Monday, April 1, 2024

MariaDB plc: In Default, Highly Speculative, 3 Bidders

This is highly speculative, but I wanted to bring the discussion out of the comment sections of my BFIN post as I found the situation interesting enough to initiate a small position.

MariaDB plc (MRDB) ($32MM market cap) offers enterprise and premium functionality on top of the open sourced (free) MariaDB Community Server database management system ("DBMS").  To distinguish between the company and the open sourced DBMS, I'll refer to the for-profit company itself as MRDB and the DBMS as MariaDB.  The lead developer of MariaDB is Michael "Monty" Widenius who was one of the original developers of MySQL, which was sold to Sun Microsystems, Widenius developed MariaDB in response to concerns following Oracle's acquisition of Sun Microsystems in 2009.  Widenius owns less than 1% of MRDB and is no longer a director/employee of the company itself.

MRDB was a 2022 deSPAC, it announced the definitive agreement with Angel Pond Holdings (POND) on 2/1/22, valuing MRDB at a headline $672MM or a lofty 14x revenue.  Between deal announcement and closing, the market's appetite for risky SPACs changed, upon closing in December 2022, the trust delivered minimal cash to MRDB as over 99% of POND holders redeemed.  Unsurprisingly, cash flow negative MRDB quickly ran into trouble and as of this January, MRDB was in default of their $26.5 promissory note to RP Ventures.  RP Ventures put restrictive covenants in their loan documentation that prevents MRDB from doing almost any major corporation action, including a change of control, without their consent.  Fortunately, MRDB does have several bidders circling looking to acquire the company in whole for cash:

Here are the players, shares trade for $0.45/share today:

  1. Runa Capital (a related party to RP Ventures, also a 7.8% stockholder) made an offer for $0.56/share, later withdrew the offer and provided debt financing instead
  2. K1 Investment Management (PE firm, SaaS focused) made an offer for $0.55/share
  3. Progress Software Corp (PRGS, $2+B market cap) made an offer for $0.60/share
Basic timeline thus far:

The entry of Progress Software as a late bidder somewhat validates that there is value here, but RP Ventures/Runa continue to be hostile to this process, potentially trying to force the company into bankruptcy where as the senior lender they'd be there to pick up the pieces on the cheap.  This is a situation similar to Armstrong Flooring (AFI) from a couple years back where the company's lender gave it a few months to find a deal, there appeared to be equity value (to me at least), but ultimately AFI was zeroed out in bankruptcy.  The appointment of a CRO flags to me that MRDB could face a similar fate.  Either way, due to Irish takeover rules (MariaDB is Ireland domiciled), we should find out soon.

Disclosure: I own shares of MRDB

17 comments:

  1. I don’t have a position in this and this is slightly bikesheddy, but as an engineer I’m compelled to correct that database management systems are referred to as DBMS, not DMBS :)

    ReplyDelete
    Replies
    1. Ha thanks, updated. I work in the securitization market, can tell I'm too used to typing MBS.

      Delete
    2. This is a very fascinating situation and I was tempted to buy a bit but at the same time I feel you are basically at the mercy of insiders. If they decide you are worthy of a few dimes you will get them - if they want to play hardball you will get screwed. The other offers are basically nonsense. They maybe incentivize insiders to make a fair bid (I'm sure the ambulance chasing lawyers would go after the company if they let the common implode) but I find it hard to get a read on what insiders will do. I might still change my mind though. If everyone thinks along the same lines the common is probably too cheap and it might be worth a punt ..

      Delete
  2. Hi there, could you help me check whether the AINC liquidation might have any kinks? If you buy 9999 shares you might get cashed out at $5? But its subject to a vote?

    ReplyDelete
    Replies
    1. Yes, but it looks like the vote is pretty much secured, because the Monty Bennett controls the company. Surprising transaction, this was a governance disaster.

      Delete
    2. I bought 9999 shares. Pretty incredible odd lot here. I would write it up, but I would get hate mail.

      Delete
    3. Thank you for pointing this out. =)

      Delete
    4. "but I would get hate mail". Haha, oops! I think this one is different from other similar situations in that, reading between the lines, management seems fine (and seems to expect) buying out a ton of arbs. This seems like a de factor management buyout of a pretty large company rather than an attempt to save a few pennies by delisting. That's why I thought it was fine to share this one.

      Delete
    5. Yeah, it is a bit different. It is not a micro cap using a lawyer that accidentally used the odd lot template, this is very intentional by the Bennetts, they're sophisticated markets people. We should send the press release to ARL/TCI.

      Delete
    6. Just one question, looking from TIKR shareholder ownership, I looks like 37% have over 10k share as of 3/14, but ashford estimates 31% share are getting cashed out. what happens if they cash out over 31%?

      Delete
    7. My guess is they'll go ahead and buy whatever they can, they have the money and want to get rid of the headache.

      Delete
    8. Can anyone comment on whether AINC shares held in "street name" via Interactive Brokers would qualify for the <10k threshold?

      Delete
    9. This is a really good question worth looking into. I am now curious as well

      Delete
    10. I guess it's trading at fair value now and you bought much cheaper.

      Delete
  3. Do we think ainc is an activism defense move? Could break 5 if so?

    ReplyDelete
    Replies
    1. No. I would view this as a gift. Monty Bennett controls this thing through the preferred stock, it is a slowly melting ice cube.

      Delete
  4. Back to MRDB. Progress stating their case out in public:

    https://www.globenewswire.com/news-release/2024/04/05/2858546/0/en/Progress-Software-Corp-Announcement-under-the-Irish-Takeover-Rules.html

    ReplyDelete