Shares of financial-technology (fintech) company Shift4 Payments (FOUR 1.17%) dropped 19.6% in March, according to data provided by S&P Global Market Intelligence. The company has been a rumored acquisition target. And for a brief moment, it looked like a deal would get done. But things fell apart in March, leading to the drop in stock price.
On Feb. 28, Shift4 stock soared after a Reuters report said that Amadeus and Fiserv were in a bidding war. D.A. Davidson analyst Peter Heckmann was quick to weigh in that Shift4 could be worth $130 per share or more in a buyout scenario. And that was really exciting considering it was trading below $90 per share at the time.
This all quickly changed in mid-March after Shift4 CEO Jared Isaacman told Bloomberg that the bids didn't "sufficiently value" the company and were consequently rejected. Looking at this from a cup-half-empty perspective, investors are concerned that apparently Shift4 isn't attractive enough to motivate a buyer to pay a fair price.
Once the slide started for Shift4 stock, it just kept sliding for the rest of the month.
Could Shift4 still be acquired?
Isaacman isn't only frustrated at its suitors for not paying up; he's also frustrated with stock market investors. The reason that companies started considering an acquisition of Shift4 in the first place was because it was something the company was exploring.
In his letter to shareholders in the third quarter of 2023, Isaacman expressed frustration that some investors allegedly hope that the company trips and falls. Therefore, he said, "We are actively exploring strategic opportunities & alternatives that will reduce distractions."
Interestingly, payments processor Nuvei agreed to a takeover on April 1 for $34 per share. This values the company at roughly four times its sales. For perspective, Shift4 stock trades at under two times sales.
FOUR PS Ratio data by YCharts.
In summary, Shift4's management wants to sell; there are buyers out there; and it could theoretically get an offer that's double where it trades now, based on Nuvei's acquisition. Therefore, it seems a deal could eventually materialize.
An alternate ending
Personally, I hope Isaacman can block out the perceived detractors of Shift4 stock so that it can remain a publicly traded company. Shift4 offers investors a rare combination of growth and profits, and this can be a powerful combination long term.
Granted, the fintech space is competitive, and Shift4 isn't guaranteed to be a winner in the space. But right now the company has a winning strategy of addressing the needs for high-volume customers, allowing the business to quickly scale.
If Shift4 can stay on its current path, then it won't matter if there are investors who are bearish. Profitable business growth often leads to strong stock returns. It can just take a long time -- sometimes years -- before it happens. That's why adopting a long-term view to investing is crucial.
