- Proposed Scheme of Arrangement to return value of Block holding in November 2022
- £2.5mn capital return and dividend paid on 15 July 2022
Chairman Ned Montarello of Aim-traded finance company ThinkSmart (TSL: 31p) is proposing a Scheme of Arrangement (Scheme) through his buy-out vehicle whereby shareholders receive a cash distribution for the company’s holding in New York Stock Exchange-listed Block (US:SQ), a $43bn market capitalisation fintech fund, and ThinkSmart’s remaining assets (£3mn in cash and a legacy leasing business in wind down) transferred to Montarello’s acquisition vehicle. The shares would then be delisted.
ThinkSmart holds 618,750 shares in Block worth $47mn (36.22p a share), so independent shareholders would receive around 36p a share in cash (99.5 per cent of gross proceeds from a share sale) if a majority approve the Scheme at a shareholder meeting in October.
However, it is a poor time for independent shareholders to crystallise value in their Block shares. In mid-January 2022, ThinkSmart exchanged its minority holding in Clearpay, a payment platform that enables consumers to split the cost of retail purchases into interest-free payments, for shares in Australian Stock Exchange listed Afterpay (‘Unravelling ThinkSmart’s share price decline’, 6 January 2022). Block shares were trading at $128 when the group completed its all-share takeover of Afterpay on 1 February 2022, having fallen from $167 on 10 December 2022 when ThinkSmart announced its Clearpay share exchange terms with Afterpay. Block’s stock price is now $76.
Montarello pointed out at the time “that all the analysts covering Block have a target price of between $200 to $250. That is the look through that we as a board have taken. It is about the volume of shares [ThinkSmart shareholders are receiving] at this point not the value of them. We are excited by the prospect of the Block holding as they emerge as one of the winners in this Payment gateway space with the Afterpay buy now pay later product and their Cash App as core to their growth strategy.” ThinkSmart has only held its Block shares since 1 February 2022, hardly enough time to reap the long-term financial rewards from the holding.
Moreover, last week’s change in the US Federal Reserve’s narrative in relation to its monetary tightening policy, coupled with lower market expectations for the peak Federal Funds rate, are likely to drive a re-rating of technology stocks. Block will be a beneficiary. I would vote against the Scheme at the current time.
Simon Thompson was named Journalist of the Year at the 2022 Small Cap Awards.
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