Synchronoss Tech (SNCR): Private Equity Buyout?

Never heard of Synchronoss Technologies, Inc? Neither had we-- until yesterday.

According to the company's website:

"Synchronoss (NASDAQ: SNCR) provides essential mobile solutions for Service Providers and Enterprise through proven and scalable software solutions and platforms. With 130+ seminal patents, Synchronoss has one of the largest, most comprehensive technology platforms in production, widely used by the largest service providers and their 3 billion-plus mobile subscribers located around the world."

Overview of Synchronoss

Essentially, the company provides managed mobile solutions to large clients. Synchronoss trades under the ticker $SNCR, and it's been a rough 6 months for shareholders. Around mid-November 2016, the stock traded at roughly $50 per share. Shares are currently trading at $15.45 per share as of the auction close on Thursday, May 4th. Synchronoss has its earnings date set for May 9th. The stock trades at a trailing twelve-month (ttm) P/E ratio of 34.33 on earnings per share of $0.45. As of Thursday's close, the firm's market capitalization was $716 million.

Securities Class Action Lawsuits Pending

In the past couple of days, multiple shareholder-rights legal agencies (law offices) launched class action lawsuits against the company for securities fraud and misleading investors.

As one of the multiple lawsuit reports states:

The filed complaint alleges that throughout the Class Period, Defendants made materially false and misleading statements regarding the Company’s business, operations, and prospects. Specifically, Defendants failed to disclose: (1) that the newly-acquired Intralinks was underperforming; (2) that the Company’s integration of other acquisitions was underperforming; (3) that the Company was facing serious hurdles integrating, and capitalizing on, its newly acquired companies; (4) that, as such, the Company’s guidance was overstated; and (5) that, as a result of the foregoing, Defendants’ statements about Synchronoss’ business, operations, and prospects, were false and misleading and/or lacked a reasonable basis.

This clearly isn't a good sign for prospective shareholders and the company itself. Lawsuits add uncertainty, and uncertainty adds an additional risk premium to a stock. Moreover, with this quarter's earnings call set for May 9th, it is possible additional shareholders could attempt to sue the company or join the class action lawsuits mentioned above. Normally, I would dig deeper to see if it would make sense to initiate a short position on the stock, but I found something very positive for Synchronoss shareholders within minutes of going through its most recent SEC filings.

Introducing Siris Capital: a Possible White Knight for Synchronoss

While scrounging the EDGAR database for recent filings on Synchronoss, I discovered that a private equity company, which appears to specialize in strategic acquisitions of high-tech companies, has been loading up on Synchronoss ($SNCR) stock.

Here's how this breaks down.

On May 2nd, 2017, Siris Capital reached the 10% ownership level of Synchronoss and had to submit its 13-D filing accordingly. Synchronoss has approximately 46.37 million shares outstanding. So Siris Capital reported 4.637 million shares on May 2nd.Between May 2nd and May 4th, including even after the class action lawsuits were launched (May 3rd), Siris Capital acquired another 1,357,383 shares. Let that sink in.

There was such heavy selling volume with the news of the class action lawsuits that Siris was able to purchase those shares with minimal price impact. It essentially acted as a market maker in some regards.

Background on Siris Capital

Naturally, I conducted some background research on Siris Capital and its investment strategy. It's a private equity company that specializes in acquiring tech companies using a "bond and call" approach. The "bond and call" approach means looking for companies with a matured, legacy business segment (the "bond") and a rampantly growing business segment (the "call").

siris capital strategy
Appears on Siris Capital's website.
Siris Capital was actually a spinoff of SAC's Private Equity Group, which means Siris' funds are run by incredibly smart managers.

Bottom Line: Potential Buyout Likely Outweighs Pending Litigation

At the end of the day, I think there is a decent chance Synchronoss gets acquired by Siris. The stock has already gotten pummeled from the drawback in its recent financial statements, and I think the worst-case scenario from the lawsuits is that the company could possibly face a fine for inadequate disclosures. The company is still viable as a going concern though, which provides a safety net for current shareholders. The downside appears to be relatively limited, and I don't think investors have even realized that Siris Capital usually acquires companies it targets.

SNCR Stock Rating

I am adding Synchronoss Technologies to the List of Bullish Opinions until further notice. We will continue to watch the SEC filings to see if Siris Capital continues to buy shares in Synchronoss and update the list as needed.

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Eric Bruin

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8 thoughts on “Synchronoss Tech (SNCR): Private Equity Buyout?

  • May 7, 2017 at 6:33 pm

    I was aware of Siri’s buying… hopefully they will buyout! Earnings PH May 09.Will be watching closely.

  • May 7, 2017 at 8:15 pm

    Sounds like to siri’s was nust averging down on an already losing position. No way there going to buy sncr anytime soon,they could wait for lower sh price when they find out if theyve been cooking there books….also where are they averaged in at? Any info would be appreciated.

    • Profile photo of Eric Bruin
      May 7, 2017 at 9:50 pm

      Siris Capital is a private equity group, it doesn’t actively trade the public markets. It’s possible that Siris may just be trying to acquire a controlling interest in Synchronoss. However, Siris primarily engages in wholly-owned acquisitions.

    • Profile photo of Eric Bruin
      May 7, 2017 at 10:05 pm

      Also, I may be wrong about this but it appears as though Siris initiated its stake on May 2nd. Siris would have had to file once it got over 5% ownership, but I can’t find any other filings with regards to its position in $SNCR. If it did buy 10% on May 2nd, it was probably through “upstairs trading” if I had to guess.

  • May 7, 2017 at 10:02 pm

    Well they already owned a bunch of shares why didnt they buy them out long ago when price was even lower? They couldve bought them last year for $22.00,also couldve made them lower offer non public at any time!!

    • Profile photo of Eric Bruin
      May 7, 2017 at 10:06 pm

      Where did you find that Siris already owned a bunch of shares? It wasn’t in the filings when I checked last.

  • May 7, 2017 at 10:08 pm

    Ok well somebody had alink tosec fillings they already been investing in sncr …ill find in am and coment back thx


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