What: Shares of Amaya (TSX:TSGI)(NASDAQOTH: AMYGF) were up 25.9% as of 11:15 a.m. ET Monday after the company confirmed that its CEO intends to make an all-cash offer to acquire the company.
So what: Specifically, Amaya confirmed it has received a "non-binding indication" from its chairman and CEO, David Baazov, that he will make an all-cash offer to acquire the company at an estimated price of $21 per common share. That's a roughly 40% premium to Friday's closing price and an 11% premium to Amaya's trading price as of this writing.
Now what: If you're wondering why shares are still trading at a relative discount to Baazov's impending offer, note the market is uncertain such a deal will come to fruition. Amaya has yet to receive Baazov's formal offer, and rightly discloses "there can be no assurance that [...] any such bid or offer will ultimately result in a completed transaction."
Meanwhile, Amaya's lead independent director, Dave Gadhia, will serve as chair of a special committee formed to consider the offer, and Amaya pledged to provide updates "if and when necessary in accordance with applicable securities laws."
For perspective, today's pop effectively pushed Amaya into the green year to date, with shares now up 8%. But Amaya stock still sits more than 40% lower than it stood this time one year ago, in part as it faces potential headwinds for its European poker business given ongoing strength in the U.S. dollar and as it pledged to appeal an $870 million verdict issued last month against the company related to "alleged losses by Kentucky residents who played real-money poker on PokerStars' website during a period between 2006 and 2011" -- long before Amaya acquired PokerStars and FullTilt parent Oldford Group and its Rational Group for $4.9 billion in cash in 2014.
On one hand, this news could be encouraging for Amaya investors considering it amounts to a massive vote of confidence from management (namely Baazov, who already owns an 18.6% stake in the company) that it views the stock as undervalued. On the other hand, this doesn't erase the regulatory, economic, and legal challeges Amaya faces. In the end, given the added risk of Baazov's offer falling through, I'm personally content continuing to watch Amaya from the sidelines. And if I were already an Amaya shareholder, I would strongly consider taking at least some of today's gains off the table.