Update – Reading the CVSL Tea Leaves and a Pie Five Pizza IPO
CVSL announced the acquisition of another large established direct sales company in the UK overnight. Betterware generated approximately $38 million in revenue over the last twelve months, has over 5,000 sales reps and offers products and services that should be very complimentary with the Kleeneze business acquired earlier this year. While the terms have yet to be disclosed, we expect that the valuation metrics for the purchase price will fall within the company’s stated target range and that this will add significantly to CVSL’s growth and ultimately, its profitability.
Wanted to point out another interesting development with CVSL that we thought the Groove community might want to consider. SEC filings from earlier in the week indicate a large movement of CVSL shares owned by insiders and it appears that 125K+ shares owned by Chairman John Rochon were gifted to children’s trusts recently. There is a tax attorney in our group who was previously an estate tax specialist, his take was that this is a very bullish sign. The amount of value that an individual can transfer in any single year without being subject to a very high gift tax has an annual limit and when you exceed that limit, you start to use your lifetime exemption amount. Without going too deep into estate tax nomenclature and strategy, these kinds of transfers are designed to take place at the time when the assets can be valued as low as possible. With a listed stock, the value for gift tax purposes is almost always going to be the trading price on the day the gift is made. Thus, from the stand point of paying the lowest taxes, the best time to transfer a stock is when it is at its lowest point. We think it is safe to say that the stock transfer gifts made recently occurred after significant thought and planning and were made because Mr. Rochon believed that the stock had reached the lowest point it will be trading.
Pie Five Pizza IPO or Blaze Pizza IPO
A good article was published by one of our own earlier this week that makes the case for a spin out of Pie Five Pizza into its own stock to allow investors to buy into a pure play on the fast casual pizza space. The valuations achieved both in the offering and after IPO trading for other fast casual restaurant stocks suggest that PIE Five as a stand alone might be worth several times RAVE’s current market cap. Additionally, it makes the point that even if Pie Five is not the first IPO in the space, RAVE will still likely benefit as Blaze Pizza or one of the other big players files to go public. The high-profile nature (especially after Lebron’s dumping Mcdonalds last week to focus on Blaze) of a Blaze IPO and the valuation it would achieve would surely lead to investors to reassess the value of the Pie Five operations given the almost identical model and similarity in size. A $300 million IPO valuation for Blaze leads to a $20+ RAVE valuation and those numbers will likely prove to be conservative for both RAVE and Blaze twelve months out. While it appears that short sellers are still having a big impact on RAVE’s day-to-day trading, we believe they will begin to unwind those positions over the next couple of months if not sooner. This additional buying pressure should continue to push RAVE shares higher and we expect to see it back over $10 again soon.
Entry filed under: Uncategorized. Tags: Betterware, Blaze Pizza, Blaze Pizza IPO, CVSL, direct sales stocks, fast casual pizza, Fast Casual Pizza IPO, Lebron James, Lebron James Blaze Pizza, Lebron James Investment, Mergers and Acquisitions, MLM Stocks, Pie Five Pizza IPO.