Amaya Inc. (NASDAQ:AYA) CEO Baazov Bid: Real or Attempt to Halt Share Price Plunge?

Amaya Inc. (TSE:AYA)(NASDAQ:AYA) CEO David Baazov has offered to take the company private for $21 per share, or $2.8 billion based on issued and outstanding shares.

As at November 9, 2015, Amaya had a total of 133,153,141 Common Shares issued and outstanding, 1,139,249 Preferred Shares issued and outstanding and convertible into 50,359,553 Common Shares, 10,576,564 options issued under the Corporation’s share option and equity incentive plans and exercisable for the same number of Common Shares, of which 3,871,534 were exercisable, and 15,280,016 Common Share purchase warrants issued and outstanding and exercisable for the same number of Common Shares.

Does Baazov Have the Juice?

Baazov himself controls 24.6 million common shares, plus 550,000 options. Assuming his options will be cancelled, and all outstanding warrants will be exercised and preferred shares converted into common shares, that means Baazov will be buying roughly 321 million for $5.74 billion, at a 40.1 percent premium to last week’s close.

Amaya was taken public in 2010.

History of Uneven Earnings

The company has delivered very uneven earnings since going public on the Toronto Venture Exchange in 2010, most recently reporting $0.21 a share for the third quarter of 2015. The company became a major player in the global online gambling space after it acquired tis largest competitor, Rational Group, in August 2014, for $4.9 billion.

Legal Problems

Amaya recently lost a lawsuit that undermined the company’s share price since coming to late last year. After the Rational Group acquisition, the shares traded as high as $38 when the company graduated to the TSX senior board.

In June 2015, the company announced a NASDAQ listing, and that seems to be where the trouble began.

The Commonwealth of Kentucky filed suit against the company and awarded the plaintiffs an $870 million judgement against Amaya for losses suffered by residents of Kentucky after playing PokerStars between 2006 and 2011. The case was set to be appealed by Amaya in January 2016, but has been delayed.

“This is a frivolous and egregious misuse of an antiquated state statute to enrich the contingent-fee plaintiff’s attorneys hired by the Commonwealth and not the people of Kentucky,” said MarlonGoldstein, Executive Vice President, Corporate Development and General Counsel of Amaya. “Given that PokerStars only generated gross revenues of approximately US$18 million from Kentucky customers during the five years at issue, a damages award in excess of US$800 million is notable only for its absurdity.”

Amaya had filed a prospectus in November 2015 that sought to raise over $3 billion from investors – a plan that was subsequently shelved as the company’s shares continued to weaken under pressure due to the State of Kentucky award.

Absence of Detail Suggests Tactic

Details of Baazov’s takeover bid remain undisclosed for the most part, and details are expected when documents required to move forward with the acquisition are file on SEDAR.

It is not inconceivable that the strategy of announcing a go-private transaction is in fact an attempt to stem the freefall of the share price in public markets, and is not a serious bid. Though time will tell.

James West

Editor and Publisher

James West founded Midas Letter in 2008 and has since been covering the best of Canadian and US small cap companies. He covers global economics, monetary policy, geopolitical evolution, political corruption, commodities, cannabis and cryptocurrencies. As an active market participant, James is not a journalist and is invariably discussing markets...
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