Kalkine Media - Shares of Lightspeed Commerce (TSX:LSPD) (TSX:LSPD) experienced another surge this week following news that the company is contemplating going private. This development adds to the ongoing series of headlines surrounding Lightspeed stock, although it hasn't translated into a significant increase in share value.
What happened:
To comprehend the future implications, let's review recent events. Over the past few years, the company's share price has remained relatively stagnant as it focused on improving its financial performance. However, Lightspeed stock recently delivered impressive results in its latest quarter, with revenue climbing 27% to US$239.7 million. Moreover, despite reporting net losses from investments, the company significantly narrowed its losses compared to the previous year. Additionally, it achieved positive adjusted earnings of US$11.8 million.
However, management announced the departure of former CEO JP Chauvet, with founder Dax DaSilva returning to the role. This transition aims to reignite subscription growth, which notably lagged during the last earnings report.
Why consider going private:
This news coincides with fellow point-of-sale (POS) company Nuvei (TSX:NVEI)'s disclosure of discussions regarding a private equity buyout. Consequently, Lightspeed founder DaSilva is contemplating a similar move, stating they are "open to it."
"I still believe that the stock market is a good place for Lightspeed, but when you look at what’s happening, you wonder if going private would be a better option," DaSilva remarked. "We are always open to these discussions."
Shares surged 5% upon this announcement, slightly retracing the following day. This indicates that all options are on the table, potentially leading to further growth in the near term as DaSilva aims to restore the company to its 2021 levels.
Looking ahead:
Firstly, what does it mean if a company like Nuvei or Lightspeed goes private for shareholders? In such cases, several scenarios could unfold. Typically, there is a buyout offer for shareholders, with the acquiring entity purchasing shares at a premium to the current market price. Shareholders can then choose to accept the buyout offer or sell their shares for cash.
However, should the company remain publicly traded, there are other noteworthy possibilities. Continued revenue growth is probable, especially as the company sustains momentum from its unified payments. Furthermore, with profitability within reach, there should be room for expansion in areas that attract subscribers.
Nevertheless, Lightspeed stock faces challenges on its path to success. The POS market is crowded, with fierce competition at both large and small scales. Thus, Lightspeed must articulate why it deserves investors' attention above its competitors. We await further details on DaSilva's strategy to achieve this.