Investors holding Appen Ltd (ASX: APX) shares probably have a bad case of whiplash after last week's wild ride.
A takeover approach from Telus International (owned by Canadian IT giant Telus Corporation) was stripped as quickly as it appeared. Unfortunately for shareholders, this meant the Appen share price yo-yoed from $6.40 to $8.35 and back.
The decision to withdraw its $9.50 takeover bid was made without further comment. However, in light of this drama, there might a silver lining.
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Appen shares' chance to rebuild and recoup
Appen shareholders, prepare yourself for this tough reflection. Once upon a time, Appen shares were commanding a price of $40 per share. Even more painful, anyone who had invested in Appen in the last four years is now in the negative.
As Motley Fool chief investment officer Scott Phillips notes in a recent Motley Fool Money podcast:
[…] if you had bought the shares at $10; $15; $20; $25; $40 — up to 40 bucks. If you had bought at $40 in the middle of 2020 you've literally dusted four-fifths of your money… 80% of your cash, even after the takeover premium is put in, and you're not going to get a chance to get that back.
In other words, if all the Appen shares were acquired it would remove the opportunity for investors to claw back some of their money. By accepting a cash takeover bid, any shareholder losses would be realised. So, the fact that Telus revoked its bid means shareholders hold that chance again.
Now, in saying that, it can obviously work the other way. Without the takeover parachute, Appen shares might proceed to fall even lower. This is a real possibility considering that its last trading update suggests lower revenue and earnings before interest, taxes, depreciation and amortisation (EBITDA) compared to the prior year.
However, CEO Mark Brayan is adamant the company is in the midst of a transformation. Part of this entails a goal of doubling revenue by 2026 and an EBITDA margin of 20%. If the company can achieve this while remaining publicly listed, it might heal some of those shareholder wounds.
Based on the current value of Appen shares, the company holds a market capitalisation of $765 million.
