Today at the open investors will get a masterclass in how fast a stock can fall from hero to zero, with Appen likely to give up much of yesterday’s gains following the news this morning that Canadian suitor Telus has withdrawn yesterday’s bid of $9.50 a share.
Given that shares in the midcap artificial intelligence data services company were trading at $6.40 prior to yesterday’s short-lived big offer, the fall from yesterday’s close of $8.27 may appear a little brutal.
Within a note to the market this morning, Appen advised that the Canadian IT services outfit was revoking its offer, without providing any rationale or explanation.
A confidentiality and standstill agreement with Telus had not been signed.
After commenting on the robustness of its M&A pipeline, Telus explained why the company chose to revoke its offer only nine hours after the potential deal became public.
“At any given point in time, our company is in various stages of due diligence with potential targets.. in this particular case, we did look at Appen, and after an initial evaluation made the decision to walk away from our non-binding offer.”
Speculation about the real reason for the Telus exit are starting to surface, with Shaw & Partners’ attributing it to a “material market de-rate over the past six months, particularly in the technology sector".
In short, the broker suspects this means “the higher historical transaction multiple levels are not appropriate in the current environment”.
Alternative suggestions attribute the exit by Telus to the nature of Appen’s weak and unpromising trading update yesterday in which the company noted “1H FY22 EBITDA to be materially lower than the prior corresponding period.”
Watch this space closely today.
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