Right before a major holiday weekend isn’t exactly prime time for investor focus. That's why the announcement from Tourbillon Capital Partners LP, a hedge fund with a 9.9% stake in organic food company SunOpta Inc. (NASDAQ:STKLC) may have slipped past you.
Because of this, SunOpta’s closing price of $4.84, up $1.02 or 27% may also have escaped notice. If it didn’t, you may have wondered what just happened and why.
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About The Letter
The letter from Tourbillon explains a lot. As SunOpta’s largest shareholder, Tourbillon represents a major voice when it comes to SunOpta’s future. And Tourbillon believes that future is as risk.
“We have become increasingly concerned that the company may be pursuing an uncertain business plan without a thorough evaluation of all value-maximizing alternatives,” Tourbillon said in the letter addressed to SunOpta’s board.
For its part, SunOpta said the company appreciated the constructive input and would review Tourbillon’s suggestions.
What’s At Stake
Toronto-based SunOpta sells organic grains, nuts and fruits to organic-food producers. With the organic food business growing at a fast rate, SunOpta is well poised to take advantage of changing consumer buying habits.
On the negative side, SunOpta hasn’t performed well. In Q1 the company posted revenue of $352.3 million, which was up 29% from the prior year. Unfortunately, instead of a profit increase, the company lost $10 million versus $5 million on the plus side last year.
What Could Go Wrong?Not counting the bump Friday, SunOpta’s stock price has declined by almost 50% over the last decade. That makes the notion of an acquisition attractive to SunOpta investors.
In its reply to Tourbillon’s letter, SunOpta pointed to the company’s acquisition of Sunrise and other moves designed to help transform the business. Among these moves, increasing private label products and increased attention on SunOpta’s globally sourced ingredients business which the company said, “offers us unrivaled access to organic and non-GMO supply and presents a high barrier to entry for competition.”
All well and good but hoping for a buyout and actually having one happen are two different things. There’s simply no guarantee M&A activity will take place.
What Say The Analysts?
D.A. Davidson currently has a PT of $6 on the stock. Canaccord Genuity’s PT is $10. Both Davidson and Genuity have a “buy” rating on SunOpta.
Citigroup’s PT is $8.50 with a “buy” rating while BMO Capital Markets has an “outperform” rating and a $7.00 PT. Both Zacks and TipRanks have "buy" ratings on the stock.
SunOpta’s 50 day moving average is $4.72. The 200 day moving average is 5.60. Market cap is $413.9 million.