Takeover offer is from Constellation Software no less! And at a massive premium.

Either one of the greatest capital allocators of all time is wrong, or markets are not efficient.

wow quality buyer......another indicator that micros are undervalued imo. i have doubled my allocation to micros this year, hopefully not on a fools errand lol

Yep, the name behind the bid definitely caught my eye. They are hard-nosed capital allocators, so I don't like the chances of coaxing a much higher bid, though I could be wrong of course!

Peak SP was $6.40. Today after the offer $1.13.

The ASX market is NOT efficient. That’s why I play here.

Not a pretty picture if you are looking at all the holders in Strawman with only a few who got their money back.

That's the problem with takeovers if you are underwater. No time to see your investment thesis in the long run pay off.

The question for all holders is what do you do now? Sell because this is a bail out from the lows and is about as good as it gets? Hold on with the expectation of an improved offer (this happened to IHR, and that was actually a great outcome given where the shares were)? Expect other bidders to emerge in a bidding war?

Interested to hear how holders intend to play the situation.

I no longer have a dog in this fight having capitulated at 67.5c (d'oh!)

But my 2c is that you should base the decision on what you personally believe eRoad shares are really worth. Specifically, what they are worth under the current ownership (the calculus for Constellation will be different, because they can choose to change management/strategy etc).

The company reckons it can grow revenue by at least 6% in FY24 to NZ$175m, and transition to EBIT positive ($0-5m), plus an additional $10m due to cost reductions. *if* they do that, or even get close, and sustain reasonable top-line growth while improving margins, then shares are probably cheap at the current price. Likely very cheap where they were prior to the takeover offer.

On the other hand, they've tasked Goldman Sachs to do a strategic review (never a good sign), and the macro outlook is shakey (especially in the US). Transport fleets rely on volumes so they could be in for a difficult period.

It all got too hard for me, but I do believe there's a good business in there somewhere. I can see why constellation would be interested.

Thank you for chiming in Andrew. It sure was tempting to bail out, if only to claim the tax loss, but I have plenty of dogs in that particular fight :)

@thunderhead

From the outside it looks like there is a level of commitment from Brillian/Constellation on this.

Firstly, they're taking a 17.7% stake at NZ$1.30 price. And secondly, they'll pay the difference between that and any higher offer to the parties that helped them gather the stake.

So they've essentially baked in a "break fee" to the current offer. If they decide to withdraw the offer, the share price will likely go (much) lower and exiting the 17.7% will crystalise a loss - a "break fee". If a bidding war ensues, and they lose the final bid, they'll pay the difference between NZ$1.30 and the final bid to those that sold them the stake - another "break fee".

If I was a betting man, which I'm not in this current situation, I'd say the offer becoming binding is likely and that Brillian/Constellation has at least some preparations in places in the event another bidder enters the fray.

It was a no brainer for the parties that sold to Brillian/Constellation. They have no downside and all the potential upside.

Thank you for your comments @mushroompanda

I'm very much in the same boat. If you're in this position, it is so hard to make a decision because you want the best exit price possible. While it will certainly be a disappointing outcome for me too, I think the question @AUROPAL is - can management turn the ship around and get the shares back to well beyond the offer price on the table, and even if they do, how long is that going to take (the opportunity cost of tying up your remaining funds here)? Do you have a view on that? I am less than 50% confident of that, given their track record and the exit of the founder, and the market is unlikely to take kindly to the deal falling through in the absence of improved offers, which means we're starting from a ~50% drawdown again from current levels.

I pulled the sell trigger too soon on IHR, and left an additional 100% on the table! However, not taking the opportunity presented by an offer can also leave you annoyed when management stuffs it up. This has happened to me with TYR and RHC, which are both languishing well below the best offers that were lobbed for them.

I've also had frustrations with promising businesses taken out at a good premium and profit to my purchase price, when I would have preferred to hold them for longer and see the evolution of the business (MSL, PTB just in the last year or so).

These takeover games are often a tough lark!

I've sold out 100% on Strawman and IRL and crystalized about a 60% loss. The good news is that at least I will offset capital gains on my tax liability this FY.

Personally I think the transport industry is unlikely to be investing significantly in new assets with the freight rates dropping quickly and a recession possible. By the time there is a pick up in the sector the EROAD hardware is likely to need upgrading which requires R&D capital.

Thanks @AUROPAL. You may know this already, but the $1.30 takeover price in the Constellation offer was in NZD, so the shares are trading not too far off that price in AUD. It traded up to the proper spot FX adjusted value on the first day (around $1.20), but quickly settled around current levels. Not sure how much you can recover by holding on here, unless you expect an improved offer to emerge.

Big step buying a house, so congratulations and good luck with that. I'm there already (I hate big debt, but little choice, especially in the inflated Sydney property market where I have to deal!).

Ah, Melbourne is still heaps better compared to the (pardon my french) flaming sh*tshow on here for the average resident.

I am close to selling out too (unless someone can talk me out of it!). Will also crystallise a loss in that order (~65%). I had cooled on the business quite a while ago (around the time of the founder stepping away), but kept holding "in hope".

I am generally terrible at selling. My reluctance to typically converts a small loss into a bigger loss! Ah well, at least the losses won't be completely in vain for tax purposes, though I have to wait a year to use them now.