Shares of small cap debt lender Elevate Credit (US:ELVT) are set to experience a strong rally on Thursday following a takeover offer received from Park Cities Asset Management.
Under the terms of a definitive agreement that was reached, the alternative asset manager Park Cities will pay ELVT shareholders $1.87 per share in cash representing a significant 76% premium to the $1.06 closing price on Wednesday. The transaction values EVLT at $67 million.
The transaction was approved by Elevate’s Board and is expected to be completed during the first quarter of 2023.
Park Cities Asset Management is an institution that is focused on providing flexible debt solutions. This aligns with Elevates business practices that ‘reinvented non-prime credit’ through online solutions that provided financial relief to customers.
Park Cities and Elevate held a pre-existing relationship before the deal was signed with Park providing corporate debt for the company in addition to financing for firms ‘Today Card’ product.
Since beginning operations in 2014, Elevate has originated more than $10 billion in credit for more than 3 million non-prime consumers.
Elevate’s CEO Jason Harvison stated his support on the transaction saying “I look forward to working with the Park Cities leadership team and believe the company will greatly benefit from their expertise and comprehensive understanding of the credit landscape”
In the week prior to the takeover offer, Elevate reported third quarter results to investors. Over the year, Elevate grew revenues by 11.3% to $125.6 million.
Underlying profits measured by adjusted EBITDA expanded more than 480% to $14.6 million from $3 million in the prior period.
Despite the growth in underlying business profits, EVLT’s net loss widened from -$11 million to -$15 million when compared to the prior period.
Analysts from Maxim Group remained ‘hold’ rated on the stock following the result as management guided to slower loan growth due to the negative impact of high inflation on credit quality coupled with fewer qualifying applicants. The firm remained cautious about subprime lending in the current environment.
So the takeover offer has likely came at the perfect time for investors….
Despite the offer price coming in at a steep discount to the $3 share price ELVT was trading at the beginning of 2022, investors will be provided the opportunity to recoup one third of losses that would unlikely have been recovered in current equity market uncertainty.
Fintel’s institutional ownership accumulation score of 30.43 is bearish on the company as it ranks ELVT in the bottom 20% when screened against 35,560 other global securities.
The score is partially explained by the weakening share price which has seen selling pressure dominate over the course of 2022.
Despite the low levels of buying activity, Elevate has 79 institutions on the register that collectively own 11.1 million shares. Some of the largest institutions include: Jb Capital Partners Lp, Acadian Asset Management Llc, Renaissance Technologies Llc, Bridgeway Capital Management Inc, Dimensional Fund Advisors Lp, HighTower Advisors, and Aviance Capital Partners.
This article originally appeared on Fintel
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