Auction Tech Group shares sink 20% on profit warning, $85 mln Chairish deal
Investing.com -- Shares of Auction Technology Group (LON:ATG) tumbled more than 20% on Monday after the company issued a profit warning and announced an $85 million acquisition of U.S.-based vintage marketplace Chairish.
The U.K.-based company said third-quarter revenue growth slightly improved compared with the first half of the fiscal year, helped by shipping.
However, changes in the revenue mix led it to revise its adjusted EBITDA margin guidance to 42% to 43%, down from its previous forecast of 45% to 46%. RBC Capital Markets had estimated a margin of 44.5%.
In a separate announcement, Auction Technology Group said it will acquire Chairish, a U.S. online marketplace focused on vintage furniture, décor and art.
The deal will be funded through a combination of cash and a drawdown from the company’s increased revolving credit facility. The transaction will raise leverage to 2.3 times.
Chairish reported revenue of $51.2 million in fiscal year 2024 and an adjusted EBITDA loss of $0.4 million. The company is expected to deliver double-digit revenue growth and an adjusted EBITDA margin of about 30%.
Auction Technology Group said it expects to achieve approximately $8 million in cost synergies from the acquisition.
It also anticipates revenue synergies, with the deal projected to contribute positively to adjusted EBITDA in fiscal 2026, become accretive to earnings per share by fiscal 2027 and generate a return on invested capital above its weighted average cost of capital by fiscal 2028.
“A profit warning and a deal are a difficult combination - there is little detail in the statement re the moving parts at ATG, although we would expect THV to have been soft and could expect take rate to have performed better driven by shipping, albeit at lower margin,” said analysts at RBC Capital Matkets in a note.
The brokerage also cited the average price point on Chairish, about $800 to $900, compared with $350 to $400 in the broader art and antiques segment.
With ATG making headlines, savvy investors are asking: Is it truly valued fairly? In a market full of overpriced darlings, identifying true value can be challenging. InvestingPro's advanced AI algorithms have analyzed ATG alongside thousands of other stocks to uncover hidden gems. These undervalued stocks, potentially including ATG, could offer substantial returns as the market corrects. In 2024 alone, our AI identified several undervalued stocks that later surged by 30 or more. Is ATG poised for similar growth? Don't miss the opportunity to find out.
