International Money Express may see increased shareholder value with Voss Capital's focus on maximization.

Company: International Money Express (IMXI)

IMXI is a money remittance services company that offers digital money transfer services through a network of agent retailers in the United States, Canada, Spain, Italy, and Germany. Its remittance services include a suite of ancillary financial processing solutions and payment services available in all 50 states in the United States, Puerto Rico, and 13 provinces in Canada. The company provides money remittance services to Latin America and the Caribbean countries, mainly Mexico and Guatemala, involving the movement of funds on behalf of an originating consumer for receipt by a designated beneficiary at a designated receiving location.

Stock Market Value: $601.9M ($18.46 per share)

Activist: Voss Capital

Percentage Ownership: 5.64%

Average Cost: $19.14

Voss is a hedge fund based in Houston, Texas that specializes in underfollowed special situations. While not traditional activists, they have employed activism as a strategy in the past.

What's happening

Voss has discussed with the company's board and management team ways to increase shareholder value, including the possibility of a private sale of the company.

Behind the scenes

International Money Express is a money remittance services provider that enables consumers to send money from various countries to Mexico, Guatemala, and other countries in Latin America, Africa, and Asia. The company provides its services through a network of authorized agents located in various unaffiliated retail establishments, 118 company-operated stores, and digitally via an app and its website. IMXI serves more than 4 million clients every month and aims to connect families across borders by ensuring financial services are accessible to those who need them most. The company has roughly 20% market share in the top five Latin America and the Caribbean (LAC) markets and is continually seeking expansion into new markets. For example, IMXI made recent acquisitions of La Nacional in 2022, which has a strong market position in remittances to the Dominican Republic and other LAC countries. The company also acquired I-Transfer in 2023, which established outbound remittances capabilities from Spain, Italy, and Germany. IMXI also snapped up a money services entity in the United Kingdom in 2024, which will give the company the opportunity to provide outbound remittances from the UK.

Voss has been holding IMXI since Q2 2021, when it was trading at $15 per share, and has not sold any shares since then. On Sept. 5, 2024, the firm filed a 13D and reported owning 5.64% of the company at an average cost of $19.14 per share, with the highest share price purchased being $20.09 in the past 60 days.

Breach Inlet Capital Management, in addition to Voss, is an actively engaged shareholder in the stock calling for a sale of IMXI. A day prior to Voss's 13D, Breach Inlet sent a public letter to the board of IMXI, urging them to pursue a review of strategic alternatives that includes a potential sale of the company. Breach Inlet asserts that, despite solid operating performance and increasing adjusted earnings before interest, taxes, depreciation and amortization by over 2.5-times since going public six years ago, the company remains undervalued by the public markets. IMXI trades at under 5-times the last 12 months' adjusted EBITDA while its peer remittances service provider MoneyGram was acquired by private equity firm Madison Dearborn for approximately 8-times adjusted EBITDA last June. Breach Inlet thinks that IMXI should be valued at a premium to MoneyGram, not a material discount, but just an equal valuation would imply a roughly $30 per share price.

The global remittances service provision market is highly fragmented, with no single company controlling more than 20% market share. This presents consolidation opportunities for IMXI, which could be acquired by a strategic partner like Western Union, which trades at a premium to IMXI. If IMXI remains independent, its growth plan of expanding into the digital and European markets would require significant investment in people and resources, potentially sacrificing short-term performance for long-term growth. This may not be well-received in the public markets. Instead, IMXI could be a prime target for a private equity firm that can facilitate its growth plan while shielding it from the public markets, which have not fully valued the company. The allure of a company like this to private equity is evident, as two private equity firms have already acquired it in 2007 and 2017.

Voss has previously advocated for a strategic review at a portfolio company, including Benefytt Technologies and Griffon. In the case of Benefytt, Voss highlighted the strategic opportunities and active M&A environment in the company's space. Benefytt was later acquired by Madison Dearborn Partners for $31 per share. At Griffon, Voss called for a strategic review, which the company undertook and ultimately concluded to stay independent. Despite this, Griffon was a highly successful activist campaign for Voss, where the firm gained board seats and made a 139.21% return on its 13D versus 1.28% for the Russell 2000 over the same period.

Modern day shareholder activism is a strategy that greatly benefits shareholders, and we believe the best type involves activists who come in with a detailed, long-term plan to create value, with a board seat being a huge plus. On the other hand, shorter-term "sell the company" activism can be great for the investor but shortchanges the long-term shareholder. In those situations, we like to see a longer-term "Plan A" with a sale as a last resort or a detailed analysis on why the company cannot or should not continue as a standalone public company. While Voss does not provide either of these, the firm has a lot of credibility as a long-term investor (an owner since 2021) who has not been public with its recommendations to management until now. As such, we think Voss's intentions here are honorable and it's doing what it thinks is best for both short-term and long-term shareholders.

If the IMXI does not execute on a strategic plan, Voss may consider nominating directors. While a proxy fight is not currently part of its plan, the firm has been successful in gaining board representation in previous campaigns. Voss is not afraid to take a proxy fight to a vote. At Griffon, the firm ran a successful proxy fight, winning a board seat for one of its two director nominees at the 2022 annual meeting, and later settling for another board seat. There are two directors up for election at the 2025 annual meeting, and the nomination window opens on Feb. 21, 2025. If a proxy fight occurs, there are several factors that could work in Voss's favor, including the company's depressed stock price and signs of shareholder discontent, such as the roughly 31% withhold votes cast against lead independent director Michael Purcell at the 2024 annual meeting.

Ken Squire is both the founder and president of 13D Monitor, an institutional research service on shareholder activism, and the founder and portfolio manager of the 13D Activist Fund, a mutual fund that invests in a portfolio of activist 13D investments.