Don’t you love it when you check the FTSE daily movements, and you see a share price climb by more than 25%?
That’s what happened on 30 October, when the Ascential (LSE: ASCL) share price spiked up a bit more than that.
It’s been on a very rocky ride since its IPO back in 2016, with some big booms and busts along the way.
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What does it do?
Ascential describes itself as a “specialist information, analytics, events and ecommerce optimisation company“.
Information, analytics, and all that stuff is the meat and veg of online business. And, these days, that increasingly means most business.
So it’s a potentially lucrative market. It’s also a very competitive one.
Ascential has a varied package of offerings, covering events, design, marketing, digital commerce, finance. But that’s all being broken up.
What just happened?
The latest share price jump is all about the proposed sale of the firm’s Digital Commerce and WGSN businesses, for a combined £1.4bn.
The firm says this is the conclusion of its “managed separation, announced in January 2023, to create the optimal structure for three distinct businesses and maximise shareholder value“.
The deal should deliver £1.2bn in cash. And the board intends to distribute around £850m of it to shareholders.
We’ll have to wait for more details, but the announcement spoke of “a special dividend, although the quantum, timing and form of the return of value will remain at the discretion of the Board“.
How’s the valuation
That £1.2bn is about the same as Ascential’s market cap at the time of writing. And it’s about 26% higher than at the close of the previous market day.
So if the company is valued at £1.2bn, and it’s set to get a cash injection of £1.2bn, does that mean investors buying now would effectively get the business itself for free? Well, there’s more to it than that, inevitably.
At the 2023 interim stage, Ascential reported net debt of £206m. That’s with an operating profit of only £0.7m in the first half. And the firm reported a loss in 2022.
And now, it seems, “new debt facilities are expected to fund Ascential’s standalone Events business“.
I reckon trying to put a valuation on Ascential stock right now is tricky, to say the least.
What should investors do?
Future expectations will all be up in the air too. Broker forecasts had Ascential stock on an elevated price-to-earnings (P/E) ratio of 130 for the current year.
They had it dropping to a more reasonable 30 by 2025, mind. And that might be a decent growth stock valuation. Earnings and cash flow looked set to rise solidly too.
But, right now, I know what I’m going to do as an investor. Nothing other than watch and wait.
We might be looking at a good buy now. But I just can’t tell. And, coupled with that rocky share price chart, things are way too uncertain for me.
