The Vocus Group Ltd (ASX: VOC) share price is up around 2% in morning trade to $3.45 with the Australian Financial Review again reporting that private equity groups may be mulling a shock takeover bid for the internet services business.
The stock has fallen 60% over a dramatic past year dominated by a major boardroom bust-up in the wake of the February 2016 merger between the M2 Group of companies and the formerly-independent Vocus business.
All was going swimmingly six months later in August 2016 with the share price above $8 and the group announcing the acquisition of the Nextgen fibre-optic network business as the final deal to catapult it into the big league of full services telcos to compete with the likes of Telstra Corporation Ltd (ASX: TLS).
In fact in August 2016 the company's board and senior management team were talking up the prospects of the share price hitting $20 by 2020 in one of their investor presentations below.
Although it seems several board members forgot one of their other company rules after infighting and heavy share selling by departing founders set the company back a long way.
Can you guess which one of Vocus's own golden rules its former management team might have forgotten?
Source: Vocus Group August 2016 Investor presentation.
As a consequence of the poor implementation of the merger much of the Vocus senior management team is now reported to have left the business, which is probably what is encouraging some of the huge short selling interest in the business.
Despite its seemingly cheap valuation on around 10x estimated earnings for FY 2017 it seems plenty of short sellers are of the belief that there is more bad news to come out of the business.
As I wrote previously I'm not surprised there are rumours of private equity interest in the business given it's on a valuation of just over $2 billion it looks very cheap with its combined Vocus, Amcom, Nextgen, North West Cable and Australia-Singapore cables having the potential to spit off rising cash flows long into the future.
Moreover, its Dodo and other enterprise or home broadband businesses also look set to avoid the worst of the margin-crunching effects of the NBN. The group's New Zealand business is also posting some impressive results with a decent outlook.
I rate the shares as a buy at $3.40, although acknowledge that its recent track record and debt pile means it's higher up the risk scale.
