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Avantax Wealth Management

Activist Investor Pushes for Sale of Avantax

Engine Capital says despite the company’s efforts, its stock price continues to trade at a discount, having lost nearly 13% of its value year to date.

Avantax, the publicly traded wealth management company that was created after Blucora shed its tax software business and changed its name earlier this year, faces more opposition from one of its shareholders. Activist investor Engine Capital, which owns about 2% of Avantax shares, sent a letter to the board of directors this week, urging them to consider selling the entire company.

This is not the first activist investor to go after Avantax and its former parent, Blucora. In 2021, Ancora, an RIA acquired by Focus Financial Partners, waged a proxy battle against Blucora, arguing that the management team was failing to find promised synergies between Avantax, Blucora's strategic roll-up of tax-focused broker/dealers, including HD Vest and 1st Global, and Blucora's legacy professional tax software business, depressing the stock price. But shareholders ultimately voted to retain existing board members.

Later that year, Ancora sent a letter to the board of directors, putting more pressure on Blucora to sell its online tax preparation unit, TaxAct. In November 2022, Blucora announced that it would do just that and focus solely on the wealth management business.

In February 2022, Engine Capital waged its own proxy battle against Blucora, seeking three seats on the board.

Now, Engine Capital says despite the company’s efforts, its stock continues to trade at a discount to its strategic value. Year to date, its stock price is down nearly 13%.

“We believe this is primarily due to the fact that Avantax is a subscale asset in the consolidating asset management industry where size is increasingly important,” Engine Capital’s letter reads. “That is why we encourage the board to initiate and publicly commit to a review of strategic alternatives—including a sale of the entire company—which we believe could fetch between $27 and $32 per share, or a 34% premium for stockholders.”

The letter outlines 10 arguments for selling the business, including the firm’s holding company structure, which it contends is creating unnecessary duplications across the organization; as well as its deteriorating competitive positioning; and the fact that its recent business momentum, such as improvements in recruitment and advisor experience, would make a sale more timely.

“Given the benefits of scale in the asset management space and Avantax’s own inefficiencies, it is obvious that the value of Avantax to a large consolidator is vastly superior to its standalone value,” the letter said.

A spokesman for Avantax did not return a request for comment by press time.

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