TOP IDEAS: Going private offer for DDS
Wireless International (TSX: DD) has more upside for insiders.
The Investorfile blog takes pride in
discovering small cap value stock investment opportunities which make up our
elite list of Top Ideas. Unfortunately at times, full value for our stock picks
never gets realized for investors.
Last month DDS Wireless International Inc.
(TSX: DD – $2.23), a world leader in providing wireless data solutions for
fleet management, announced a going-private transaction whereby the Company’s
CEO and controlling shareholder proposes to buy out minority shareholders for
$2.25 per share. This consideration implies an equity value for DDS Wireless of
approximately $31 million, this for a Company with $35 million in annual sales
(mostly recurring) with cash/investments of $11.3 million and no debt.
Our comment is: Here we go again.
Within the last year or so, several of our
Top Ideas have been subject to opportunistic offers from insiders, controlling
shareholders, at the expense of minority shareholders.
It started early last year with Radiant
Communications Corp., when a controlling shareholder group attempted to steal
the Company (with the help of its own directors) from minority shareholders at
$0.85 per share (See: Radiant Communications shares are a steal: Too bad they
are getting stolen). Fortunately for us minority shareholders (with the
help of media pressure), the highway robbery was thwarted and about six months
later a 68% higher offer ($1.43 per share) was consummated (See: Justice
served and big gain for minority shareholders of Radiant Communications.)
Not long after, our Top Idea Glavanic
Applied Sciences Inc. announced that the Company was going to be privatized at
an offer of $1.70 per share (of which $0.65 per share was paid using minority
shareholders’ own cash) (See: Offer to buy
Galvanic Applied Sciences pockets shareholders cash). This
transaction closed as is, returning only a small upside on our stock pick.
This time it is DDS Wireless. Although the
current offer equates to total return of about 50% (including dividends paid)
since we first recommended the Company’s stock, in our opinion the full value
for this investment has not been reached.
Realistically, what can we do about it? Not
much, but hope for a higher offer. That said, DDS Wireless is a great value
play but only for the Company’s CEO. It is now his top idea!
The Company has 13.5 million shares
DDS Wireless' website address is www.ddswireless.com
Author's Ownership Position TSX: DD - Yes
This article is for informational purposes only. This article is based on the
author's independent analysis and judgment and does not guarantee the
information's accuracy or completeness. The information contained in this
article is subject to change without notice, and the author assumes no
responsibility to update the information contained in this article. The
information contained within this article should not be construed as offering
of investment advice. Those seeking direct investment advice, should consult a
qualified, registered, investment professional. This is not a direct or implied
solicitation to buy or sell securities. Readers are advised to conduct their
own due diligence prior to considering buying or selling any stock.
Investorfile is not engaged in an investor relations agreement with DDS Wireless
International Inc. nor has it received any compensation from DDS Wireless
International Inc. for the preparation or distribution of this article.
The author of this article has acquired and may trade shares of DDS Wireless
International Inc. through open market transactions and for investment purposes