Legendary investor George Soros (Trades, Portfolio) took a stake in Exa Corp (EXA, Financial) on March 9, GuruFocus Real Time Picks reported Thursday.
Soros’ filing reveals that he purchased 1,266,666 shares, or 9.15%, of the company. Exa shares closed the day of the transaction at $10.10 per share, down from a historic high reached in February 2014 of $15.75. Year to date, the share price has fallen 14% to close at $10.45 per share on Thursday.
Exa Corp offers simulation software and services to the automotive industry, and has recently branched out into other markets such as aerospace, oil and gas production and engineering. It has a market cap of $142.5 million and went public in 2012.
Exa became an activist investment target for Discover Group in September, when the fund sent a letter urging it to seek a buyer, suggesting Ansys (ANSS, Financial), Autodesk (ADSK, Financial), Dassault Systemes (XPAR:DSY, Financial), PTC (PTC, Financial), Siemens PLM Software as potential acquirers. Discovery also stated in the letter that it believed the market had “significantly undervalued” the company, adding, “This is a common phenomenon with micro-cap companies, where their small float, limited trading volume, and general lack of research coverage lead to low institutional investor interest -- and thus chronic undervaluation.
The fund calculated its estimate of value as much higher:
“Discovery’s detailed valuation analysis, as summarized below, shows that Exa’s takeover value in the M&A market is estimated at $16.00 to $20.00 per share, or approximately $220 to $280 million on an enterprise value basis,” the letter said. “This is significantly higher than the recent publicly traded closing price on September 19, 2014 of $11.28 per share, or approximately $144 million on an enterprise value basis.”
Discovery also disclosed a 7% stake in the company in a Dec. 16 SEC filing and said that it would propose at the annual meeting that the company discontinue use of a classified board. “Discovery Equity Partners states that it feels strongly that the Company must continue to improve its corporate governance and that it believes a large deficiency in the Company’s corporate governance is the continued existence of a classified board,” the letter stated.
Exa announced results for its fiscal fourth quarter ended Jan. 31, 2015, on March 19, with a revenue increase of 11% year-over-year to $16.9 million, within its target range. It also reported a GAAP net loss of $1.1 million, compared to GAAP net income of $0.1 million in the same period a year ago.
Exa also has a P/B ratio of 7.4 and P/S ratio of 2.35, which is near a one-year low.
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