share in cash and $2.65 per share in newly issued 8.5% preferred stock in the company, and represents a premium of 20% to GROW's Jun. 24 closing price.

Comments

[Sound Investor]

Frank, what do you say now? It won't help minority shareholders given Frank's control but a proxy effort might be useful here

[Josh Klein]

This is just the beginning I presume. Frank unfortunately won’t take any price for the company and that’s why he must be ousted as CEO. He’d reject $8-$10 as well. His interests lie with HIVE and using GROW as a piggy bank. The stock is down over the last 10 years. Where is the value creation? I would welcome a buyout at $5.30+ because Frank won’t get the stock there

[Isdn6666]

@Josh Klein
I was hoping at least some interest even at an undervalued price would push the stock up a little bit but nothing. Holmes' statement about recession and hoarding cash is absolutely comical.

[lowdawg81]

So theyre offering the cash on the balance sheet and perferred stock in a partnership. So basically just a change in management and business focus.

[Sound Investor]

We're trading well below the offer so the market doesn't think the bid is real. However, Echo Lake has highlighted the opportunity here. Frank can either take aggressive steps to raise the value of the company - how about a self tender for 25% of the company? - or it can be put in play. His choice

[Purewater]

Overpaying by about $5

[thehip]

Wait 3 months and submit a new bid for $4. They will jump at it.

[Extreme Income Plus]

@thehip wrong my friend; I'm long and I won't jump at less than $7 cash. The offer is crap; $2.65 in preferred stock from some investment partnership? Are you kidding? Probably will be unlisted, so you can't sell it.

This is close to an insult to shareholders, but I don't get insulted about money stuff; I just say NO.

Jim
Extreme Income Plus
(long GROW)

[JunkBondage]

Not a large premium, and half wampum doesn’t bode well for these bidders. It’s on my radar now!