On Monday, Squarespace (NYSE: SQSP) experienced a shift in stock rating as JMP Securities altered its stance from Market Outperform to Market Perform. This adjustment follows the company's announcement earlier today regarding its anticipated acquisition by private equity funds managed by Permira. The deal is set to take place at $44 per share in cash, amounting to a $6.6 billion all-cash transaction.
The analyst from JMP Securities noted that the acquisition price is closely aligned with their previous price target of $45 for Squarespace. The transaction's valuation is based on a multiple of 18.0 times the firm's projected 2025 free cash flow and 4.7 times its projected 2025 revenue. This valuation reflects the company's financial outlook and the premium that Permira is willing to pay for the acquisition.
The acquisition is subject to approval by Squarespace's shareholders beyond its principal stakeholders. The key shareholders, including CEO Anthony Casalena, General Atlantic, and Accel, have already indicated their positions regarding the transaction. Casalena intends to roll over a "substantial majority" of his existing equity, and both General Atlantic and Accel plan to "re-invest" as part of the acquisition process.
The analyst's commentary points out that while the acquisition requires the green light from the remaining shareholders, the deal is expected to proceed without significant hurdles. This is largely due to the commitment shown by the major shareholders and the CEO, who have a significant influence on the company's direction and have expressed their support for the transaction.
The acquisition by Permira represents a pivotal moment for Squarespace, as it transitions from a publicly traded company to a private entity. The all-cash deal at $44 per share provides a clear exit strategy for investors and a defined future path for the company under new ownership.
InvestingPro Insights
With Squarespace's (NYSE: SQSP) impending acquisition by Permira, a glance at the company's financial health and market performance through InvestingPro data reveals several key insights. The market capitalization currently stands at $5.93 billion USD, and the company has seen a robust revenue growth of 17.88% over the last twelve months as of Q1 2024. Notably, Squarespace boasts an impressive gross profit margin of 76.78% during the same period, underscoring the company's strong ability to retain earnings after the cost of goods sold is accounted for.
InvestingPro Tips further suggest that Squarespace is expected to see net income growth this year, which aligns with the positive outlook that may have contributed to Permira's acquisition decision. Still, it is important to note that 7 analysts have revised their earnings expectations downwards for the upcoming period, indicating potential headwinds or a more conservative outlook.
Moreover, the company's significant return over the last week of 7.76% and strong return over the last three months of 20.82% reflect investor optimism, possibly influenced by the acquisition news.
For those looking to delve deeper into Squarespace's financial metrics and future projections, InvestingPro offers additional tips and tools. Readers can benefit from an exclusive offer by using the coupon code PRONEWS24 to get an extra 10% off a yearly or biyearly Pro and Pro+ subscription, providing access to a wealth of financial analysis and data to inform investment decisions. With 13 additional InvestingPro Tips available, investors can gain a comprehensive understanding of Squarespace's market position and future potential.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.