Purple Stock Sale, $26 Billion in Deals, and More (The Week-in-Review, May 15—21, 2021)
Four Wall Street firms will soon sell $256 million of stock in Purple Innovation, but Purple will get none of the moolah; Utah firms did over $26.4 billion in deals in 2020, a new record; and more.
Typically news of an upcoming Public Offering to sell stock in a company is good news and Wall Street reacts favorably.
The operative word in that sentence, however, is “typically.”
But when I saw the headline of the news release on Tuesday afternoon about a forthcoming Secondary Offering of its Purple Innovation shares by four major investors, I didn’t think much about it. And then I read the entire release.
Turns out that these four Purple shareholders
Coliseum Capital Partners, L.P.,
Coliseum Co-Invest Debt Fund, L.P.,
Blackwell Partners LLC – Series A, and
Coliseum Capital Co-Invest III, L.P.
plan to collectively sell over 7.3 million shares of Purple stock (NASDAQ:PRPL) in the very near future.
Not too big of a deal, except that none of the money generated from the sale of the stock is going to Purple. In fact, Purple will pay for many of the costs associated with this stock sale.
Additionally, the underwriters of the Secondary Offering have the ability to purchase (and sell) up to 1.1 million additional shares of Purple stock at the offering price.
The offering price itself? It was not disclosed in the news release.
To find that out, I had to dig-up the Form S-3 Registration Statement filed by Purple with the U.S. Securities and Exchange Commission on Monday.
The answer:
The pending stock sale has an “offering price” of up to $30.56 per share. Which means the selling shareholders could receive up to $256 million collectively from the offering.
The good news is that the pending sale does not increase the number of Purple shares outstanding, hence it’s not dilutive.
What the sale will do, however, is add up to 8.4 million Purple shares to the so-called “float” (aka, the number of Purple shares available for purchase at any given time), and that’s a boost of nearly 13% of Purple shares in the float. Ouch!
On top of that, that offering price of $30.56 named in the Form S-3 … it was 5.7% lower than the closing price per share of $32.30 on Tuesday afternoon (May 18th).
So what happened the next morning when trading of Purple’s shares began in the stock market?
Yup, dropped right out of the gate before hitting its low of $29.47 mid-morning, a drop of 9.6% and a clear overreaction, before finally closing the day at $31.04/share.
Since then, Wall Street’s reaction to the news seems to be fairly ho-hum as the per share price of Purple has remained above the stated offering price. And given Purple’s underlying fundamentals (quarter-over-quarter growth of over 50% and year-over-year growth of 23% in quarterly earnings), I’m not too surprised.
So … more shares in the float, with no money going to Purple, with Purple bearing some of the costs of the secondary offering.
But otherwise? Nah, not too big of a deal financially.
By the way, if you’ve not slept on a Purple brand mattress before, I highly recommend it. Very comfortable, even enveloping.
Seems like maybe their advertising guys knew something when they launched this commercial back in 2016.
BTW: One of the best commercials ever!
Utah’s Deal Flow in 2020 Hit $26.4 Billion, a Rise of 5.6% (Covid-19 Notwithstanding)
When you see the numbers in black and white, they’re definitely impressive:
$4.7 Billion: Ancestry.com
$4.2 Billion: Vivint Smart Home
$2.6 Billion: Conservice
$2.0 Billion: Instructure
$1.66 Billion: Utah Jazz, Vivint Smart Home Arena, etc.
$1.5 Billion: Vivint Solar
$1.5 Billion: Workfront
$1.2 Billion: Galileo Financial Technologies
$1.15 Billion: Venafi
$0.99 Billion: Finicity
According to MountainWest Capital Network’s annual Deal Flow Report, Utah’s business community saw 289 financial market transactions occur in 2020, which was 64% lower than the 474 fundings, public offerings, and mergers/acquisitions that occurred in 2019.
Yet though the number of transactions was significantly lower in the State of Deseret last year, Utah’s business community set a new record monetarily in 2020 with over $26.4 billion in transactional valuations during the year.
And as highlighted in the list above, the cumulative value of 2020’s Top 10 deals alone equaled $21.5 billion, 81% of Utah’s transactional totals for the entire year.
You can learn more about the MWCN’s 2020 Deal Flow Report by clicking on this link.
UPDATE (8:20am MT): Utah is Left Standing at the Altar as Breeze Airways Announces its First Destinations and NONE of the Flights Start or End at Salt Lake International Airport
Well … this was unexpected!
Turns out that Utah’s newest airline, Breeze Airways, announced its first destinations early this morning, and shock of shocks, NOT A SINGLE FLIGHT start or end in Utah.
In fact (as shown above), roughly half of the U.S. is served initially (from the Northeast to Texas and Oklahoma), while the rest of the country is a blank canvas.
According to Founder and CEO David Neeleman’s prior statements, Breeze plans to serve mostly underserved markets, and with two main exceptions (New Orleans and Tampa, Florida) I would agree with his declarations.
According to a report from The Points Guy this morning, Breeze will begin flying May 27 and by July to reach these 16 cities (shown in alphabetical order):
Akron/Canton, Ohio;
Bentonville/Fayetteville, Arkansas;
Charleston, North Carolina;
Columbus, Ohio;
Hartford, Connecticut;
Huntsville, Alabama;
Louisville, Kentucky;
New Orleans, Louisiana;
Norfolk, Virginia;
Oklahoma City, Oklahoma;
Pittsburgh, Pennsylvania;
Providence, Rhode Island;
Richmond, Virginia;
San Antonio, Texas;
Tampa, Florida; and
Tulsa, Oklahoma.
Utah and Utahns, however, will apparently be out luck for now.
Perhaps in 2022?
Squatty Potty Acquired for $28.1 Million, with an Additional $4 Million Earn-Out Payment also Possible
Not only is squatting helpful to the bowels, but it’s apparently not bad on the pocketbook either.
Earlier this month, St. George, Utah-based Squatty Potty was acquired by Aterian (NASDAQ:ATER), a New York City-based company that builds, acquires and partners with consumer product brands.
According to Aterian’s quarterly results news release, Squatty Potty’s owners will receive
$19.0 million in cash;
$1.1 million as consideration related to acquired inventory;
$8.0 million for transition services (payable in stock or cash at Aterian’s discretion); and
Up to approximately $4.0 million, also payable in stock or cash and also at Aterian’s discretion.
By way of background, Squatty Potty generated $16.8 million in revenue and $4.7 million in operating income, respectively, over the prior 12 months.
Who knew that helping improve poop flowage could be so smooth?
30 Utah High Schoolers Get the Surprise Phone Call of their Life
Earlier this week, 30 Utah high school students were surprised when they answered their phones only to find a member of the Utah Jazz on the other end of the line.
And the purpose for those calls? Letting the students know they were among the first 30 recipients of the Utah Jazz Scholarship.
Utah Jazz majority owner and manager, Ryan Smith, announced the Utah Jazz Scholarship in early January during a podcast interview with ESPN’s Adrian Wojnarowski.
Simply put, the Utah Jazz will award one Scholarship for every win the team has during the 2020-21 season, including games won during the Pre-Season, Regular Season, and Playoffs.
To be clear, these are four-year, full-ride Scholarships designed specifically for underrepresented students of color enrolling in college for the 2021-22 school year.
These Scholarships cover
Tuition,
Books,
Fees, and
Room and Board
at any of these six Utah-based universities:
Brigham Young University,
Southern Utah University,
Weber State University,
The University of Utah,
Utah State University, and
Utah Valley University.
Utah Jazz majority owner and manager, Ryan Smith, recently explained during a video interview with the MountainWest Capital Network one of the driving factors behind the decision to launch the Utah Jazz Scholarship.
Starting at the 33:33 mark in the video, Ryan says,
“The Scholarships came out of a different place that I haven’t really talked about. I was looking at universities and I was specifically diving into D&I (Diversity & Inclusion), diversity in the universities. And I was so appalled that a 35,000-person university* had 300 Black students, with Athletics. Think about that. With no plan to get to a thousand (Black students).
“I think a lot of people are saying, ‘Well, this Scholarship program’s tilted one way.’ Go look at the university. That’s where the scholarship program for everyone else already exists, because it’s clearly not working. And it’s any university near you.
“And so what we’re doing is showing these universities how to actually get unbelievable candidates to have a better university, which is a different thought, people that can rise up and become the next Dwyane Wade. And that’s what this is about.”
As of today, the four-year cost per student for each of these Scholarships is roughly $100,000, so it’s initially a $3 million commitment to the Utah Jazz. And they won 50 games during the Regular Season alone, not counting the Post- or Pre-Season.
But the value in Goodwill, both in Utah and throughout the National Basketball Association is incalculable. In fact, I suspect that’s especially true among the players: current, former and future.
So as far as PR or Marketing goes, don’t make the mistake of calling these Scholarships a “stunt” by Jazz management, ‘cause they’re not.
And if you don’t believe me, go back and watch the clip of Ryan Smith explaining where the idea behind the Jazz Scholarship program had its nexus.
I’ll tell you, this is real to him, no question about it.
Other News Items of Note from This Week
What follows below are five additional Noteworthy News Items taken from the breaking news announcements that hit our radar this past week from Utah’s business community, news items we thought you might find worthwhile if not also intriguing.
Case in point —
Over 40 Million Americans now Have access to Sera Prognostics’ Preterm Pregnancy Tests as Sera Enters Collaboration with the Second Largest Health Insurer in the U.S. — Anthem
Ten percent of all births in the United States are preterm. And unfortunately, traditional methods do not detect 80% of the cases where spontaneous preterm deliveries occur.
Salt Lake City-based Sera Prognostics aims to change that with its PreTRM Test, a straightforward blood test administered during the 19th or 20th week of pregnancy.
So the fact that Sera announced last week that the second largest health insurer in the U.S. (Anthem) is collaborating with Sera is really big news. Congrats!
By the way, if you’re not familiar with the challenges associated with preterm deliveries, this description from a recent Sera news release may help:
“Preterm birth is defined as any birth before 37 weeks gestation and is a leading cause of illness and death in newborns. The 2020 March of Dimes Report Card shows that of nearly 4 million babies born annually in the U.S., more than one in ten is born prematurely. Prematurity is associated with a significantly increased risk of major long-term medical complications, including learning disabilities, cerebral palsy, chronic respiratory illness, intellectual disability, seizures, vision and hearing loss, and can generate significant costs throughout the lives of affected children. The annual U.S. health care costs to manage complications of prematurity were estimated at $31.5B for 2015.
Utah Inland Port Authority Signs Deal with Port of Oakland to Improve Goods Movement
I get that certain individuals are opposed to the idea of building out an Inland Port in the greater Salt Lake City area.
But given that products are already being exported to and from Utah, it just makes sense to me to have such goods go “through Customs” here in Utah versus at a coastal city port … if it can be done economically and with minimal negative impact on the local environment. And that includes acknowledging the fact that the importation / exportation is not going to stop IF the Inland Port is not built.
So … this past week the Utah Inland Port Authority announced that it has signed a cooperative logistics and marketing agreement with the Port of Oakland to improve the movement of goods to/from Oakland, California to/from Utah.
Makes sense to me.
Park City-based AI Startup, Wingman Defense, Acquired by Connecticut-based ThayerMahan
The world leader in ocean-based sound monitoring and detection, ThayerMahan, has acquired Wingman Defense, an artificial intelligence startup based in Park City, Utah.
Although terms of the acquisition were not disclosed, the news release announcing the deal can be found here.
SLC-based Performance Audio Sells its Production & Rental Divisions to San Diego-based Power Plus Productions
If it feels like Salt Lake City-based Performance Audio has been around forever, you’re not far off. Well, okay, 45 years is all.
So when I saw the news release announcing the fact that the Production and Rental divisions of Performance Audio have been sold to Power Plus Productions out of San Diego, I took notice.
Hopefully this is a good deal all the way around.
Two More Things for Your Consideration
ITEM NUMBER ONE: In case you missed it, I invite you to check out our in-depth Feature Story published on Wednesday titled “Gunther Family Wins As Altabank Sells.”
It’s been our most-read issue so far, so I hope you check it out.
ITEM NUMBER TWO: Deseret Business Watch needs your help. I recently launched a short online survey asking for feedback from you, the readers of Deseret Business Watch.
My goal? Simply to find out what companies you would like to see highlighted in an in-depth Feature Story by DBW.
If you haven’t seen or provided such feedback yet, I invite you to do so now by clicking on the link above and completing the survey. It should take 5—10 minutes.
Thank you.
* — I’ve checked. It’s BYU. As an alum, I wish it wasn’t, but it is.
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About the Author
David Politis is a Marketing Mercenary, which is a fancy way of saying that organizations and individuals hire him to solve their marketing problems. To learn more, please feel free to visit David’s LinkedIn Profile or the website for his business: The David Politis Company. If you have a story idea for him (or would just like to connect), you can reach him at me@davidpolitis.com.