Well, OK there's not much to investing in SIMO now other than waiting for the acquisition by MXL to close.
My calculation says SIMO has 20% upside to the value of the cash (about $93) plus stock (0.388 shares of MXL per share of SIMO). It's a great stock to be invested if the market continues it's decline, and if the tech market turns up, SIMO owners will get both the 20% price increase as the gap closes, and ~39% of the increase in MXL stock which may occur between now and deal close.
MXL seems to have a very strong backlog and demand trends, so as they report their quarterly results perhaps the mood around MXL will turn more positive. MXL is now $40, it might be able to get to $80 if it reports well between now and next March, so SIMO would enjoy $16 of price appreciation (in addition to closing the 20% gap) if MXL makes it to $80.
Also, as SIMO reports Q2 and Q3 we've still got a chance that another buyer appears, and outbids MXL, but that seems a far off hope at this time. Lets see what SIMO reports for Q2 and Q3, if it's as strong as seems possible, perhaps that will drive other related companies (MediaTek? MCHP?) to want to own SIMO's revenues and cash flows. Remember SIMO said they would grow 20%-30% in 2022, and more than that if they could get a higher allocation from TSMC. There has been so much news of slowdown in PCs and cell phones that one would think SIMO can get a higher allocation from TSMC, the question then becomes has SIMO's demand stayed elevated such that SIMO can take and sell that higher allocation, or has SIMO also experienced some cancellations which change their outlook? Since SIMO isn't giving guidance due to the deal announcement, we've gotta wait and see what they actually report rather than hear management's outlook (like normal).
I also wonder whether SIMO will continue to pay it's dividend until the deal closes? I'm sure MXL would rather have that cash to pay down the debt they plan to take on, but whether SIMO management pays the dividend or cancels it going forward due to the deal remains unknown. |
