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Ergoresearch Ltd. value exposed in low-ball offer
Posted by: Gerry Wimmer

TOP IDEAS: Company CEO will realize the future upside from going private offer for Ergoresearch Ltd. (TSXV: ERG) at the expense of public shareholders.

We have always said that Investorfile takes pride in discovering small cap value stock investment opportunities, which make up our elite list of Top Ideas. But, that said, at times, full value for our stock picks never gets realized for the minority investors of some of these public companies.

Last month, Ergoresearch Ltd. (TSXV: ERG – $0.295),a leading manufacturer of specialty orthotics, which has built up Quebec’s largest network, comprising of 70 orthotic clinics best known as "Equilibre” announced a going-private transaction. The Company’s CEO (a controlling shareholder in Ergoresearch) in conjunction with a merchant bank proposes to buy out minority shareholders for C$0.30 per share.

This offer implies an equity value for Ergoresearch Ltd. of approximately $22 million, which is essentially at no premium to book value. Last reported the Company had cash of about C$8 million (C$0.11 per share) and no debt.

What a "sweet” deal for the buyer!

Since the inception of the Investorfile blog, several of our Top Ideas have been subject to opportunistic offers from insiders, controlling shareholders at the expense of minority shareholders.

It started 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 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 Investorfile’s stock pick four months after the date when we initiated first coverage.

Next was DDS Wireless. It was a privatization offer by the Company’s CEO and controlling shareholder. The offer equated to total return of about 50% on this investment from the date we first recommended it. In our opinion the full value for this stock was not nearly reached.

This time it is a low-ball offer for Ergoresearch.The shareholder meeting to vote on this privatization will be held on February 16, 2018. If approved, the return on this investment will be capped at 30%, less than a one year since Investorfile first recommended this stock (See: Ergoresearch is a small cap healthcare technology stock that is rich in value and cash).

We left numerous messages for the CEO of Ergoresearch, and hence no reply. I guess he will use the cash and realize the upside.

The Company’s website:

Author ownership disclosure: Yes: TSXV: ERG

Read Disclaimer:

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. is not engaged in an investor relations agreement with Ergoresearch Ltd. nor has it received any compensation from Ergoresearch Ltd. for the preparation or distribution of this article.

The author of this article has acquired and may trade shares of Ergoresearch Ltd. through open market transactions and for investment purposes only.



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Hi Gerry, Your philosophy is focused on principles that have been shown to produce above average results over time and your record has clearly proven that. Congratulations on a great blog and thank you for the hard work that you do in sharing and updating your ideas; it is much appreciated.