YTRA - Yatra

[cameronfen]

I'm in the car right now, so I have to keep it short.  Basically the stock has a acquistion offer from Ebix for $7 a share in EBIX stock or cash (but cash unlikely imo), but if you read the fine print of this really strange offer, its effectively $6.3 in shares with downside protection in the form of a put (again really wierd but read the offer).  2 weeks before the acquisition stock was at 4.20.  Right before the announcement stock was at 3.80.  It's now back at 4.20 despite no deteriotion of the business along with the buyout offer.  Considering the strange buyout offer, I can't really handicap how likely the buyout is to be approved, but the company is the second leading online travel agency (like priceline) in India.  Trades at 1.5x Revenue, forecasted to grow 20% next year based on guidence (15% this year), operating leverage kicking in as EBITDA loss declined 60% this year to 2.2 million usd.  Even if deal falls through, company is quite attractive.  The EBIX offer may be wierd, but more reflective of the issues of that company, then anything suspect of Yatra which had no say in the acquisition offer. 

[wisowis]

GURUGRAM, India and NOIDA, India and ATLANTA and NEW YORK, July 17, 2019 (GLOBE NEWSWIRE) -- Ebix, Inc. (NASDAQ: EBIX) and Yatra Online, Inc. (NASDAQ: YTRA) today announced that they have entered into a definitive agreement under which Ebix will acquire Yatra via merger. In connection with the merger, each ordinary share of Yatra (“Yatra Ordinary Share”) will be entitled to receive 0.005 shares of a new class of preferred stock of Ebix (“Ebix Convertible Preferred Stock”). Each share of Ebix Convertible Preferred Stock received for each Yatra Ordinary Share will, in turn, be convertible into 20 shares of common stock of Ebix (“Ebix Common Stock”).

 

Based on the trailing 15-day volume weighted average price (“VWAP”) of Ebix Common Stock of $49.05 per share, each Yatra Ordinary Share convertible into Ebix Common Stock would be valued, on an as-converted basis, at $4.90 per share, representing an approximately 32% premium to Yatra’s closing share price on March 8, 2019, the last trading day prior to the public announcement of Ebix’s offer to acquire Yatra. Assuming a value of $4.90 per Yatra Ordinary Share, the transaction implies an enterprise value of $337.8mil at the Ebix collar price of $59 per share and post adjustment for Indebtedness, Working capital, Warrants to be converted and minimum cash requirement, a net equity value of $239 million.

[writser]

Has anybody looked into whether the preferreds are convertible immediately?

[hillfronter83]

Has anybody looked into whether the preferreds are convertible immediately?

 

Seems to me should be convertible immediately:

4.1.1                    Conversion Ratio.  Each share of Series Y Preferred Stock shall be convertible, at the option of the holder thereof, at any time and from time to time, and without the payment of additional consideration by the holder thereof, into 20 fully paid and non-assessable shares of Common Stock (the “Series Y Conversion Ratio”). Such initial Series Y Conversion Ratio shall be subject to adjustment as provided below.

[SnarkyPuppy]

What's up with the warrants?  I'm looking at mid 30 cents per warrant if the deal goes through...  it even explicitly states 37 cents per warrant in the press release.  After accounting for the 50% haircut.  I must be missing something

[MrB]

I'm in the car right now, so I have to keep it short.  Basically the stock has a acquistion offer from Ebix for $7 a share in EBIX stock or cash (but cash unlikely imo), but if you read the fine print of this really strange offer, its effectively $6.3 in shares with downside protection in the form of a put (again really wierd but read the offer).  2 weeks before the acquisition stock was at 4.20.  Right before the announcement stock was at 3.80.  It's now back at 4.20 despite no deteriotion of the business along with the buyout offer.  Considering the strange buyout offer, I can't really handicap how likely the buyout is to be approved, but the company is the second leading online travel agency (like priceline) in India.  Trades at 1.5x Revenue, forecasted to grow 20% next year based on guidence (15% this year), operating leverage kicking in as EBITDA loss declined 60% this year to 2.2 million usd.  Even if deal falls through, company is quite attractive.  The EBIX offer may be wierd, but more reflective of the issues of that company, then anything suspect of Yatra which had no say in the acquisition offer.

 

cameronfen why do you say it's attractive? Data I'm looking at suggests cash burning, even on operating level and falling topline. What am I missing?

[FF4F]

What's up with the warrants?  I'm looking at mid 30 cents per warrant if the deal goes through...  it even explicitly states 37 cents per warrant in the press release.  After accounting for the 50% haircut.  I must be missing something

 

Meh...50% being converted for a premium. You get 0.075 shares per warrant. At current pricing that comes down to 0.325. So if you buy currently for 20c/warrant, you basically end up with the remaining 50% of warrants that you bought for 0.075c/warrant. After conversion those warrants will have a strike of ~100$. If you do black and scholes on that, my value estimate is ~ 1.35$ per warrant for 1 share of Ebix. (heavily dependent on vola inputs). As 20 current warrants will form 1 right on shares of ebix, you currently seem to be paying 1.50$ for that, and hence, its not a great deal. If you assume that <100% will tender for the conversion, it might be a good deal.

 

Its unclear how the prefs/warrants will be adjusted for the potential IPO of EBIX cash. If EBIX remains parent to EBIX cash, its not a problem. If they spin off Ebix Cash, it could be a huge problem. It was discussed a bit in the call, and they intent Ebix to remain parent for Ebix Cash.

 

 

[bobp]

Second edit - after listening to cc I don't understand the warrant deal and I'm just erasing everything I wrote in my first post in a long time!

 

 

 

 

[cameronfen]

I'm in the car right now, so I have to keep it short.  Basically the stock has a acquistion offer from Ebix for $7 a share in EBIX stock or cash (but cash unlikely imo), but if you read the fine print of this really strange offer, its effectively $6.3 in shares with downside protection in the form of a put (again really wierd but read the offer).  2 weeks before the acquisition stock was at 4.20.  Right before the announcement stock was at 3.80.  It's now back at 4.20 despite no deteriotion of the business along with the buyout offer.  Considering the strange buyout offer, I can't really handicap how likely the buyout is to be approved, but the company is the second leading online travel agency (like priceline) in India.  Trades at 1.5x Revenue, forecasted to grow 20% next year based on guidence (15% this year), operating leverage kicking in as EBITDA loss declined 60% this year to 2.2 million usd.  Even if deal falls through, company is quite attractive.  The EBIX offer may be wierd, but more reflective of the issues of that company, then anything suspect of Yatra which had no say in the acquisition offer.

 

cameronfen why do you say it's attractive? Data I'm looking at suggests cash burning, even on operating level and falling topline. What am I missing?

 

The decline in revenue is due to a change in accounting not anything organic.  I can't find the exact 6-K right now but they do mention it in presentations as a footnote.  Once you address that you find they are growing 15-20% (which is admittedly slow considering TAM) in a highly under penatrated Indian market as the number 2 player.  I mean they are burning cash, but they seem to show increasing operating leverage with EBITDA loss declining by 50% when revenue grows 15%.  But again this is a tech company in early stages of a land grab.  You really want to to be losing money to gain share at this point. 

 

edit: I will say my opinion of them has gone south from where I was before.  I came across an indian newspaper article that highlighted some ex management saying that Yatra is not being truthful in its financial statements.  This didn't get any press, but if someone's making statements like that who worked inside the company, I'm not going to hold the stock.  That being said EBIX has also done DD and is not going to by an empty shell company (which they certainly are not one as you can book flights of their website).  I can no longer find that article so I feel a little weird making an unsubstantiated claim, but that was the reason I sold before this deal and maybe why you are seeing merger mispricing to some extent. 

 

edit2: Just kidding I found it.  This is much more in depth than when I found it the first time.  Not really sure what to make of it.  Maybe someone with better accounting or legalese can explain: https://www.dailypioneer.com/2019/state-editions/fir-lodged-against-yatra-online.html

[Sunrider]

also ... I recall seeing Fintwit shorts having a go at EBIX for various things ...

[writser]

What's up with the warrants?  I'm looking at mid 30 cents per warrant if the deal goes through...  it even explicitly states 37 cents per warrant in the press release.  After accounting for the 50% haircut.  I must be missing something

 

Meh...50% being converted for a premium. You get 0.075 shares per warrant. At current pricing that comes down to 0.325. So if you buy currently for 20c/warrant, you basically end up with the remaining 50% of warrants that you bought for 0.075c/warrant. After conversion those warrants will have a strike of ~100$. If you do black and scholes on that, my value estimate is ~ 1.35$ per warrant for 1 share of Ebix. (heavily dependent on vola inputs). As 20 current warrants will form 1 right on shares of ebix, you currently seem to be paying 1.50$ for that, and hence, its not a great deal. If you assume that <100% will tender for the conversion, it might be a good deal.

 

Its unclear how the prefs/warrants will be adjusted for the potential IPO of EBIX cash. If EBIX remains parent to EBIX cash, its not a problem. If they spin off Ebix Cash, it could be a huge problem. It was discussed a bit in the call, and they intent Ebix to remain parent for Ebix Cash.

 

If you sell 50% at $0.325 your cost basis for the rest is closer to $0.04, right? However, if I am not mistaken the current warrants have a 0.5x multiplier and after the deal close they will have a .05x multiplier. A 2.5 year YTRA warrant at 2.5x the current stock price with a 0.5x multiplier is worth $0 - $0.06 depending on your assumptions? Maybe I'm comparing apples to oranges because you already took into account the multiplier.

[cameronfen]

also ... I recall seeing Fintwit shorts having a go at EBIX for various things ...

 

Yeah EBIX is a battleground stock.  But where ever their money came from doesn't matter all that much for Yatra I think. 

[bobp]

I don't think anyone knows what they're doing with the warrants other than maybe the lawyers.

 

The press release reads as if you will receive .075 common per yatra warrant.

In the cc they made it sound as if you receive .075 only for the warrants you tender and only 1/2 will be accepted. So that would be .0375 per current warrant. Or .075 for each 2 you're buying now.

 

Press release "Assuming the value of the underlying Ebix Common Stock to be received for each Yatra share is $4.90, the value offered per Yatra Warrant would be $0.37." But the other reading is that only the 1/2 tendered are worth 37 cents, the other half are not worth much, maybe a few cents.

 

The merger agreement says nothing about any of this but only refers to both a cancellation and a change of terms. An adjustment of terms is what would normally happen in a stock deal.

 

The preferred -  the common converts into a preferred which will have a put option at the equivalent of 5.31 per yatra or 53.1 per EBIX. It can be redeemed in the 25th month.

I think the put option makes yatra common and warrants cheap. You have to assume ebix will be around in 2 years, but the put is valuable. I thought the warrants seemed especially cheap as they will convert through the common to the same preferred.

 

Unfortunately I'm really not sure what the warrants will get you but they're being sold like it's the lesser amount.

 

What's up with the warrants?  I'm looking at mid 30 cents per warrant if the deal goes through...  it even explicitly states 37 cents per warrant in the press release.  After accounting for the 50% haircut.  I must be missing something

 

Meh...50% being converted for a premium. You get 0.075 shares per warrant. At current pricing that comes down to 0.325. So if you buy currently for 20c/warrant, you basically end up with the remaining 50% of warrants that you bought for 0.075c/warrant. After conversion those warrants will have a strike of ~100$. If you do black and scholes on that, my value estimate is ~ 1.35$ per warrant for 1 share of Ebix. (heavily dependent on vola inputs). As 20 current warrants will form 1 right on shares of ebix, you currently seem to be paying 1.50$ for that, and hence, its not a great deal. If you assume that <100% will tender for the conversion, it might be a good deal.

 

Its unclear how the prefs/warrants will be adjusted for the potential IPO of EBIX cash. If EBIX remains parent to EBIX cash, its not a problem. If they spin off Ebix Cash, it could be a huge problem. It was discussed a bit in the call, and they intent Ebix to remain parent for Ebix Cash.

 

If you sell 50% at $0.325 your cost basis for the rest is closer to $0.04, right? However, if I am not mistaken the current warrants have a 0.5x multiplier and after the deal close they will have a .05x multiplier. A 2.5 year YTRA warrant at 2.5x the current stock price with a 0.5x multiplier is worth $0 - $0.06 depending on your assumptions? Maybe I'm comparing apples to oranges because you already took into account the multiplier.

[writser]

I don't think anyone knows what they're doing with the warrants other than maybe the lawyers.

 

The press release reads as if you will receive .075 common per yatra warrant.

In the cc they made it sound as if you receive .075 only for the warrants you tender and only 1/2 will be accepted. So that would be .0375 per current warrant. Or .075 for each 2 you're buying now.

 

I think it's not that mysterious. A condition to completion of the merger is " Yatra obtaining the cancellation or other extinguishment of Yatra Warrants such that no more than 8,768,979 Yatra Ordinary Shares remain subject to Yatra Warrants". That's why Yatra anticipate a pre-merger tender offer for 50% of the outstanding warrants at a nice premium of 0.075 shares per warrant. There are ~35m warrants outstanding, they want to buy back 17.5m warrants at 0.075x which implies ~1.3m Yatra shares will be issued which is exactly the number of shares they plan to issue according to the press release. Everything I see implies 50% pro rata execution if everybody tenders.

 

Maybe they decide that they want to tender for all warrants rather than 50%, in which case warrants are obviously too cheap. But I wouldn't bet on that; the company telegraphed their intentions pretty clearly. Maybe management has an incentive to buy back more warrants rather than the required minimum? Could be, but I don't know what that would be.

[bobp]

I thought that there are 17.5 million outstanding now. 1 warrant buys 1/2 share at 11.50.

The 37 cents of value in the press release is wrong or misleading.

Thanks for the input.

Friday night so I don't want to type or think any more.

 

[writser]

There are 17.5m shares remaining subject to warrants. But one warrant only buys half a share. I agree that the phrase “value offered per warrant” is a bit misleading but not wrong: they offer ~$0.37 per warrant but just not for every warrant. If a company tenders for 5% of their shares at $40 they don’t state “we offer $2 per share in value” either.

[estoybien]

Anyone have any thoughts or info on the Yatra-Ebix deal fail and lawsuit?

Anyone have the Complaint that Yatra says they’ve filed with DE Court of Chancery?

I asked their IR for a copy but don’t know if they’ll send it. Not sure how to get it from the DE court.

Very curious about the allegations and factual representations.