In short: The controlling-shareholder lowball, re-underwritten with a DCF — and already half-harvested. "We bought this in the low fives, we sold half of it above six. It rallied because of two small hedge funds getting involved. We can add back to it if it sells off on Monday back in the fives." The model: "it generates about 200 million of unlevered free cash flow… about 100 million of free cash flow [after debt]… if you were to value this 200 million… growing at single digits, that would probably be worth about 2.6 billion dollars, even penalizing this company with a 2% small cap premium in its weighted average cost of capital. So that gives us about $21 a share." He discounts his own number: "that doesn't take into account AI risk… it does have a software component. So it should probably trade at a discount to this $21, but it probably should not trade at 5.94… it basically trades at a quarter of what its cash flow say it should be trading at." The catalysts: the CEO (who "owns like 60%") paying "nine to 10 dollars a share just to get you guys off my back," or a full sale — because a take-private needs a majority of the minority: "there's 4% activists of the 40%, they need to convince another basically 16 plus percent… and they can reject the CEO's offer." The named flaw: the CEO's roll-ups (a $15M acquisition last month) — "he can make these acquisitions because he does control the shares and the majority of the minority doesn't apply… it only applies when he's bidding on the business. So it is not a perfect trade." Realised: "we sold half at a decent profit… over a 15% profit, and we will likely buy back if it sells off again."
Priority Technology processes card payments and business-to-business payments. Its founder and chief executive owns around 60% of the company and has offered to buy the rest from public shareholders for about $6 a share — roughly five times the cash the business produces in a year, which is very cheap.
Singh's team built a cash-flow model that values the business at about $21 a share, even after adding an extra penalty for being a small company. He does not expect $21. The business has some software exposure that artificial intelligence could disrupt, and it carries a lot of debt. But the gap between $21 and $5.94 is so large that he thinks the chief executive will have to raise his offer — perhaps to $9-10 — or the company will end up being sold to someone else.
The reason he has leverage is a governance rule. When a controlling owner buys out the minority, the deal normally needs approval from a majority of the shareholders who are not the controlling owner. Two activist funds own about 4%; they need about another 16% of the independent shares to vote no, and the bid fails. The weakness in the thesis is that this protection does not apply to the chief executive's other decisions, such as buying small companies with the firm's cash, which makes the future cash flow harder to predict. Singh bought in the low $5s, sold half above $6 for a gain of more than 15%, and plans to buy back if the price drops into the $5s again.
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In short: Last week's new position, revisited with the numbers filled in and the upside marked down to something honest. The setup is unchanged — "PRTH is effectively majority owned by an individual CEO" (Tom Priore, 46.6M shares, ~56.5-58%) — and the activists are now sized: "investors that have gone activist hold more than 4% of the stock… they could get a majority of the minority." Steamboat Capital Partners (~1.58M shares) and Buckley Capital (~1.81M shares) both wrote the special committee. "What they are doing is they're trying to get the CEO to raise his bid from $6, or roughly five and a half times cash flow, to something like $17 to $19. In reality, I think they'll get to 7 and a half to 8. But there's a lot of upside if I were to be right on this." The valuation: "EV to EBITDA is around six times forward, trailing P/E is around eight times, forward P/E is around four to five times. The company's quite cheap. It does have debt, like 950 of net debt, but that debt is covered by the EBITDA for now." He is also careful not to pretend the sell-off was irrational: "the sell-off in Q2 is because the company saw margin compression… the payables segment is not doing well and they had to cut guidance… so their EBITDA guidance got cut. And that's why the stock was down so much, not for no reason." Legal spine: under Delaware's MFW framework, a bid without a strict majority-of-the-minority condition leaves "the special committee as the primary defense line to squeeze out a higher price," and given the public opposition "the CEO will likely need to raise the bid… to avoid post-closing fiduciary litigation." Timeline: special-committee process into Q3-Q4. Sell-side: KBW cut its target from $7.50 to $6.50 — "still above where it trades now."
Priority Technology processes card payments for merchants, automates bill-paying for businesses, and rents payments infrastructure to other companies. Its founder and chief executive, Tom Priore, owns about 57% of it and has offered $6.00 a share to buy the rest and take it private — an offer made days after a weak quarter knocked the stock down. Singh bought a starter position at $5.52 last week.
The update this week is a downward revision of his own expectations, and it is the most useful part. Two activist funds, Steamboat Capital Partners and Buckley Capital, have between them accumulated 4.1% of the shares and written to the board's independent directors arguing the company is worth $17 to $19. Singh does not believe that: "In reality, I think they'll get to seven and a half to eight." He is buying a negotiation, not a valuation argument — and he is marking the likely outcome at a 25-45% gain from his entry, not a triple.
He is also unusually candid that the sell-off was deserved. One of the three divisions, business-to-business bill payment, is growing revenue while losing money on it: higher card-network fees mean each extra dollar of payment volume carries less profit, so the company had to cut its profit guidance even as sales grew. Overheads rose 21%. Debt is about 3.8 times annual profits. "That's why the stock was down so much — not for no reason."
What protects the buyer is company law rather than the business. In Delaware, where the company is registered, a controlling shareholder buying out the minority is presumed to be conflicted unless the deal is negotiated by a committee of genuinely independent directors and approved by a majority of the non-controlling shareholders. Without both protections, the controller risks being sued after the deal closes and having a court set a higher price. That makes it cheaper for him to raise the bid than to force it through. And in the meantime his own $6.00 offer acts as a floor under the shares.
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In short: The week's new position and the call's centrepiece: "Last week we added a starter position in PRTH at 552 per share… we're positioned to buy more." Chairman and CEO Thomas Priore, who already owns 55-58%, submitted a non-binding take-private at $6.00-6.15 in cash — "only five and a half times cash flow… we think that this was a lowball bid" — filed "right after PRTH released a soft Q3 earnings on purpose, which caused the stock to plummet from 7 down to 487," so the offer was "anchored right between the pre-crash price and the post-earnings lows." The business: payments and data processing (consumer and commercial payments, automated AP, banking-as-a-service, EFT) out of Alpharetta, Georgia — "a cash cow": $75M of free cash flow in 2025, $91M expected this year on a ~$460M market cap = a ~20% levered free-cash-flow yield, against a $1.4B enterprise value and ~$920M of net debt (~4× EBITDA on $230M) — "the main issue… not egregious, but moderately high leverage." Buckley Capital wrote the special committee that $6 "drastically undervalues the company," publishing a sum-of-the-parts at $15 to $20; Steamboat Capital Partners joined the objection; conservative intrinsic value is "closer to $10 a share… a 78% premium to the 561 close." The structure is the trade: "the founder's bid acts as a structural price floor… you could easily see a bump to a $7 or $8 offer" — 25% and 50% upside. "So it's quite asymmetric risk reward here."
Priority Technology is a payments plumbing company in Alpharetta, Georgia. It processes card payments for merchants, automates the bill-paying side for businesses, and rents out banking-and-payments infrastructure to other companies. Dull, but it throws off cash: about $75 million of spare cash last year and roughly $91 million expected this year, against a stock market value of only about $460 million. That is a cash return of roughly 20% a year on what you pay for the shares — cheap by any normal standard. The catch is around $920 million of borrowings, about four years' worth of earnings, which is high but not dangerous.
The reason it is interesting right now is a fight over who gets that cash. The founder and chief executive, Thomas Priore, already owns 55-58% of the company, and he has offered to buy the rest for $6.00-$6.15 a share in cash and take it private. Singh's objection is not the idea but the price and the timing: the offer came immediately after a weak earnings report knocked the stock from $7 to $4.87, so the bid was pitched into the hole it had just fallen into. At $6 you are being paid about five and a half times the company's annual cash generation — for a business that is still growing.
Two professional investors have publicly refused. Buckley Capital wrote to the board's special committee — the independent directors legally obliged to represent the shareholders who are not the founder — saying the company is worth $15-20 a share if you value each of its businesses separately. Steamboat Capital joined the objection. Even conservative estimates put fair value near $10.
That produces an unusually lopsided bet. The $6 bid effectively puts a floor under the shares, because a controlling holder who wants to buy is unlikely to let the price collapse below his own offer. Meanwhile the pressure on the committee makes a raised bid plausible — $7 would be about 25% above where Singh bought at $5.52, $8.50 about 50%. He calls that "quite asymmetric risk reward," has taken a starter position, and is ready to add.
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