Long-suffering shareholders of Forward Air (FWRD +1.28%) got a boost in June following reports that an activist investor is building a stake in the transportation and logistics company.
Shares of Forward spiked nearly 20% on the news and finished June up 13.3%, according to data provided by S&P Global Market Intelligence.
Outsiders push for change
Forward is an asset-light transportation company, providing connections between customers in need of shipping services and providers of those services. The company has been under pressure due to a controversial decision late last year to acquire Omni Logistics, a deal that raised objections about price and fit.
The deal closed in January but cost Forward's CEO his job. It is now up to new management to properly integrate Omni in what is a sluggish demand environment for transportation.
Management reportedly could soon feel an outside push to improve performance or find a buyer. The Wall Street Journal reported early in June that activist shareholder Irenic Capital Management has amassed a 5% stake in Forward.
Irenic, according to the report, sent a letter to Forward's board calling on directors to consider a range of options including a possible sale. The report said that Irenic believes there are several private equity firms that would be interested in acquiring Forward Air at a substantial premium to its current trading price.
NASDAQ: FWRD
Key Data Points
Is Forward Air a buy?
Forward Air shares hit a 15-year low prior to the reported activist involvement. Even with the June boost, the stock is still down 70% year to date.
The stock is almost certainly undervalued if management can get this collection of assets to operate to their potential. But given what has happened over the past year, that is a huge "if." With Irenic getting involved and private equity firm Clearlake Capital owning a substantial stake, there will be a number of forces pushing for change in the months to come.
Investors interested in buying in should be aware that even if Forward is undervalued, turnarounds can take time. With questions remaining about the direction of interest rates and the health of the overall economy, Forward might not get the benefit of a near-term surge in demand. While there could be a quick sale of the company, investors need to be prepared for a long, drawn-out period of restructuring and recovery.
Forward Air could be a big winner from here, but some investor patience will be required.
