Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Integrated Silicon Solution (NASDAQ: ISSI) rose as much as 14% on Thursday after the fabless semiconductor company announced it has agreed to be acquired in an all-cash deal for $19.25 per share by a Chinese group of investors led by Summitview Capital.
So what: On Dec. 1, respected activist investor Starboard Value, ISSI's second largest shareholder with an 8% stake, published an open letter to the company's CEO and its Board of Directors. In it, Starboard advised ISSI to focus on its specialty memory products for the auto and industrial markets rather than continue pursuing distracting acquisitions and it proposed a slate of five candidates for election to the Board. ISSI's stock, which closed at $14.42 on the trading day prior to the letter's release, gained 6% on the day.
Now what: In its December letter, Starboard Value wrote:
Despite this strong business [selling specialty memory products for the auto and industrial markets], which has grown from approximately $44 million to $230 million over the past five fiscal years, a compound annual growth rate in excess of 100%, ISSI currently trades at a substantial discount to peers, and is in fact one of the cheapest companies in the semiconductor space on multiple valuation parameters.
ISSI's stock price of $18.55 at 2.10 p.m. EDT today represents a 29% premium to the closing price prior to the release of Starboard Value's letter. That premium is a significant help to closing the valuation gap that may have existed between ISSI and its peers.
Given that the shares are trading at a discount to the $19.25, the market is signaling that a higher offer is unlikely. It's no multibagger, but Starboard Value appears to have earned a decent return on a short-lived campaign.