Rebuffed earlier this month, a hedge fund on Tuesday urged remote deposit capture and identity-verification software provider Mitek Systems Inc. to reconsider its rejection of a buyout offer and begin negotiations.
In a letter to Mitek’s board of directors, New York City-based Elliott Management Corp. accuses the board of “old-fashioned entrenchment” by recently adopting a so-called poison pill to make a takeover harder, and questions “whether the board’s priorities are aligned with those of shareholders.”
An Elliott portfolio company, the Naples, Fla.-based business software provider ASG Technologies Group Inc., last month offered $10 per Mitek share in a deal valued at $425 million and which ASG said represented a 51% premium to Mitek’s share price before buyout rumors started pushing the stock up. Mitek on Nov. 5 said its board “unanimously rejects” the unsolicited offer, saying it “substantially undervalues” the company, and instead intends to pursue a growth strategy as an independent company.
In Tuesday’s letter, Elliott said Mitek’s stock has “meaningfully unperformed all relevant benchmarks” for the past five years, and “profit margins have deteriorated significantly.”
“Approximately two-thirds of Mitek’s revenue is tied to a secularly challenged market (check deposits), and we believe its efforts to diversify into the faster-growing market of identity verification are fraught with risk due to intense competition and Mitek’s lack of scale,” the letter says.
Spokespersons for San Diego-based Mitek could not be reached for comment Tuesday morning.