Care.com (CRCM) is ending its run as a public company. The online marketplace that helps consumers find care providers for children, seniors, and pets is being acquired by IAC (IAC), a holding company with numerous media and Internet brands under its umbrella.
So what does this acquisition mean for investors? Let's break down the deal and how its implications affect both Care.com and IAC investors.
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Investors holding shares of Care.com
Shares of this healthcare stock were riding high at the start of 2019, exceeding $25 per share in March. But then controversy struck, followed by executive departures. Care.com stock has struggled since then, reaching a low of $7.61 in August.
As a result, Care.com became an acquisition target, and now that possibility is reality. Investors who were compelled to buy at that point have seen the price jump to around $15 per share. So is now the time to sell?
Given the deal structure, it looks like the answer is yes. Under the terms of the deal, IAC is offering $15 per share in cash unless you hold series A convertible preferred stock. There will be no conversion of Care.com shares into IAC stock. Once the deal closes, Care.com stock will cease to exist.
Most retail investors buy common stock and do not have access to the series A convertible preferred stock. As a result, it makes sense to sell your stake now. Even if you bought when the stock was at its height, by selling now, the loss can have positive implications on your taxes.
Investors holding shares in IAC
On the flip side, investors in IAC will see the company gain a leading marketplace for caregivers with 34 million members in 20 countries. Care.com has delivered consistent revenue growth every year as a public company, with 2019 full year revenue guidance targeting over $208 million, compared to 2018's $192.3 million.
This is a quality acquisition for IAC with years of continued growth expected given the increasing need for care, particularly among seniors. In fact, by 2024, the home care industry is expected to double to $225 billion due to an aging population in need of care.
Moreover, a longtime IAC executive, Tim Allen, will be appointed as CEO of Care.com after the deal closes. This means investors can look forward to leadership familiar with the inner workings of IAC to help ensure a smooth transition.
What can investors expect?
Even though Care.com as a company possesses many strengths, shareholders had a rough year in 2019. With the next step in Care.com's evolution on the horizon (the deal is expected to close in the first quarter of 2020) and given the terms of the acquisition, it's time for Care.com investors to divest their shares.
Meanwhile, investors in IAC can expect to see Care.com continue its revenue growth, adding value to IAC for years to come. This is one acquisition that looks to be of benefit for IAC shareholders.