A regulatory filing reveals that someone is plotting to take Skullcandy Inc. (NASDAQ: SKUL) private. Who is he? The founder and former CEO of the company called Rick Alden. The intension to pull SKUL from public hands comes at a time when shares of the company currently sit far below their $20 IPO price five years ago.
But investors in Skullcandy Inc. (NASDAQ: SKUL) appeared to like the idea of taking the company private going by the reaction immediately the news reached the market.
Through his investment firm called Ptarmagin LLC, Alden told regulators he was exploring a transaction that could see Skullcandy go private.
What will the buyout cost?
Some analysts are already estimating the value that Skullcandy Inc. (NASDAQ: SKUL) might command if it were to be acquired by its former CEO. For example, analysts at Wunderlich Securities think that a price in the band of $5.50 to $6.50 per share would be a reasonable offer for SKUL buyout. At that price, the buyer would require about $186 million to acquire Skullcandy.
Alden, who has shown interest in buying SKUL, owns about 13% of the company through a family trust.
A troubled business
Skullcandy has been troubled in the recent times, partly by a stronger U.S. dollar. A large portion of the company’s sales are generated abroad. As such, a stronger USD makes its products more expensive on the international market, thus dousing demand for them.
Additionally, the stronger USD means that SKUL’s international sales are worth less than they should when converted to USD.
What happened in 1Q?
Skullcandy Inc. (NASDAQ: SKUL) generated net sales of $46.3 million in 1Q2016 compared to $45.6 million in the same quarter a year ago, suggesting a 1% YoY increase in revenue. But the management said revenue would have expanded 6% YoY had it not be for the tough business environment the company faced in China during the quarter.
Skullcandy Inc. (NASDAQ: SKUL) posted EPS loss of $0.17 in the latest quarter, wider than $0.13 a year ago thanks to the challenge in China.
But the company’s cash balance increased a whopping 94% to $45.8 million compared to the prior quarter.