A minority investor in Dallas-based financial technology firm Avantx Inc. is urging the company’s board of directors to consider selling the company.
In a Monday letter to the board, Engine Capital LP laid out 10 reasons why it thinks a sale now would boost shareholder returns by as much as 34%. Engine Capital argues a sale could net $27 to $32 a share for investors. The company’s stock has been trading around $22.
“Avantax’s stock continues to trade at a meaningful discount to its strategic value. We believe this is primarily due to the fact that Avantax is a subscale asset in the consolidating asset management industry where size is increasingly important,” said the Engine Capital letter.
Engine Capital said it owns about 2% of Avantax shares. In recent months, the activist hedge fund has pushed other companies to explore a sale, including fuel marketer Parkland and chemicals distributor Brenntag SE. It also previously pursued a similar strategy with retailers Kohl’s and Ann Taylor.
Avantax, which changed its name from Blucora at the beginning of this year, provides tax-focused wealth management services and platforms used by small business owners, tax and financial professionals and accounting firms. It sold its tax software arm, TaxAct, last year for $720 million after being pressured by a different investor. TaxAct had over 3 million consumer users and about 21,000 professional users.
The company, through an investor relations agency, declined comment on Engine Capital’s letter.
At the heart of Engine Capital’s argument is whether Avantax is worth more to a competitor than it is as a standalone company.
“The gap between the value proposition offered by Avantax and its larger peers is widening, putting the company’s competitive advantages increasingly at risk,” its letter said. “We question how long Avantax can remain relevant when large competitors are able to dwarf the company’s investments in technology, product development and customer service.”