FTK - Flotek Industries (FTK) - Flotek Receives Unsolicited Indication of Interest - Details Sparse
Flotek Industries released a press release announcing that it has received an unsolicited indication of interest, and that it has engaged Piper Sandler & Co to evaluate the interest. The company did not provide any details regarding the indication or Flotek's response, and that it does not plan to make additional comments until the Board has determined a course of action. We have not had a chance to talk with management, nor do we expect them to provide additional commentary should we talk to them.Flotek has recently taken steps that we believe will lead to a higher valuation, but may consider a takeout if the price is right. We believe the company has taken positive steps towards restructuring and growing operations and is on the verge of recognizing the benefits of these steps. Management has become increasingly optimistic about the future and we believe they would be comfortable taking a longer-term perspective to growing shareholder value. That said, we believe Flotek would be a good fit for a larger oil service company that could sell Flotek's environmentally-friendly products and data analytics over a larger sales platform. We also believe management would consider a merger offer that accelerated the company's growth and offered shareholder's an attractive return.The shares of FTK have been weak, making a takeover more feasible. The shares of FTK have fallen from a peak of approximately $2.50 per share in the spring of 2020 to a price below $0.60 per share prior to the announcement. On December 10, the company received a continued listing notice from the NYSE because the stock traded below $1 for 30 trading days. The weakness in the shares has come despite our belief that company fundamentals have improved and the outlook for the energy industry has also improved.We believe the shares of FTK to be fully valued at our price target of $2.50 and believe any takeout offer must be significantly higher than current prices. The shares of FTK rose 50% to a price near $0.85 in after hours trading. Still the shares remain well below what we consider to be fair value. As such, we are maintaining our Outperform rating and our $2.50 price target until further details regarding the indication of interest are released. Read More >>