Why SPS Commerce Rallied on Friday
Key Points
Bloomberg reported that SPS was in advanced talks with a large private equity firm.
SPS had said it was exploring a sale back in June.
Are activists pushing for a sale at too cheap a price?
- 10 stocks we like better than SPS Commerce ›
Shares of e-commerce backend software company SPS Commerce (NASDAQ: SPSC) rallied as much as 15.8% before retreating to a 7.1% gain at the end of the trading day.
Bloomberg reported today that SPS was in talks with a large private equity firm over a potential buyout. SPS stock has bounced recently, but it remains well below its 2024 highs. As such, there may be a decent premium involved with any buyout.
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GTCR considers buying SPS
SPS is a backend software platform that facilitates e-commerce by connecting brands, retailers, distributors, and logistics providers and by providing data and fulfillment services that help e-commerce merchants run their businesses efficiently.
The company is still growing but saw a deceleration in revenue growth this year, coinciding with the "SaaS-pocalypse," when fears of AI disruption overtook much of the software sector. The downturn in SPS stock attracted the interest of activist investors, with multiple activist firms taking stakes in the company. Those activists had reportedly been advocating for a sale, and Reuters reported in June that SPS management had been exploring one.
Today, Bloomberg reported that a Chicago-based private equity firm, GTCR, was in advanced talks with SPS, and that a deal could potentially be consummated in the next few weeks.
Image source: Getty Images.
Is SPS Commerce selling out too cheaply?
SPS stock is still about 65% below its all-time high, which raises the question of whether management might be selling out too cheaply under pressure from activists. After all, the stock trades at roughly 17 times this year's average adjusted (non-GAAP) earnings estimate.
That seems like a cheap valuation for a software company, even after this year's sectorwide pullback. However, SPS also saw its revenue growth fall from the mid-double digits late last year to just the mid-single digits in the first two quarters of 2026.
Therefore, it's perhaps no surprise that activist investors would prefer a buyout in the near-term. Moreover, if a deal is consummated, it's possible these activists would stay on as investors and work with GTCR to improve operations. In either case, the news story was a nice reprieve for SPS shareholders today.
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Billy Duberstein and/or his clients have no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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