Software company investors coupe are sounding the alarm about a possible sale to private equity, concerned that any such transaction in the current investment environment could unreasonably limit its value.
This is something you don't see every day. A few weeks ago rumors arose that Vista Equity Partners I was interested in buying coupe. Coupa's largest shareholder, HMI Capital, with 4,8% of the shares, has released a letter to Coupa's board stating that he would oppose any deal he believed undervalued the company.
He set its value at a minimum of $95 per share. Coupa's share price was around $63, down almost 3%. Like many SaaS stocks, Coupa's value fell precipitously in 2022, down 60% for the year.
HMI is concerned that Coupa's current value does not reflect what it believes will be a lucrative future once it overcomes the current troubled valuation market for software companies.
Unlike the poison-pen letters we're used to seeing from activist investors, this one was full of praise for the company (probably because their goals were so different):
As we have communicated to the Board of Directors and the management team, we invested in Coupa based on our belief that it is an excellent business. His management team, particularly CEO Rob Bernshteyn, has done an exceptional job of building the company into an undisputed market leader, while also establishing business expense management as its own critical category. Perhaps most importantly, Coupa's prospects for future growth and long-term value creation are bright. As Mr. Bernshteyn himself said just a few months ago:
“Now, short-term scenario aside, we are proudly the undisputed leader in business expense management. Our total addressable market is massive and under-penetrated and we are more excited than ever in our quest to revolutionize this market and deliver customer success like never before.”
We believe we speak for many other shareholders when we say we'd be pleased to own Coupa for the foreseeable future and bet the team continues to build momentum and execute on its proven strategy.
It's almost strange to see an outside investor praising a company's leadership, since most public investor feedback is negative. Here we don't see an investor begging management to cut costs or change direction. Instead, it is praise and a belief in greater value to come.
The sunny vision of the future of coupe it conflicts with current public market sentiment about the future value of tech companies. That prevailing viewpoint, crossed with copious amounts of private equity dry dust, may have put PE investors in a deal-making frame of mind.
