Like nearly each different deSPAC, DMS got here to the market with inflated expectations, they initially guided to $78MM EBITDA in 2021, however solely delivered $58MM. DMS began 2022 with flat steering of $55-60MM EBITDA, however now solely anticipate $30-35MM on account of wage inflation hitting their value construction (500+ workers), advertising budgets getting slashed and LTV fashions being adjusted down of their core auto insurance coverage market (Allstate and State Farm are two of their largest clients). Administration expects to return to progress in 2023.
DMS is founder led, the corporate was began in 2012, the three co-founders are nonetheless within the c-suite right now and personal 35.8% of DMS via their “Prism Information LLC” funding car. In 2016, DMS took on a PE funding from Clairvest, who nonetheless owns 27.5% of DMS, and rounding out the highest 3 holders is Lion Capital at 11.6% possession, Lion was the sponsor of the SPAC. In whole, these three corporations personal 75% of DMS, the remaining 25% has little or no institutional possession and is probably going held by retail holders who had been caught up within the SPAC mania.
On Monday 9/8, through Prism Information, administration made a non-binding supply to accumulate the entire publicly traded Class A shares for $2.50/share, a 121% premium from the place the inventory closed the earlier Friday. In their letter, they point out that Clairvest and Lion “are prone to conform to take part” alongside Prism, leaving solely 25% of shares needing to be bought, or about $40MM. The supply isn’t topic to a financing situation (essential in right now’s market), however DMS does have $26MM money on its stability sheet and Prism has $50MM in pre-committed financing from B. Riley (RILY) to finish the transaction.
The supply values the minority curiosity at someplace round ~10x probably trough EBITDA, once more administration expects to return to progress in 2023 (they’re the very best positioned to know if there may be certainly an inflection) so this could possibly be an opportune time for them to take it personal once more. In August 2021, the corporate introduced they had been exploring strategic options, on the final two convention calls, CEO Joe Marinucci (the signatory on the Prism supply letter), has acknowledged they had been “hoping to have an replace right now” relating to strategic options, this supply is probably going the top outcome. Marinucci would know the place third events presents had been for the enterprise earlier than providing $2.50 to the board, that is possible the very best supply and the impartial board members will take it given there are not any vocal or vital minority shareholders.
Shares closed right now at $1.94/share, a 28% unfold to the Prism supply. Sure, there may be vital draw back given the place DMS traded earlier than the supply, however there are not any shareholders to place up a struggle and certain that is the very best supply after the corporate ran a course of. In any other case, I believe the unfold is extensive as a result of it’s a low float former SPAC. I purchased a smallish place. Given the variety of deSPACs, I anticipate this being the same fruitful looking floor because the “damaged/busted biotechs”, please ship me any others that sound or really feel like this one.
Disclosure: I personal shares of DMS
