In a curious move, a shareholder group led by management has voiced its intention to take Dye & Durham (TSX:DND) private after it only went public less than a year ago. The offer price totals $3.4 billion, or $50.50 per share — a 23% premium to Friday’s market close price.
What’s interesting is that since its initial public offering (IPO) in July 2020, the growth stock has raised funds from stock offerings on five separate occasions. The most recent offering raised about $202 million of proceeds at $50.50 per share. Most of the proceeds from its equity offerings went to acquisitions.
The company is truly amazing. From its IPO price of $7.50 per share, the tech stock has been a six-bagger, generating approximately 536% returns in a little over 10 months!
A business overview
Here’s a quick overview of what Dye & Durham does. It provides an easy way for legal and business professionals to access public records. Through its cloud-based platform, its clients can access government registry data accurately in real time. This allows its clients to improve efficiency and increase productivity.
With operations in Canada, the United Kingdom, Ireland, and Australia, Dye & Durham is helping clients including legal firms, government organizations, and financial institutions.
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In its last quarterly financial results, Dye & Durham reported incredible revenue growth of 300% to $68.9 million versus the same quarter in the prior year. However, it reported a net loss of $10.6 million. It was good to see adjusted EBITDA, a cash flow proxy, of $37.6 million, which was 267% higher year over year. The EBITDA margin was 46%.
The tech stock also ended the quarter in a strong financial position with access to more than $1 billion to fund its growth strategy.
The quarterly results were a clear acceleration from what the company has achieved in the last 12 months — revenue growth of 109%, EBITDA of $39 million, and an EBITDA margin of 28%. In the last 12 months, Dye & Durham also reported a net loss of $51 million. However, the company could be fast approaching turning a profit as the earnings-per-share growth was 308%!
Should DND stockholders take profit?
It feels like the management-led group decided that the company has raised enough capital from the market, and as the tech company is about to turn a sustainable profit, it’s taking it private. That said, there’s no wrongdoing, because, in the process, shareholders who aimed to buy DND stock at a good valuation would have made a decent (or even awesome profit).
At writing, DND stock trades at $47.85 per share, which has room for about 5.5% upside to the $50.50 offer price. Importantly, the 12-month average analyst target of $57.50, suggests upside potential of 20% over the near term.
There’s no guarantee that the company would be taken private. And there’s no telling if the management-led group will be willing to make a higher offer. That said, I don’t think it’s a bad idea for shareholders to hold on to the stock a little longer to see how the situation will unfold.
Technically, the stock has consolidated sideways since late 2020. It has support at about $38-40 per share and resistance at about $52.50 per share.
Shareholders looking to realize gains quickly could consider taking profit at close to $50.50-$52.50 level. Those who have more patience could see if the tech stock will trade close to $57.50.
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Fool contributor Kay Ng owns shares of Dye & Durham.