Kahoot: After The Potential Buyout, The Company Becomes A Definite 'Hold'

seekingalpha2023-10-12

Kahoot! has outperformed expectations and received a buyout offer from a conglomerate, including Goldman Sachs and Lego.The buyout offer is for 35 NOK per share, and the deal is expected to go through...

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has outperformed expectations and received a buyout offer from a conglomerate, including Goldman Sachs and Lego.The buyout offer is for 35 NOK per share, and the deal is expected to go through...</p>\n\n<a href=\"https://seekingalpha.com/article/4640375-kahoot-after-potential-buyout-company-becomes-definite-hold\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4527","symbol_name":"明星科技股","start_time":0,"source_url":"https://seekingalpha.com/article/4640375-kahoot-after-potential-buyout-company-becomes-definite-hold","article_id":"2374871889","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1453981380/image_1453981380.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2374871889","pubTimestamp":1697109837,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"  is a company I've been reviewing for about a year at this point. The company initially followed my stance of neutral, mostly trading sideways, but in accordance both with the overall tech trends we've seen during the year as well as some company-specific trends, Kahoot!has been outperforming even my expectations for the company and has gone higher and higher. This is despite increased costs for financing as we've seen more and more rising rates here. So, Kahoot!has performed in excess of my expectations - and my thesis therefore needs an update, but this update is based on something that wasn't really forecastable for any company, even this one. So this update will also mark the end of my coverage for Kahoot!ASA provided nothing significant changes in the future in terms of the bid. In this article, I'll do my best to decipher what's been happening and see where things might go from here. Kahoot!","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4527":"明星科技股","BK4588":"碎股","BK4550":"红杉资本持仓","LU2023251221.USD":"ALLIANZ GLOBAL SUSTAINABILITY \"AM\" (USD) INC","BK4552":"Archegos爆仓风波概念","GS":"高盛","BK4231":"零售房地产信托","BK4551":"寇图资本持仓","BK4581":"高盛持仓","LU2089284900.SGD":"Allianz Global Sustainability Cl AM Dis H2-SGD","BK4504":"桥水持仓","IE00BSNM7G36.USD":"NEUBERGER BERMAN SYSTEMATIC GLOBAL SUSTAINABLE VALUE \"A\" (USD) ACC","BK4085":"互动家庭娱乐","LU1861217088.USD":"贝莱德金融科技A2","BK4127":"投资银行业与经纪业","LU1861220207.SGD":"Blackrock FinTech A2 SGD-H","PYPL":"PayPal","LU0158827948.USD":"ALLIANZ GLOBAL SUSTAINABILITY \"A\" (USD) INC","BK4106":"数据处理与外包服务","BK4554":"元宇宙及AR概念","LU2089283258.USD":"安联环球可持续基金Cl AM Dis","O":"Realty Income Corp","BK4534":"瑞士信贷持仓","BK4585":"ETF&股票定投概念","BK4227":"交易和支付处理服务","BK4533":"AQR资本管理(全球第二大对冲基金)","BK4566":"资本集团","BK4535":"淡马锡持仓","BK4080":"零售业房地产投资信托","BK4524":"宅经济概念"},"translate_title":"卡霍特：在潜在的收购之后，该公司成为一个明确的“持有”","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"PYPL":1,"O":1,"KHOTF":1,"KAHTY":1,"GS":0.74},"content_text":"Kahoot! has outperformed expectations and received a buyout offer from a conglomerate, including Goldman Sachs and Lego.The buyout offer is for 35 NOK per share, and the deal is expected to go through with over 81% acceptance of shares.The author reflects on the need to prioritize bottom-line improvements and spotting potential winners in the tech industry.FatCamera/E+ via Getty Images Dear readers/followers, Kahoot! (OTCPK:KHOTF) (OTCPK:KAHTY) is a company I've been reviewing for about a year at this point. The company initially followed my stance of neutral, mostly trading sideways, but in accordance both with the overall tech trends we've seen during the year as well as some company-specific trends, Kahoot! has been outperforming even my expectations for the company and has gone higher and higher. This is despite increased costs for financing as we've seen more and more rising rates here. So, Kahoot! has performed in excess of my expectations - and my thesis therefore needs an update, but this update is based on something that wasn't really forecastable for any company, even this one. So this update will also mark the end of my coverage for Kahoot! ASA provided nothing significant changes in the future in terms of the bid. In this article, I'll do my best to decipher what's been happening and see where things might go from here. Kahoot! - Is there a sudden appeal to this company? Kahoot! is not an uninteresting company. In fact, I pointed out in my last article, that using tech-specific methods for evaluating a company based on growth at percentages of revenues, there was an upside to the company.  if you recall, across tech/growth, analysts tend to value companies at a multiple or percentage to revenues, which compared to other tech businesses with success would imply undervaluation here, even now after the company is up more than 20% in a relatively short time. (Source: Kahoot! Article, Seeking Alpha)  This is also, interestingly enough the almost exact amount/RoR we've seen in the company since that article. However, this trend is not because the company suddenly delivered superb results. This significant bounce is in fact because the company has received an offer for all shares. The buyout offer comes from a conglomerate or gathering of parties, including but not limited to Goldman Sachs, Lego, and others. Specifically, this is what is said:  The private equity division of Goldman Sachs Assets Management is leading the bid, with existing Kahoot backers General Atlantic (currently its largest shareholder), LEGO Group's KIRKBI Invest A/S (\"KIRKBI\") and Glitrafjord (controlled by Kahoot CEO Eilert Hanoa) named as the other major shareholders in the deal. Unnamed other investors and management also will have stakes in Kahoot. (Source: Techcrunch)  My initial article asked the fundamental question if this company is worth considering. In hindsight, it should have been considered, because the short-term (<1 year) RoR has proven to be double-digits. However, given what we know here, that upside isn't based on any sort of company-specific quarterly outperformance, but on this bid. The final consideration, published on October 9th, making it very fresh news, is a consideration of 35 NOK per share. The current share price, as of the publishing of this article comes to 34.53 NOK. The variance between the acquisition share price and the current share price, is, as I see it, not worth \"playing around\" with. There is a very small chance the deal might not go through, but given we're already seeing acceptance of over 251M shares, which taken together with the 148M shares to which the offeror is conditionally entitled pursuant to the investment agreement, comes to 81.08% of the share capital and voting rights in the company. In short, I say this deal is now \"done\", and I don't see this changing in any material way. I've written a few \"final\" articles on companies in 2023, and one other article due to a company being taken private or delisted from the stock market, but this is the first company where the last article is dependent on a PE company going in and taking over. The main question that I always ask myself in these situations is the following: What do I learn/change from this, if anything? And I'm actually going to change a bit in my investment methodology based on this. Everything I said in my earlier articles about this company is still very much true. Like any tech-oriented business, the company's focus in the presentation was on top-line numbers and accounts, which presents the company with positive stats. This was the trend in my first article on Kahoot! as an investment. Kahoot! IR (Kahoot! IR) However, the problem as with any other tech-oriented company is that, even with adjusted positive EBITDA that Kahoot! posted, those numbers were only positive due to their adjustment based on SBC, payroll taxes and M&A. On any sort of GAAP number, the company has been operating negatively for almost the entirety of its existence, and it wasn't expected to go GAAP positive for a very long time, with a net debt of 4x to EBITDA while trading at a book value of essentially 1.2x when I started covering the company. So it was a situation, like many places in tech, where top-line numbers make perfect sense, but where bottom line numbers certainly do not. The difference that can be said for Kahoot!, which was clear from the get-go when I started looking at the company, was that things weren't as bad here as they were in some other tech businesses. I want to remind you, though, that SBC looked something like this when I first started writing about it, so my worries about share-based comp wasn't pulled from thin air. Kahoot! SBC (TIKR.com) Also, let's say that you bought Kahoot! when everyone else was spouting its praises and when we were in tech mania - how exactly would you have performed then in terms of RoR? Not good, is the answer. While things certainly look good today, if we go back to ZIRP, the potential is that you could have lost over 70% of your invested capital if you did not sell at the peak. Kahoot RoR (Tikr.com) In fact, if you invested at any one time after July of 2020 and prior to early 2023, your RoR is most likely here to be negative or far less than the overall market. Kahoot has, for many investors, not been a good investment, and proof that valuation for tech businesses most definitely matters. So what am I talking about changing, and what do I need to improve upon? I need to improve upon spotting these sorts of potential \"winners\" in tech. This is, as I see it, very hard to do because the fundamentals even for a \"winner\" like Kahoot! do not necessarily look attractive even prior to a buyout like the one we've seen here. It goes perhaps to the acceptance of SBC, provided the company is really seeing those top-line growth trends. Above all, and this is primarily the lesson I am talking about that I am taking away from this, is that I need to put higher importance on bottom-line improvements in tech-based businesses. Kahoot! has been improving KPIs related to profitability for some time, but I did not pay this the heed it might have deserved, given both the interest that this company obviously garnered from the investment community, as well as the valuation that's being put on the company. Obviously, it's not worth anywhere close to what it was valued at during its peaks, well over 50 NOK/share. But even at 35 NOK per share, it's an impressive price, and if we had picked it up at the trough valuation, we could have seen impressive and indeed market-beating returns for the company. Failing to do this was a failure, and no excuses here. However, I will argue that this was something that was near-impossible to actually forecast with any sort of accuracy - just like any company going private or being bought out. So, as I said - this is my final update on Kahoot! The company has been an interesting one to cover, even if I have been neutral on it and not held a stake for a very long time. It has nonetheless been an educational sort of process, and I will take with me the lessons mentioned from this last year. Do not expect me to change my theses on many of the tech companies I cover - and for most of them, my estimates have actually turned out far better. If you take for example, PayPal (PYPL) where I call the company to not be an undervalued sort of growth stock, the company has declined materially more than the decline in the S&P500. Seeking Alpha PayPal (Seeking Alpha) And this is for an actually profitable tech business. I maintain that tech companies are some of the higher-risk plays that are possible here, and I would be extremely careful investing in almost any of them, despite at what is being argued to being very \"undervalued\" levels of price. However, going forward and when reviewing these tech businesses, I will pay closer attention to reversing trends or improvement in profitability KPI's - and if they do end up going firmly positive over time, I may become interested in at least establishing a watchlist or a speculative position in the stock. However, that would also have to coincide with companies like Realty Income (O) trading at bottom multiples. Because those are better options or me. This is my final article on Kahoot. I say \"HOLD\" because there is no upside left worth considering here. Here is my thesis. Thesis  Kahoot! \"was\" an interesting and market-dominating learning and engagement business, with very impressive top-line trends. However, like many tech businesses, it did fail to consistently generate positive operating income and net income - which meant that I do not view it as a successful or investable business at this price. I will not give a valuation for the business other than 35 NOK, because it's what the buyers of the company are paying to take the company private. But despite this being above the company's share price, I would not buy the company here. I consider the company to be a \"HOLD\" here.  Remember, I'm all about:  Buying undervalued - even if that undervaluation is slight and not mind-numbingly massive - companies at a discount, allowing them to normalize over time and harvesting capital gains and dividends in the meantime. If the company goes well beyond normalization and goes into overvaluation, I harvest gains and rotate my position into other undervalued stocks, repeating #1. If the company doesn't go into overvaluation but hovers within a fair value, or goes back down to undervaluation, I buy more as time allows. I reinvest proceeds from dividends, savings from work, or other cash inflows as specified in #1.  Here are my criteria and how the company fulfills them (italicized).  This company is overall qualitative. This company is fundamentally safe/conservative & well-run. This company pays a well-covered dividend. This company is currently cheap. This company has a realistic upside based on earnings growth or multiple expansion/reversion.  The company fulfills none of my investment criteria. It's a \"HOLD\" going into its end toward being taken private.  Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. 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