NEW YORK (Reuters) – Enad Global 7 AB’s stock price jumped 5% on Monday after U.S. activist investor Alta Fox urged the Swedish video game company to explore strategic options, including a possible sale.
Alta Fox asked EG7’s board to “expeditiously” address the company’s trading discount and forecast that a sales process plus other changes “could unlock more than 100% in near-term upside for EG7 shareholders,” according to a letter made public on Monday.
Alta Fox, which owns 6% of EG7 and made headlines last year by running a board room challenge at toymaker Hasbro, is worried the market is not valuing the company properly despite positive steps taken by management.
“EG7 is a high-quality business that remains dramatically undervalued due to no fault of current leadership,” Alta Fox’s managing partner Connor Haley wrote.
A representative for EG7, which has game development divisions Daybreak Games and Big Blue Bubble, did not immediately respond to a request for comment.
Previous management’s missteps and the fact that it is not well known outside of Sweden are hurting the company, the letter said.
The hedge fund suggested the company, whose stock is listed in Sweden, should relist in the United States in order to buy back shares. It also suggested management should promise to pay a recurring dividend, saying the company could pay “a 10%+ dividend on the current share price while still properly reinvesting and maintaining a net cash balance sheet.”
Most urgently though, Alta Fox wants to see a formal review process, including a possible sale of the entire company, which it expects could attract several potential acquirers willing to pay a considerable premium.
($1 = 10.56 Swedish crowns)
(Reporting by Svea Herbst-Bayliss; Editing by Conor Humphries)
