Time to sell cyber stake to Kape’d crusader Teddy Sagi

A takeover offer has resulted in a 24% gain on our investment idea in less than three months

(KAPE:AIM) 291.5p

Gain to Date: 24%

An under-the-radar growth option that gave investors direct exposure into the booming cybersecurity space – that was how we described Kape Technologies (KAPE:AIM) back in November 2022 when we said to buy at 235p.

We anticipated the market waking up to the opportunity in time, but it now appears that major shareholder Teddy Sagi isn’t prepared to wait.

WHAT HAS HAPPENED SINCE WE SAID TO BUY?

Sagi owns a near-55% stake in the business and has been a long-time backer of its buy-and-build growth strategy. On 13 February, Sagi’s Unikmind investment vehicle tabled a 285p per share cash offer to take the business private.

The investor has been putting pressure on the board since December 2022, when he first approached the board with a rejected 265p per share deal. The entrepreneur has made no secret of his view that Kape’s growth strategy, which relies on further acquisitions and likely regular cash injections, would be best served away from the glare of public markets. Given the volatility of growth stocks over the past 15 to 18 months, he has a point. By sweetening his original offer by an extra £8.5 million, Sagi believes he can win over enough independent investors to seal the deal. He needs to get 75% of shareholders to support his offer to force it through.

WHAT SHOULD INVESTORS DO NOW?

Kape plans to talk to other shareholders to gauge views, then make a recommendation, but Shares believes investors are better off being proactive. Given that Kape shares have traded as high at 455p in late 2021, some investors may feel short-changed by the tabled offer, a valid position in our view.

Yet it is difficult to see Sagi offering more money without rival interest, of which there is no evidence. That convinces us that the best course of action, for readers who followed our original buy call, is to sell in the market now and bank a very decent 24% profit for less than three months’ work. [SF]