The LiveTiles Ltd (ASX: LVT) share price has been a strong performer on Wednesday.
In afternoon trade the intranet and workplace technology software company's shares are up 17% to 24 cents.
Why is the LiveTiles share price storming higher?
As we covered here earlier today, LiveTiles requested a trading halt this morning amid media reports that private equity firms were interested in launching a takeover approach.
The report claims that the low multiples its shares trade on relative to its peers have caught the eye of international investors.
This afternoon the company confirmed that it receives unsolicited approaches by parties interested in exploring a corporate transaction from time to time.
However, it advised that it is not currently in formal discussions in relation to a control transaction with any third party and will inform shareholders as required under its continuous disclosure obligations.
It also confirmed that it has engaged Credit Suisse and Gilbert & Tobin to advise the company on any potential control transaction should one happen.
Why is the LiveTiles share price underperforming?
There appear to be a number of reasons for the weakness in the LiveTiles share price. One of those is the company's growth, which has failed to live up to expectations.
In February 2019, LiveTiles stated its aim of organically growing its ARR from $30.9 million to at least $100 million by 30 June 2021.
A year later, the company had dropped the word "organically" but advised that it "continues to pursue its short-term target of $100m in ARR and sees significant market and growth potential beyond this level."
However, this target has now disappeared without any commentary on the matter. At the end of the second quarter, LiveTiles' ARR stood at $64.7 million, which is well short of its June 2021 target of $100 million with just a few months left to go.
Another concern has been the company's cash burn. During the second quarter, LiveTiles posted a net cash outflow of ~$13.6 million, leaving it with just $19.2 million in the bank.
And while $9.8 million of this related to one-off legal and litigation fees, investors appear concerned that LiveTiles will require some form of capital injection in the near future. This may be weighing on investor sentiment somewhat.
