What happened
Shares of software-as-a-service provider Actua Corp. (NASDAQ: ACTA) soared on Tuesday after the company announced that it had agreed to sell its three majority-owned businesses. Actua plans to wind down its operations following these sales, selling its remaining minority stakes and distributing the net proceeds to shareholders. The stock was up about 25% at 12:30 p.m.
So what
CVC Growth Fund has agreed to acquire VelocityEHS and a controlling stake in Bolt Solutions from Actua, while Envestnet has agreed to acquire FolioDynamics. Actua expects to realize aggregate cash proceeds between $472 million and $502 million from these sales, and it plans to distribute "substantially all" of the net proceeds to its shareholders. Those distributions, totaling between $14.35 and $15.18 per share, should be made sometime during the first quarter of 2018.
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Once these sales are complete, Actua will wind down its operations. Operating costs will be slashed as the company works to monetize its remaining holdings over a period of 12 to 18 months. All proceeds from these additional sales will also be distributed to shareholders. In total, the company expects to distribute between $15.68 and $16.50 per share to shareholders.
These sales are the result of a comprehensive strategic review. The company believes these transactions "are the optimal outcome for our stockholders and deliver significant cash value for their investment in Actua."
Now what
It's not common for a public company to decide its best course of action is liquidation. Shareholders will ultimately receive a premium of 27% to 32% over the closing price on the last day prior to the announcement, but the maximum distribution of $16.50 per share is still well below the stock's peak price of around $21 per share reached in early 2014.
With the stock price now around $15.35, investors who hold on through the liquidation will receive a bit more than if they sell today. But with the process likely to take a year or more, it's probably not worth it to stick around waiting for those incremental gains.
