Shares of SiriusPoint (US:SPNT) look set to extended Wednesday’s more-than-10% gain as investors mull the potential of Third Point LLC acquiring the company. The activist fund, run by Daniel Loeb, currently owns 9.34% of the stock.
Loeb’s Third Point believes that SiriusPoint’s management team, led by its CEO, is taking the necessary steps to position the company for long-term success and is supportive of the current strategy and plan being pursued. However, they think SiriusPoint may be better positioned to execute its turnaround strategy as a privately held company. Third Point anticipates that the acquisition price that they intend to deliver will be generally consistent with the industry’s recent precedent transaction valuations.
SiriusPoint issued a press release acknowledging Third Point’s interest in exploring the acquisition of the company. The firm’s board of directors stated that they would evaluate any proposal to acquire the company carefully. The company welcomed dialogue with investors and said that they share the common goal of maximizing value for all shareholders.
Making Progress
SPNT management highlighted in the release that they have made significant progress in the last seven months toward its strategic priorities of reducing volatility, business simplification, and improving profitability. Management reiterated that its capital position has been further strengthened by the recently announced Loss Portfolio Transfer transaction which aided the Fitch outlook rating upgrade to Stable from Negative.
SiriusPoint is a Bermuda-based insurance and reinsurance company that may not be well known to the public, but has already taken a significant boost from the news of the potential acquisition. As Loeb, the investor who plans to acquire SiriusPoint, himself sits on the company’s board, the acquisition may not be difficult to accomplish.
SiriusPoint first listed in 2021 when Third Point’s own Reinsurance company merged with Sirius International Insurance Group. Loeb believes that SiriusPoint’s turnaround plan is likely to be best served by going private to strengthen its financial position, enhance its credit ratings further, and adhere to the highest regulatory standards. Insurance companies are drawing a lot of interest from fund managers due to their ability to stand up during economic downturns.
Options Sentiment
When analysing investor sentiment on the Fintel platform for SPNT we noticed a significantly deteriorating Put/Call options sentiment indicator over the last year for the stock. This ratio has risen from a positive read of 0.4 in May 2022 to more than 6.4 currently. This ratio tells us that there are currently over 6x more bearish bets for the stock in the market than bullish bets.
This indicator analyzes all disclosed open put and call options positions in the market over time to determine the magnitude of bullish and bearish investment orders that are in play over time.
The chart above shows how this ratio has behaved vs the share price since listing.
The potential acquisition of SiriusPoint could be a positive outcome for investors depending on the price. The company’s shares have struggled to perform, and the acquisition could provide a catalyst for change. If the acquisition is successful, SiriusPoint will have access to the resources of Third Point and its affiliates. The investment fund’s experience in the insurance industry could help SiriusPoint to execute its turnaround strategy successfully.
Institutions Interested
Research from the Fintel platform highlighted SPNT has attracted above average levels of institutional buying activity during the first quarter of 2023. The Fintel Fund Sentiment Score of 68.72 ranks SPNT in the top ~30% out of 36,228 globally screened securities.
There are a total of 358 institutions on the register that collectively own 94.09 million shares or about 58.56% of the total float. The share ownership has grown 6.68% during the quarter.
The chart below shows the rising level of institutional share ownership in the stock for the last two years.
This story originally appeared on Fintel.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
