What: It has been an eventful few months for shareholders of comparison website owner and operator iSelect Ltd (ASX: ISU).
Firstly, there was the abrupt resignation of Chief Executive Officer (CEO) Mr Alex Stevens in mid-October after just 18 months in the role.
Then, in the same announcement was news of a non-binding acquisition proposal being put to iSelect's board. However no acquisition price was mentioned. The acquirer was subsequently outed as private equity firm Providence Equity Partners.
So What: Investors initially reacted positively to the news of a potential takeover with the share price jumping from around $1.50 to $1.65. The share price continued to climb higher in the days following to around $1.80.
Then just this week came news that the Chief Financial Officer (CFO) Mr Paul McCarthy had tendered his resignation and would leave the business at the end of January. The news sent the stock crashing around 9% and back to the $1.60 level.
Now What: For the full year ending June 30, iSelect reported a 17% increase in normalised net profit after tax to $21.4 million with guidance provided for the current financial year suggesting a small uptick in earnings. Based on consensus data provided by Morningstar this has led to a forecast of 8.6 cents per share which implies a forward price-to-earnings ratio of 18.2x.
Buy, Hold or Sell?
The loss of senior management coupled with the uncertainty surrounding the takeover talks given the lack of any offer price would suggest investors are best off waiting on the side-lines for now.
Should positive developments surrounding a firm takeover offer occur then quick-footed investors may be able to undertake a successful takeover arbitrage opportunity. As investors in Asciano Ltd (ASX: AIO) will know however, takeovers don't always run smoothly or go to plan.
