Corner of Berkshire & Fairfax Message Board

General Category => Investment Ideas => Topic started by: writser on December 11, 2018, 06:22:00 AM

Title: MITK - Mitek Systems
Post by: writser on December 11, 2018, 06:22:00 AM
Mitek System is (according to Wikipedia) a software company that specializes in digital identity verification and mobile capture built on artificial intelligence algorithms. The company's technology allows people to deposit checks via their mobile phones and open bank accounts from mobile devices. Additionally, the technology verifies people’s identity with patented algorithms that capture, classify and authenticate photos of identity documents including passports, ID cards, and driver's licenses.

Crosspost from the Paul Singer topic:

An Elliott portfolio company is trying to buy MITK (hostile takeover). Singer increased (https://seekingalpha.com/pr/17352688-asg-technologies-increases-offer-11_50-per-share-acquire-mitek) his bid from $10 to $11.50 today.
Quote
In the letter, sent to the Mitek Board of Directors two weeks ago, ASG CEO Charles Sansbury noted that the new offer price represents a 73% premium above the unaffected closing price on October 9, 2018, a significant premium above the average share price for all relevant periods, and a 90% premium above Mitek’s 5-year average. The letter also noted that the proposal would not be subject to any financing condition, as Elliott would commit to provide the necessary equity to complete the acquisition.

ASG released the private correspondence because despite the increased offer, Mitek has maintained its refusal to engage with ASG on reasonable terms that would allow ASG to conduct the necessary diligence and make a binding offer. The letter’s publication is intended to update the market on ASG’s continuing efforts to engage.

I bought a few shares on the open today. I guess I like Singers style a bit more than most of you. But regardless what you think of him, he's offering a price higher than what shareholders have seen the past few years, the deal has synergies and consider me skeptical about the chances of a random ~$300m company resisting the Singer antics (and financial power). Yet shares were trading at a ~15% discount to the improved offer. Very tiny position, just for the heck of it.

Board reply today (link (https://www.sec.gov/Archives/edgar/data/807863/000080786318000112/mitk-20181211x8k.htm)):

Quote
Following this announcement, in the spirit of open, constructive engagement and with a focus on exploring all opportunities to deliver value for shareholders, Mitek’s CEO, Chairman and its General Counsel, along with our financial advisor, met in person with the ASG team for over 90 minutes to discuss Mitek’s value drivers and the reasons why Mitek is worth significantly more than ASG’s proposal. During that meeting, we also made it clear to ASG that we remain open to a transaction at the right price.

[..]

Nonetheless, following the receipt of ASG’s revised proposal, Mitek offered ASG the opportunity to access preliminary diligence, on a confidential, non-exclusive basis, to provide them an opportunity to increase their offer price. We requested that ASG and Elliott agree to a confidentiality agreement, including a customary standstill, to prevent the misuse of the Company’s confidential and proprietary information. Further, to demonstrate its good faith the Company also offered to provide an agreed list of specific key diligence items pursuant to the confidentiality agreement, as well as making a number of other concessions which ASG and Elliott requested.

Excluding other buyers. Elliott/ASG are insisting that we sign an agreement to interact with ASG as an exclusive buyer. Given the number of other parties that have expressed interest in Mitek, there is no reason for ASG to get exclusive treatment (other than reasons that solely benefit ASG).


Looks to me like the company will be sold one way or another and the board is just trying to play poker a bit to increase the price. Yet shares are trading at a significant discount to the Elliott bid. Seems like an interesting situation to me.

My apologies for the meager opening post. Has anybody else looked at Mitek?
Title: Re: MITK - Mitek Systems
Post by: Foreign Tuffett on December 11, 2018, 07:13:08 AM
Certainly does look like there's a good chance of the company being sold, with $11.50 being the current bid.

I think Elliott would have a good chance of winning a proxy battle, if it chose to launch one. Insiders only own 7.5%, and there's a non-staggered board. Plus you have a brand new CEO (started 11/6/18), and a CFO that very recently (11/26/2018) rescinded his resignation, neither of which engenders much confidence in management.

I wonder if the CFO decided to "un-resign" once he realized that the company was likely to be sold off? Why not hang around for  < 1 year to cash in?


Title: Re: MITK - Mitek Systems
Post by: GregS on December 11, 2018, 09:03:47 AM
The backroom drama has been interesting.  DeBello was fired but no one knew why, and the CFO leaving the same day was obviously concerning, then the offer comes in.  The initial offer was a lowball IMO and I think ASG is trying to strong arm a deal due to the chaos.  It's not going to happen because they overplayed their hand by coming in so aggressively.  I think shareholders and the Board realize if this went to a bidding war the price would be higher than the original $10 or current $11.50. 

Mitek has a dominant franchise in mobile check deposit.  Despite check usage declining, because mobile adoption is increasing, revenue here will probably grow in the double digits for some time.  They're using this cash to invest in Mobile ID.

Mobile ID is a much larger opportunity and has crossover with their financial industry expertise and customer base which is particularly important when you consider the regulatory hurdles.  However, it is a much more competitive industry with lots of new entrants so Mitek is ramping spend on R&D, sales and acquisitions.  Huge secular shifts in this direction make this a very attractive market and make Mitek an attractive target. 

My guess is the PE folks realize that companies that need digital ID verification are going to start buying up the tech companies and Mitek will be a top target.  If Mitek can manage to fend off the economic buyers and get interest from the strategic buyers the price goes higher.  I think the Board is well aware of this.  In the meantime the business is growing rapidly and they have no problem funding growth.
Title: Re: MITK - Mitek Systems
Post by: Foreign Tuffett on December 12, 2018, 06:21:05 AM
Writeup from the Clark Street Value blog:

http://clarkstreetvalue.blogspot.com/2018/12/mitek-systems-elliott-bear-hug.html (http://clarkstreetvalue.blogspot.com/2018/12/mitek-systems-elliott-bear-hug.html)
Title: Re: MITK - Mitek Systems
Post by: Jurgis on December 12, 2018, 06:57:25 AM
So the thesis is pretty much Elliott bid going through or someone else acquiring the company? And that the stock won't fall much if acquisition does not happen because it was trading in range close to current price?

If I look at financials without considering buyout, I don't see much margin of safety. Valuation is high IMO and seems to assume high growth and great results going forward...
Title: Re: MITK - Mitek Systems
Post by: writser on December 12, 2018, 09:16:20 AM
So the thesis is pretty much Elliott bid going through or someone else acquiring the company? And that the stock won't fall much if acquisition does not happen because it was trading in range close to current price?

Yes :) . The thesis is basically: nobody fucks with Paulie.
Title: Re: MITK - Mitek Systems
Post by: Schwab711 on December 12, 2018, 11:01:53 AM
So the thesis is pretty much Elliott bid going through or someone else acquiring the company? And that the stock won't fall much if acquisition does not happen because it was trading in range close to current price?

If I look at financials without considering buyout, I don't see much margin of safety. Valuation is high IMO and seems to assume high growth and great results going forward...

I don't know anything about the deal but I've looked in to the company off and on. I don't think it's FICO by any means but MITK is a highly in-demand asset with pricing power in my view. Will they take it, when, and how can I be sure how much pricing power they have was my sticking point on investing in the past. Of course that doesn't mean the stock can't or won't fall in the deal failed. I do think there's some floor on the value of the assets though.
Title: Re: MITK - Mitek Systems
Post by: LightWhale on December 14, 2018, 07:07:49 AM
Thanks for writing it up writser. 

That's from 2018 AR Mitek submitted today:

Quote from: Mitek
Our corporate documents and the DGCL contain provisions that could discourage, delay, or prevent a change in control of our company, prevent attempts to replace or remove current management, and reduce the market price of our stock.
Provisions in our restated certificate of incorporation and second amended and restated bylaws may discourage, delay, or prevent a merger or acquisition involving us that our stockholders may consider favorable. For example, our restated certificate of incorporation authorizes our Board to issue up to one million shares of “blank check” preferred stock, sixty thousand of which are reserved for the Section 382 Rights Agreement, discussed below. As a result, without further stockholder approval, the Board has the authority to attach special rights, including voting and dividend rights, to this preferred stock. With these rights, preferred stockholders could make it more difficult for a third party to acquire us. We are also subject to the anti-takeover provisions of the DGCL. Under these provisions, if anyone becomes an “interested stockholder,” we may not enter into a “business combination” with that person for three years without special approval

Plus this is from October 23rd:
Quote from: Mitek
Pursuant to the Plan, the rights would become exercisable if a person or group acquires a position of 4.9% or more of Mitek’s outstanding common stock after the adoption of the Plan...Once exercisable, all holders of rights other than the person or group triggering the rights will be entitled to purchase additional shares of the Company’s common stock at a 50% discount.  Rights held by the person or group triggering the rights will become void and will not be exercisable.

Mitek will submit the Plan to a stockholder vote at the 2019 annual meeting of shareholders.


So it's seems that the board intends to hang in there until the annual meeting, and see whether Elliott can really win enough seats. Last year the meeting was held on March 7, so it might take a few months until we see concrete developments.
Title: Re: MITK - Mitek Systems
Post by: writser on December 14, 2018, 12:08:03 PM
Yes, Mitek has a poison pill in place - probably one of the reasons the stock trades where it trades. The key question is, to me, how credible is the story of the company? The Elliott bid is basically around the all-time high of the stock. Yes, the bid was opportunistically timed, but still it's way better than what the market has been offering the past few years. And the Mitek insiders? Directors own basically zero shares and get paid ~$150k / year to show up at board meetings. I'd want to keep that job too .. One director bought 20k shares in August but the rest has been selling the past few years. As do basically all insiders (http://openinsider.com/screener?s=mitk&o=&pl=&ph=&ll=&lh=&fd=1461&fdr=&td=0&tdr=&fdlyl=&fdlyh=&daysago=&xp=1&xs=1&vl=&vh=&ocl=&och=&sic1=-1&sicl=100&sich=9999&grp=0&nfl=&nfh=&nil=&nih=&nol=&noh=&v2l=&v2h=&oc2l=&oc2h=&sortcol=0&cnt=100&page=1). So, how much value should you ascribe to the insider shtick? (always have wanted to use that word). Are these guys really true believers, do they have solid arguments and does that make them want to battle Paul Singer, the guy who seizes Argentinian sailing ships in Ghana, allegedly hires PI's to find dirt on CEO's and who was described by the AthenaHealth CEO as follows:
Quote
Bush told me that, when he began to research Elliott online, the experience was like “Googling this thing on your arm and it says, ‘You’re going to die.’ ”

Consider me skeptical. Paul Singer might be an asshole but he's money-good, offering a decent price and the deal seems to make sense for them. Meanwhile insiders are barking about value but own no shares, have said that they want to sell the company and have given Elliott private access to the books. If they don't come up with something good I think they will yield and/or booted by shareholders. Maybe Elliott will raise his bid another fifty cents or so to allow the board to save face.

Obviously things can go wrong in myriad ways but I like my odds. The bad thing is that shares have risen ~5% since my post and are now trading closer to the $11.50 offer.
Title: Re: MITK - Mitek Systems
Post by: LightWhale on December 14, 2018, 09:33:39 PM
I agree both about the odds and about the opportunistic usage of shtick... the references below were aimed at calibration of IRR.
Title: Re: MITK - Mitek Systems
Post by: Foreign Tuffett on December 26, 2018, 05:52:54 AM
Elliott has backed away from a proxy contest in exchange for the board initiating a review of strategic alternatives. "Multiple parties" have expressed interest, which is definitely a good sign.

https://www.sec.gov/Archives/edgar/data/807863/000080786318000117/mitk-20181221x8k.htm (https://www.sec.gov/Archives/edgar/data/807863/000080786318000117/mitk-20181221x8k.htm)

My interpretation of this is that the board realized that putting the company up for sale was fait accompli, so why fight the process and risk getting removed?
Title: Re: MITK - Mitek Systems
Post by: LightWhale on December 26, 2018, 06:59:52 AM
I agree, bought a few more shares. Surprising the stock has not reacted to the news
Title: Re: MITK - Mitek Systems
Post by: GregS on December 26, 2018, 09:45:43 AM
Elliott has backed away from a proxy contest in exchange for the board initiating a review of strategic alternatives. "Multiple parties" have expressed interest, which is definitely a good sign.

https://www.sec.gov/Archives/edgar/data/807863/000080786318000117/mitk-20181221x8k.htm (https://www.sec.gov/Archives/edgar/data/807863/000080786318000117/mitk-20181221x8k.htm)

My interpretation of this is that the board realized that putting the company up for sale was fait accompli, so why fight the process and risk getting removed?

It seems the greenmail option is off the table for awhile, that's good news.

Obviously a more open sales process would be best for shareholders in getting the best price.  Maybe Elliott realized they weren't going to win a proxy contest?  Another possibility would be a take private by management and Elliott.  Might end up at a higher price than current offer but probably would still undervalue the company.

I agree stock should be higher today.
Title: Re: MITK - Mitek Systems
Post by: writser on December 27, 2018, 08:08:51 AM
Elliott has backed away from a proxy contest in exchange for the board initiating a review of strategic alternatives. "Multiple parties" have expressed interest, which is definitely a good sign.

https://www.sec.gov/Archives/edgar/data/807863/000080786318000117/mitk-20181221x8k.htm (https://www.sec.gov/Archives/edgar/data/807863/000080786318000117/mitk-20181221x8k.htm)

My interpretation of this is that the board realized that putting the company up for sale was fait accompli, so why fight the process and risk getting removed?

Yeah, seems unlikely that Elliott would back down from a proxy contest without cause. Probably they reached some sort of an agreement: we pull the proxy contest if you don't obstruct the sale process. But then again, what do I know. Seems like the most sensible explanation but hard to read the tea leaves. Thanks for bringing up the news here. Bought a few more shares during the festivities.

Strange price action past few days (though I guess that was true in basically every stock) but you don't hear me complaining.
Title: Re: MITK - Mitek Systems
Post by: LightWhale on January 02, 2019, 08:24:28 AM
I got out at 11.32, for 12% in three weeks. 
I hope for you guys I'll be missing out on bidding war.
Title: Re: MITK - Mitek Systems
Post by: writser on January 02, 2019, 08:53:08 AM
Value investors always sell too early, right? I sold the majority of my position as well. So far the best bid is $11.50 and shares are trading very close to that price as of today. Hard to handicap the chances of a higher bid (so far I've seen nothing that indicates a bidding war) and there's still some downside if management does something stupid. Wouldn't mind adding opportunistically if it drops a few percent.
Title: Re: MITK - Mitek Systems
Post by: LightWhale on January 02, 2019, 08:57:19 AM
In retrospect, considering our conviction after the latest management announcement, the right play might have been to lever up the position, fully covered by the 7.5 puts, which were dirt cheap.
Title: Re: MITK - Mitek Systems
Post by: writser on January 02, 2019, 09:13:42 AM
My conviction wasn't that high. In hindsight it's always easy to say a position should have been much bigger (and I love to complain about that every time an investment works out). But in reality unexpected things happens. If shares drop 10% I'd feel like an utter idiot losing a shitload of money after doing basically two hours of due diligence and a circle jerk in this topic.  I'm usually a bit (too?) conservative. My position sizing was ~3% here. Something like 6% could have been fine but I really would feel uncomfortable with a much larger position. I'm also usually skeptical about using options.
Title: Re: MITK - Mitek Systems
Post by: writser on January 03, 2019, 08:23:10 AM
At some point today shares were down almost 10%. Thinking about buying back some shares.
Title: Re: MITK - Mitek Systems
Post by: Foreign Tuffett on January 15, 2019, 08:25:38 AM
Presentation at investor conference starts in ~30 minutes.

http://investors.miteksystems.com/events-presentations (http://investors.miteksystems.com/events-presentations)
Title: Re: MITK - Mitek Systems
Post by: LightWhale on January 15, 2019, 12:01:32 PM
To save others the bother - Unless I dozed off at some point, nothing relevant to the acquisition
Title: Re: MITK - Mitek Systems
Post by: writser on January 16, 2019, 08:50:18 AM
Value investors always sell too early, right? I sold the majority of my position as well. So far the best bid is $11.50 and shares are trading very close to that price as of today. Hard to handicap the chances of a higher bid (so far I've seen nothing that indicates a bidding war) and there's still some downside if management does something stupid. Wouldn't mind adding opportunistically if it drops a few percent.

Obviously ..
Title: Re: MITK - Mitek Systems
Post by: landstander on January 18, 2019, 02:00:24 PM
Same, got out at $11.25 at the start of the year. I tell myself better early than late. It doesn't help, but that's what I tell myself =)

Thanks for the topic, good idea that worked out faster than I expected.
Title: Re: MITK - Mitek Systems
Post by: Castanza on January 30, 2019, 07:19:41 AM
Link to Aite Report

https://www.miteksystems.com/aite-aim-whitepaper

Observations from ER.

Agilisys

 I believe their expansion into the casino/gaming industry will prove to be vital and lucrative as online gaming regulations relax causing an influx of "couch gamblers"
 from mobile devices.

Growth and Cash Flow

They have continued to be on par with their growth estimates and cash flow. During the conference call someone asked why cash flow was slightly
less this quarter than the previous two. Jeff responded by saying it was due to bonus payout, acquisition and other standard expenses. And that
moving forward we should continue to see similar growth. This was encouraging.

Competition

Mobile check deposits are completely cornered by them. There certainly is other competition out there (Listed in linker Aite Report). Mitek is regarded as the "best in class" currently. However in my opinion they need to expand their geographical influence to Asia.

Growth

I like that growth is not entirely depended upon their marketing efforts. A lot of it is organic through their "partners" or "customers" that utilize their system. However I'm not sure if I like their pricing strategy as it focuses on volume rather than per transaction such as some competitors. However they did take a few questions regarding price leverage and whether or not they would exploit this. Its something they are looking into, specifically in Mobile Check Deposits.

All in all I think it was a good solid ER, Fundamentals still look strong as well as guidance. However the competition is there and I hope Mitek can continue to hold an edge. I think they have an advantage in the financial industry over competition which is a key focus for them. I personally would like to see them expand into gov't related services. States are clearly headed towards virtual drivers licenses etc. I believe there is room for more than one company in this field. The key is picking the right industries to target.
Title: Re: MITK - Mitek Systems
Post by: Foreign Tuffett on January 30, 2019, 09:20:34 AM
Maybe I'm a rube, but I thought earnings were fine + they affirmed 2019 guidance. Obviously it's too early in the process for there to be any update on the strategic alternatives process. Anyway, as of this morning I am back on this pain train.


Title: Re: MITK - Mitek Systems
Post by: GregS on January 30, 2019, 10:01:34 AM
I'll add one observation from the ER: the relationships with their channel partners are early and they described Mitek as "co-selling."  This obviously requires resources and increases selling costs for now, but as this matures they will get much more leverage from these relationships.  Good for bottom line growth as they achieve scale.
Title: Re: MITK - Mitek Systems
Post by: Castanza on January 30, 2019, 10:59:59 AM
I'll add one observation from the ER: the relationships with their channel partners are early and they described Mitek as "co-selling."  This obviously requires resources and increases selling costs for now, but as this matures they will get much more leverage from these relationships.  Good for bottom line growth as they achieve scale.

Yeah I really like this aspect. It can be rough at first but when you get large partners (especially in finance) this could rapidly expand their customer base. Lots of financial institutions like to use products from the same provider for simplicity reasons.
Title: Re: MITK - Mitek Systems
Post by: writser on February 08, 2019, 06:53:49 AM
I bought back some shares after earnings (still only a smallish position). Agreed that the numbers basically looked fine at first glance. The downtick seemed excessive to me anyway as the company has a firm bid on the table and is in the middle of a sale process.

Usually not my habit to post rumours but from yesterday:

Quote
Mitek (MITK -0.9%) is attracting private equity interest, according to TheDeal.com sources.

Mitek started its auction in December. The company will set a deadline for the first bids at the end of this month and decide by the end of March whether to accept.

Benchmark's Mark Schappel thinks Jack Henry (JKHY -2.4%), Fidelity National Information (FIS -0.6%), and Paylocity (PCTY +4.6%) could be among the interested parties.

Source: Bloomberg First Word.

I'm not really interested in buying more at current prices: low conviction idea and hard to handicap the chances of a higher bid getting on the table. So I'm not too trigger-happy around $11.50. Still might be an interesting idea around current prices though.
Title: Re: MITK - Mitek Systems
Post by: writser on February 25, 2019, 09:13:24 AM
Shares have been drifting down slowly on a few weeks of no news. Today might be a decent entry point again. I haven't sold any shares since the 8th but this is a low conviction idea and I don't feel comfortable adding to my position yet. Usually I add too soon.
Title: Re: MITK - Mitek Systems
Post by: Foreign Tuffett on March 11, 2019, 06:38:26 AM
Shareholders did not approve amending MITK's stock incentive plan that would have allowed more shares to be issued. I take this as another sign that shareholders are out of patience with this board.


https://www.sec.gov/Archives/edgar/data/807863/000080786319000018/mitk-20190307x8k.htm (https://www.sec.gov/Archives/edgar/data/807863/000080786319000018/mitk-20190307x8k.htm)
Title: Re: MITK - Mitek Systems
Post by: Castanza on March 11, 2019, 07:09:10 AM
Shareholders did not approve amending MITK's stock incentive plan that would have allowed more shares to be issued. I take this as another sign that shareholders are out of patience with this board.


https://www.sec.gov/Archives/edgar/data/807863/000080786319000018/mitk-20190307x8k.htm (https://www.sec.gov/Archives/edgar/data/807863/000080786319000018/mitk-20190307x8k.htm)

Can you expand upon this a bit? In regards to the patience comment. I think shareholders are content with either a sale or continued growth. I would be unhappy to see the company prematurely sold without realizing the full value Mitek's product is worth.
Title: Re: MITK - Mitek Systems
Post by: Foreign Tuffett on March 11, 2019, 07:33:08 AM
Shareholders did not approve amending MITK's stock incentive plan that would have allowed more shares to be issued. I take this as another sign that shareholders are out of patience with this board.


https://www.sec.gov/Archives/edgar/data/807863/000080786319000018/mitk-20190307x8k.htm (https://www.sec.gov/Archives/edgar/data/807863/000080786319000018/mitk-20190307x8k.htm)


Can you expand upon this a bit? In regards to the patience comment. I think shareholders are content with either a sale or continued growth. I would be unhappy to see the company prematurely sold without realizing the full value Mitek's product is worth.

I don't have much to add except that if you look at the events of the past year it's fairly clear that MITK shareholders have grown increasingly restive. If shareholders were happy with the status quo, they wouldn't be voting down the board's proposals.
Title: Re: MITK - Mitek Systems
Post by: GregS on March 11, 2019, 10:07:06 AM
The Board's communication regarding the CEO's and CFO's departure was atrocious.  No surprise they aren't getting deference from shareholders even if things look better now than 6 months ago.
Title: Re: MITK - Mitek Systems
Post by: writser on March 12, 2019, 09:38:43 AM
Stock ran up to ~$11.60 today - maybe because of optimism due to the results of the shareholder vote? I don't know, but I sold the majority of my position. Probably too early, but $11.50 is the only firm bid that I am aware of. Let's see if the market offers another buying opportunity soon.
Title: Re: MITK - Mitek Systems
Post by: Castanza on March 12, 2019, 10:50:18 AM
Stock ran up to ~$11.60 today - maybe because of optimism due to the results of the shareholder vote? I don't know, but I sold the majority of my position. Probably too early, but $11.50 is the only firm bid that I am aware of. Let's see if the market offers another buying opportunity soon.

Didn't management way there were multiple parties interested? Why would they turn down an 11.50 bid if there weren't better offers on the table? Even if they dont selel I think there is still plenty of room for Mitek to grow.
Title: Re: MITK - Mitek Systems
Post by: writser on March 12, 2019, 11:25:23 AM
I'm not in this name for the organic growth - no views on that. I'm all for the quick gain! As I said before, consider me skeptical about management. The board gets paid way too much and hardly owns shares. $11.50 is the only firm bid we've seen, despite all the big talk about "interested parties". Yes, there is a possibility that a higher bid will emerge but there's also the chance that other parties aren't as interested as management portrays them to be, not to mention that there's a chance that the board decides to do something stupid. I'll gladly lock in my gains when this is trading near the Elliott bid and leave some money on the table for those with a more optimistic outlook (or more knowledge of the company!). It is just my simplistic view that given the facts I know MITK looks like a way better proposition at $10.70 than $11.40. The market has given me the opportunity to bet on this view a few times. Keeps me off the street.
Title: Re: MITK - Mitek Systems
Post by: Castanza on March 12, 2019, 11:44:41 AM
I'm not in this name for the organic growth - no views on that. I'm all for the quick gain! As I said before, consider me skeptical about management. The board gets paid way too much and hardly owns shares. $11.50 is the only firm bid we've seen, despite all the big talk about "interested parties". Yes, there is a possibility that a higher bid will emerge but there's also the chance that other parties aren't as interested as management portrays them to be, not to mention that there's a chance that the board decides to do something stupid. I'll gladly lock in my gains when this is trading near the Elliott bid and leave some money on the table for those with a more optimistic outlook (or more knowledge of the company!). It is just my simplistic view that given the facts I know MITK looks like a way better proposition at $10.70 than $11.40. The market has given me the opportunity to bet on this view a few times. Keeps me off the street.

Fair enough, I respect that stance.
Title: Re: MITK - Mitek Systems
Post by: Schwab711 on March 13, 2019, 07:01:47 AM
Maybe not my best idea ever but I switched to Apr10 calls. If there's a deal at $11.50, I lose roughly what I made going from $10.60 ish to yesterday. If there's no deal, I lose quite a bit more. I think there's a fair chance of an increased offer. MITK is an in-demand asset and they could potentially generate a lot more cash with greater scale.

It's a gamble. I think there's a high probability a deal is completed. I have very little experience chasing dimes so I might look like a fool being so confident. I also think there's a meaningful chance there's a higher bid, with the chance of a higher bid > the chance of no deal at all.
Title: Re: MITK - Mitek Systems
Post by: LightWhale on March 14, 2019, 03:42:11 AM
Why April?
Title: Re: MITK - Mitek Systems
Post by: Schwab711 on March 14, 2019, 06:39:18 AM
https://seekingalpha.com/news/3430254-mitek-attracting-pe-interest-thedeal

I assume this is a roughly true timeline. Even among bets, I'm not sure it's a great bet.
Title: Re: MITK - Mitek Systems
Post by: LightWhale on March 14, 2019, 07:34:26 AM
Thanks for the link. Is there any official confirmation for the timeline within it? I haven't seen any reference to bids since the Dec 11th filing.
Interesting that eventually, Elliott did not attempt to nominate individuals to the Board.
Sold again yesterday @11.72 thanks to writser's reminder, will repurchase below 10.6.
Title: Re: MITK - Mitek Systems
Post by: Castanza on March 25, 2019, 08:34:07 AM
Looks like moves are being made, possible news coming out? Can't find anything but volume is way up and it just broke through 52 week high.
Title: Re: MITK - Mitek Systems
Post by: writser on March 26, 2019, 06:39:55 AM
Stock ran up to ~$11.60 today - maybe because of optimism due to the results of the shareholder vote? I don't know, but I sold the majority of my position. Probably too early, but $11.50 is the only firm bid that I am aware of. Let's see if the market offers another buying opportunity soon.

Definitely too early! I guess some market participants know more than I do about upcoming bids (or they are suddenly way more optimistic than two days ago ..). We'll see how things will turn out.
Title: Re: MITK - Mitek Systems
Post by: Schwab711 on March 26, 2019, 06:45:18 AM
I'm hopefully selling the options today. Feels like a sell the news type of moment. This was a pretty lucky outcome.
Title: Re: MITK - Mitek Systems
Post by: writser on March 28, 2019, 04:12:20 AM
S-8 filed yesterday for 1m shares for the CEO. The CEO received 800k performance options in November last year, and "none of the performance options will vest prior to the third anniversary of the date of grant outside a change of control of the Company". Mitek just making sure they have the paperwork in order to grant 800k shares in November 2021? Seems more likely a deal is imminent.
Title: Re: MITK - Mitek Systems
Post by: writser on March 29, 2019, 06:35:35 AM
Quote
Mitek Systems (NASDAQ:MITK) could see $18.50 to $20 per share in a a potential takeout, according to Benchmark analyst Mark Schappel.

(link (https://seekingalpha.com/news/3446780-mitek-worth-18_50-20-takeout-benchmark)). And another spike on the opening.

The rumors are strong in this one the past few days.
Title: Re: MITK - Mitek Systems
Post by: Foreign Tuffett on March 29, 2019, 06:52:12 AM
Quote
Mitek Systems (NASDAQ:MITK) could see $18.50 to $20 per share in a a potential takeout, according to Benchmark analyst Mark Schappel.

(link (https://seekingalpha.com/news/3446780-mitek-worth-18_50-20-takeout-benchmark)). And another spike on the opening.

The rumors are strong in this one the past few days.

I don't know if that price range is realistic or not. I suppose it could be if there's a bidding war, or if acquirers see Mitek as a "must have" strategic asset. I doubt a private equity firm would want to pay that big a premium. Obviously the stock is trading much lower than $18.50, so shareholders could still do really well even if the lower end of the range isn't reached.

It's reasonably clear that Elliott's bid was opportunistic, coming as it did at a time when Mitek's management was in disarray. Since it looks increasingly likely the company will be sold (I agree with you about the options package timing), buying at ~$12 may not be a bad idea. $12 is only a ~4.3% premium to Elliott's $11.50 bid which, at least in theory, provides some implicit downside protection.
Title: Re: MITK - Mitek Systems
Post by: writser on March 29, 2019, 06:55:50 AM
Agreed. My portfolio is in a dire need of cash at the moment and there are other ideas I like better, but it's certainly an interesting idea. The S-8 filing from yesterday makes it, in my eyes, even more likely a transaction is imminent. Though I assign zero weight to what Mark Schappel is thinking. =
Title: Re: MITK - Mitek Systems
Post by: writser on April 18, 2019, 06:44:50 AM
Big seller 10 minutes after the opening, shares dropped as low as $11.30. I don't see any news, got a few fills. Here we go again ..
Title: Re: MITK - Mitek Systems
Post by: Castanza on April 26, 2019, 06:55:10 AM
https://www.sec.gov/Archives/edgar/data/807863/000080786319000022/xslF345X03/wf-form4_155622696518504.xml

Not sure what to make of this. Options weren't close to expiry, yet he payed 56k to convert them to common share? What's the reasoning behind a move like this?
Title: Re: MITK - Mitek Systems
Post by: Castanza on May 01, 2019, 01:12:30 PM
Surprisingly no acquisition.

“Over the past several months, our Board of Directors has led a process to engage with several interested parties to evaluate the relative benefits of various strategic alternatives, with a view to maximizing value for our shareholders. Following a thorough review of the results, the Board of Directors determined that there were no offers that it deemed in the best interest of Mitek shareholders, and today, we are announcing that we have concluded this process. We continue to focus on maximizing the significant opportunities we see for Mitek in the marketplace and remain thoroughly committed to delivering shareholder value through operating and growing the business.” - Max
Title: Re: MITK - Mitek Systems
Post by: writser on May 01, 2019, 01:32:39 PM
You beat me to it. Shares are now down ~14% after hours. Had a very small position left but managed to close it out at a decent price after-hours. All in all this didn't turn out as expected so far but I think there were a few times when the market was either very pessimistic or optimistic which I thought were decent trading opportunities. So financially this turned out pretty ok actually.

Results actually look fine at first glance but I don't want to get suckered into this on a fundamental basis so I sold, I'll gladly leave analyzing the underlying company to investors smarter than me. I'll keep an eye on this, I hope Elliott will issue a snarky press release soon :) .

And I'll leave the conference call to those who don't like Messi.
Title: Re: MITK - Mitek Systems
Post by: Foreign Tuffett on May 01, 2019, 04:23:57 PM
Mitek Systems Board,

Better thou hadst not been born than not t' have pleased me better.

Your Bitter Enemy,
Foreign Tuffett

Title: Re: MITK - Mitek Systems
Post by: Castanza on May 01, 2019, 05:19:41 PM
You beat me to it. Shares are now down ~14% after hours. Had a very small position left but managed to close it out at a decent price after-hours. All in all this didn't turn out as expected so far but I think there were a few times when the market was either very pessimistic or optimistic which I thought were decent trading opportunities. So financially this turned out pretty ok actually.

Results actually look fine at first glance but I don't want to get suckered into this on a fundamental basis so I sold, I'll gladly leave analyzing the underlying company to investors smarter than me. I'll keep an eye on this, I hope Elliott will issue a snarky press release soon :) .

And I'll leave the conference call to those who don't like Messi.

I'm a bit mixed on the results. At one end it would have been nice to see that buyout and take my gains and put my cash to work somewhere else, but on the other end I really like their new CEO. He seems very knowledgeable and seems to be pushing the company in the correct direction. I'm not really concerned with the share drop as it seems to simply have weeded out the people simply playing the m/a and I do feel pretty confident buying at this level (Although I think we could see mid 9's). The financials look pretty good and their customer base is expanding simply on their presence/respect in the market place. I believe they picked up Credit Karma this past quarter (don't quote me on that)

Their main competition (Jumio) seemed to have a good quarter as well. But it's hard to say because they're private and I can't see their financials. I think this space is very hot right now and Mitek certainly has a good (growing) client base. Now that I'm typing this I'm actually happy they didn't sell (could eat crow on that later). I am a bit overweight in my positions so that is slightly annoying (expected that merger for sure), but what can you do.

Castanza 
Title: Re: MITK - Mitek Systems
Post by: Antisthenes on May 03, 2019, 05:24:22 AM
Surprising as I would have expected the board to transact even if just slightly above Elliot's $11.50 offer

Have exited as current valuation is a bit too rich for my blood -- still think it's a great company, but at 5.3x 2019 revenue, a lot has to go right
Title: Re: MITK - Mitek Systems
Post by: Castanza on December 05, 2019, 12:34:47 PM
(no current position)

Haven't visited this in a bit. Shares have fallen quite far. Currently trading at 3.4x 2019 rev

Conference Call - http://investors.miteksystems.com/events/event-details/q3-2019-mitek-systems-earnings-conference-call

Fiscal Fourth Quarter 2019 Financial Highlights

Total revenue increased 19% year over year to $25.0 million in a record quarter.
GAAP net income was $3.3 million, or $0.08 per diluted share.
Non-GAAP net income was $8.7 million, or $0.21 per diluted share.

Fiscal 2019 Full Year Financial Highlights

Total revenue increased by $21.0 million or 33% year over year to a record $84.6 million.
GAAP net loss was $(0.7) million, or $(0.02) per diluted share.
Non-GAAP net income increased 57% year over year to $17.3 million, or $0.42 per diluted share.
Full year cash flow from operations was $14.3 million.
Total cash and investments were $34.8 million at the end of fiscal 2019.

The acquisition of A2IA seems to be working out pretty well. However they mentioned downsizing staff who were ported over from A2IA so they did incur a restructuring cost. They are also discontinuing a few products of A2IA which they predict will have a negative impact on revenue but a positive impact on profitability. Mobile deposit is profitable and the time frame for mobile ID verification to become profitable is sub 2 years (not great news). Customer acquisition seems to be steady. No further mention of acquisition during the conference call.

To me this is only interesting if they are open to acquisition. Max seems quite staunch that he wants to "build and grow the company." I imagine this is somewhat reflected in the share price.
Title: Re: MITK - Mitek Systems
Post by: Schwab711 on December 05, 2019, 02:03:29 PM
https://twitter.com/AndrewRangeley/status/1193920823352016896

As a heads up, I think much of the decline is based on this potential liability.
Title: Re: MITK - Mitek Systems
Post by: Castanza on December 05, 2019, 02:29:08 PM
https://twitter.com/AndrewRangeley/status/1193920823352016896

As a heads up, I think much of the decline is based on this potential liability.

Thanks, good find. Looking at their report again their litigation costs are way up yoy. Not sure if this is reflective of what you mentioned though.
Title: Re: MITK - Mitek Systems
Post by: Schwab711 on December 09, 2019, 07:04:31 AM
I don't know either. I missed this lawsuit when I did DD earlier in the year so I'm not sure I know the company as well as I should to comment.
Title: Re: MITK - Mitek Systems
Post by: GregS on December 09, 2019, 02:26:04 PM
Not sure why that tweet contended that Mitek "buried" the info on their lawsuit.  They discussed it on the call in the CEO's prepared remarks.

I can't handicap the outcome of the litigation, but Mitek pursuing a declaratory judgment action is an offensive action by Mitek.  They decided not to sit around anymore while USAA threatens and pursues lawsuits and are seeking a court declaration that their software doesn't infringe.  They probably should have done it sooner but they probably thought Wells would win.

Also notable is that the Eastern District of Texas, where USAA sued Wells Fargo, is considered the friendliest in the nation to patent trolls.

Title: Re: MITK - Mitek Systems
Post by: Castanza on March 20, 2020, 07:43:41 AM
Thoughts on this with potential government checks on the horizon?

They have a monopoly in mobile check deposit. They could be seeing a lot more customers in the near future.
Title: Re: MITK - Mitek Systems
Post by: patientcapital on March 21, 2020, 10:37:59 AM
The lawsuit with Wells is troublesome for MITK because they could be liable to Wells to cover the damages.

This obviously would bankrupt the company / make he equity worth $0.

They gave a very evasive answer when asked about the possibility of this happening.

While there's a lot to like about the growth story for MITK, you have to assume there's is a real chance it's a zero.

Title: Re: MITK - Mitek Systems
Post by: GregS on March 23, 2020, 11:07:04 AM
Thoughts on this with potential government checks on the horizon?

They have a monopoly in mobile check deposit. They could be seeing a lot more customers in the near future.

Regardless of government checks, I think the coronavirus will be good for their business. Mobile check deposit is a cash cow that will continue during the crisis. A lot of people will try it for the first time as they won't want to use the ATM.  They will become recurring customers.

That said, I can't imagine the sales pipeline for their ID technology looks very good right now. But at least they will be able to fund operations with the check business.