Q: Please comment on the proposed merger between DV and CTGO. What does this mean for existing DV shareholders? Is it a hold? Announced this morning and it is trading lower.
5i Research Answer:
It is mostly a merger of equals, with the goal of being a bigger company which will get a better valuation and better cost of capital. This does usually occur when a company approaches $1B market cap, and the combined company will be nicely over this. DV holders will get 0.1652 CTGO shares for each share. It is a friendly transaction. It will create a new mid-tier North American company, and on paper sounds good. DV shareholders are a bit disappointed, but CTGO shares have outperformed, and thus have a higher valuation already. We would not rule out another party coming in here. The sector is consolidating fairly fast and lots of companies might be interested. We would hold to see how this shakes out.