Shares of financial technology (fintech) company Shift4 Payments (FOUR 0.22%) dropped on Monday morning as the market digested news regarding a potential sale of the company. As of 10 a.m. ET, Shift4 stock was down 9%.
Potential acquirers aren't bidding high enough
According to a weekend report from Bloomberg, Shift4 founder and CEO Jared Isaacman sent an internal memo on Friday. The memo said that multiple companies have offered to buy Shift4 for more than its stock price right now. But the board of directors decided that the offers weren't high enough.
On one hand, investors might interpret this as bullish news. According to a previous Reuters report, Fiserv and Amadeus were in a bidding war for Shift4, potentially valuing the company at $7 billion. For perspective, its current market cap is only $6 billion. Therefore, the acquisition offers represent upside.
On the other hand, during a bull market (like now), one can reasonably expect a generous acquisition offer for a high-quality company. Investors, therefore, appear discouraged that demand for Shift4 isn't meeting what the company believes its true value is.
In other words, these are ideal market conditions for a really good offer, but the company isn't getting it. This casts doubt on the value of the business and it's why the stock is down today.
Is this good news for long-term investors?
I actually believe this is good news for Shift4 investors. While a buyout would give the stock a nice little pop, it would be a one-time benefit. But by staying an independent, publicly traded company, Shift4 can compound returns, provided the business performs well.
Right now, Shift4 is performing well. It's one of only a handful of companies that's growing at over a 30% rate while also delivering profits according to generally accepted accounting principles (GAAP). That's a powerful combination that can deliver for shareholders over the long term. And it's why I think the market should appreciate management's apparent rejection of its acquisition offers so far.
