Voss Capital wants to maximize value at International Money Express

Business: International Money Express is an omnichannel money remittance service company. IMXI offers digital money transfer services through a network of retail merchants in the United States, Canada, Spain, Italy and Germany. It works through company-operated stores, its mobile app and company websites. Its remittance services include a suite of ancillary financial processing solutions and payment services available in all 50 states of the United States, Puerto Rico and 13 Canadian provinces. It offers money remittance services to countries in Latin America and the Caribbean, mainly Mexico and Guatemala. These services involve the movement of funds on behalf of an originating consumer to be received by a designated payee at a designated destination location.

Scholarship value: $601.9 million ($18.46 per share)

Percentage of ownership: 5.64%

Average cost: $19.14

Activist Commentary: Voss is a Houston, Texas-based hedge fund focused on untracked special situations. They are not traditional activists, but they have used activism as a tool in the past.

Voss engaged with the company’s board and management team on ways to maximize shareholder value, including a possible sale of the company in a private transaction.

International Money Express is a money remittance service provider that allows consumers to send money from the United States, Canada, Spain, Italy and Germany to Mexico, Guatemala and other countries in Latin America, Africa and Asia. The company offers its services through a network of authorized agents located in various unaffiliated retail outlets, 118 company-operated stores and digitally through an app and its website. IMXI serves more than 4 million customers every month and aims to connect families across borders, ensuring financial services are accessible to those who need them most. The company has a market share of approximately 20% in the top five Latin American and Caribbean (LAC) markets and is continuously looking to expand 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 remittance capabilities from Spain, Italy and Germany. It also set up a money services entity in the UK in 2024, which will give the company the ability to provide remittances from the UK.

This is not an opportunistic activist engagement for Voss. The firm initially reported holding IMXI in its Q2 2021 13F filing when the company was trading around $15 per share and has held the stock ever since. Now on September 5, 2024, Voss filed a 13D and reported ownership of 5.64% at an average cost of $19.14 per share, buying shares as high as $20.09 in the past 60 days.

One of the things the firm says in the 13D is that it has engaged in communications with IMXI’s board and management about a potential sale of the company in a take-private transaction. Voss is not the only shareholder actively involved in the shares requesting a sale. A day before Voss 13D, Breach Inlet Capital Management sent a public letter to IMXI’s board urging them to pursue a review of strategic alternatives that includes a potential sale of the company. Breach Inlet says that despite solid operating performance and adjusted earnings before interest, taxes, depreciation and amortization growing more than 2.5 times since going public six years ago, the company remains undervalued by public markets. IMXI trades at less than 5 times trailing 12-month adjusted EBITDA, while its remittance services provider MoneyGram was acquired by private equity firm Madison Dearborn for around 8 times adjusted EBITDA last June. Breach Inlet believes IMXI should be valued at a premium to MoneyGram, not a significant discount, but just an equal valuation would imply a price of around $30 per share.

The provision of global remittance services is a highly fragmented market, with no single company holding more than 20% market share. As a result, there could be consolidation opportunities for IMXI with a strategic acquirer like Western Union, which also trades at a premium to IMXI. If IMXI remains independent, its growth plan to expand into digital and European markets would require large investments in people and resources, sacrificing short-term performance for long-term growth. This is not the type of plan that works well in the public markets. Instead, IMXI could be a great deal for a private equity firm to acquire that can help facilitate the company’s growth plan while shielding it from the public markets, which have failed to fully capitalize on the company . You don’t have to be a genius to see the appeal of such a company to private equity: one private equity firm bought it in 2007 and another again in 2017.

This is not the first time Voss has advocated for a strategic review at a portfolio company. In his 13D on Benefytt Technologies filed in December 2019, when the stock was trading at about $14 per share, Voss highlighted the strategic opportunities at Benefytt and the active M&A environment in the company’s space. Benefytt was acquired by Madison Dearborn Partners on August 31, 2020 for $31 per share. Most recently at Griffon, Voss called for a strategic review, which the company undertook and ultimately concluded, deciding to remain independent. Despite this, Griffon was a highly successful activist campaign for Voss, with the firm gaining board seats and returning 139.21% on the 13D, compared to 1.28% for the Russell 2000 over the same period .

We strongly believe that shareholder activism today is a strategy that greatly benefits shareholders. We believe the best kind of shareholder activism involves activists who come with a detailed, long-term plan to create value, with a board seat being a big plus. The other end of the spectrum is shorter-term “sell the company” activism, which is often great for the investor but short-changes the long-term shareholder. In these situations, we like to see a longer-term “Plan A” with a sale as a last resort, or a detailed analysis of why the company cannot or should not continue as a stand-alone public company. While Voss offers none of these, the firm has a lot of credibility as a long-term investor (an owner since 2021) that hasn’t made its management recommendations public until now. As such, we believe Voss’ intentions here are honorable and he is doing what he believes is best for both short-term and long-term shareholders.

If IMXI does not execute a strategic plan, Voss will likely consider director nominations. While a proxy fight is likely not part of its current plan, the firm has managed to win board representation in previous campaigns. Voss isn’t afraid to take a proxy fight to the polls. At Griffon, the firm ran a successful proxy fight, winning a board seat for one of 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 February 21, 2025. If it’s a proxy fight, there are several factors that could work in Voss’ favor, including the low price of the company’s shares. There were also signs of shareholder discontent, including about 31% withholding votes cast against independent lead director Michael Purcell at the 2024 annual meeting.

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