Atento (ATTO) – Rumored Merger – Upside TBD

Current Price: $29.6

Target Price: TBD

Upside: 30%

Expiration Date: Q1-Q2 2022

This idea was shared by Lukas.


Recently, rumors appeared that Atento – a small-cap providing BPO call center services – has hired Goldman to explore a sale. Nothing out of the ordinary so far – there are dozens of firms that are rumored to explore a sale. However, Atento has two very interesting twists to it:

  • The company has adjourned its investor day with a weird excuse – basically saying they were too busy.
  • Most importantly,  the company is 62% owned by 3 ex-noteholders, which received ownership stakes at the time of the debt exchange in 2020. The exchange included a non-sale provision that expires in Jun’22. These ex-noteholders are mostly credit firms/unnatural shareholders, who were likely interested only in ATTO’s debt (13.25% PIK rate), and will be looking to unload their holdings as soon as the non-sale provision expires. Due to low trading liquidity, company sale is the only option. In other words, the start of the sale process seems to be perfectly timed making it quite likely that the rumors are true.

Despite 17% increase in ATTO share price since the rumors were published, there still seems to be plenty of headroom left for the sale at a premium to current prices. The company now trades at 5x TTM adj. EBITDA – materially below larger peers. Due to substantial leverage, slight uptick in the multiple translates into very meaningful incremental equity increase for common shareholders – at 5.8x adj. EBITDA (which is the current valuation of peer IBEX) ATTO share price would stand at $41/share, or 33% upside to current prices. The business process outsourcing/call centre industry is consolidating and many peers have been recently acquired at 7-10x adj. EBITDA multiples. Even much smaller peer SRT has received an offer from its major shareholder (55%) at 4.7x adj. EBITDA, just below ATTO’s current multiple. SRT has weaker margins than ATTO, whereas the offer is still way too low and the parent is trying to opportunistically steal the company on the cheap (see here for SRT write-up)

ATTO is progressing well with its 3 year turnaround and management has made positive comments regarding 2022 and 2023 performance with expectations of continued margin improvement.

Downside to pre-rumor annoucnement stands at 14%. The main risk, aside from rumors turning out to be incorrect, is that major shareholders (ex-noteholders) might be willing to compromise on the sale price just to get rid of the stake.


Background on Controlling Shareholders

A more detailed Atento background can be found in this VIC article.

Atento was founded in 1999 as part of Telefonica Group, one of the largest telecom companies in the world with a market cap of over $25b. In 2012 Atento was acquired by Bain Capital for over €1b via a carve-out and subsequently, IPO’d in 2014 at around $70/share (adjusted for splits).

A couple of months before the IPO of Atento, Bain raised for itself (not for ATTO) $380m of very expensive 13.25% financing by issueing PIK notes to credit firms HPS, GIC, Farallon. The interesting part was that the notes were collateralized with the 67m ATTO shares that Bain owned at the time (numbers and table below taken from the VIC article). The notes were due to mature in May 2020. However, in 2020 Bain did not repay the notes+interest (refinancing was impossible during COVID peak) and instead handed over the controlling stake in ATTO shares to the 3 noteholders. Concurrent with the debt exchange, the 3 noteholders agreed to a non-sale provision for two years (expires this Jun’2).

The cost basis of these noteholders was $$5.62/share or $28.1/share, adjusted by a 1:5 reverse split.

atto vic 1

3 ex-noteholders:

  • HPS ended up owning 25% of shares outstanding. HPS focuses on debt and private equity and public equity is just 0.3% of their total AUM with ATTO being their second-largest position. They are not natural shareholders and are most likely to sell out of all 3 substantial holders.
  • GIC Asset Management owns 22% of ATTO. GIC manages Singaporean foreign reserves and does not provide investment services to the public. 32% of their portfolio is in equities, with 3% coming from Latin America  – further breakdowns are unclear. Their goal seems to be capital preservation (positive inflation-adjusted returns). So while there is no definitive answer of saying if they are indeed willing to sell, they are mandated by the government to keep a certain risk exposure, despite ATTO only marginally contributing to their Latin American exposure. Hence, I believe the odds of selling are likely higher than 50% as the company will not want to take on equity risk in exchange for the original debt risk. Moreover, ATTO share price is relatively volatile as well.
  • Farallon Capital Management owns 15%. Their investments are pretty broadly diversified as the company invests in credit, merger arbitrage, real estate, etc. Atento’s position comprises about 0.3% of their total AUM. Farallon holds substantial equity investments.

All three combined own 62% of ATTO stock. At least two of them seem like unnatural shareholders that were only interested in 13.25% PIK ATTO loan and should be unwilling to hold the stock once the non-sale provision ends. Given the size of the ownership, open market selling seems unlikely.


Peers and Suggested Valuation

ATTO currently trades at 5x TTM EBITDA, in-line or below similarly sized and significantly below larger peers.

atto peers

Q4 is the strongest quarter for these companies and all peers except ATTO have already reported Q4 earnings and they are included in EBITDA calculations. It’s likely that ATTO’s Q4’21 will be stronger than the year before, so the actual adj. EBITDA 2021 multiple here should be even lower (slightly). SRT market cap, EV, and multiple are indicated at the offer price.

Here are several of the recent industry transactions:

  • Teleperformance/Senture in 2021 at a $400m EV or 13x EV/EBITDA ;
  • ChrysCapital Management/ResultCX in 2021. Deal terms were undisclosed, but sources say valuation came in at between 9.5 times and 10 times the target’s $47m in 2021 EBITDA. ResultsCX had EBITDA margins around 11.7%;
  • Sitel Group/Sykes Enterprises for $2.2bn or just over 7x EBITDA in 2021;
  • Brookfield Asset Management/Everise Holdings in 2020. According to The Deal’s sources, reportedly paid between $425m and $450m for Everise. Everise  had reportedly generated revenue of $300m and EBITDA of $40m in its fiscal 2020, which would put Brookfield’s deal multiple at 11x EBITDA. Everise’s EBITDA margins stood at 13%.
  • Concentrix/Convergys for around $2.4bn or at an estimated 10x EBITDA in 2018.



Atento is the largest call center service provider in Latin America – 15% share at end of 2019. The company operates in 13 countries worldwide (45% of revenue comes from Brazil, 40% from the Americas, 15% from Spain). The largest client is Telefonica (was 90% in 1999, now just above 30% and decreasing).

The table below summarizes ATTO’s financial history:

Screenshot 2022 03 25 at 16.38.39 1

The company has showed a rather lackluster performance since the IPO and that combined with the leverage has gradually destroyed ATTO share price. The reasons for were incompetent previous management as well as significant negative FX impacts – ATTO has a large exposure to Brazilian Real and other EM currencies, which have been depreciating against USD (e.g. Brazilian Real had depreciated by about 60% in the period from 2014 to 2020 but has been quite stable since).


3 year turnaround plan

The poor performance led to a management change in 2019. New management quickly instituted a 3-year turnaround plan to deliver sustained organic growth and margin expansion. Announced during 2019 investor’s day:

  • Diversify exposure to Telefonica (generated around 40% of revenue at the time);
  • Forecasted 14-15% EBITDA margins in 2022 vs 9% in 2019 and 10% in 2018;
  • Reduce leverage from 3.5x to 2x;
  • Return capital to shareholders via share buyback + dividend (30-35% of FCF).

atto turnaround

The plan has been progressing pretty nicely so far (except for the COVID impact) and profitability/margins are gradually improving. 2020 adj. EBITDA margin came in at 11.4% and in 9M it has improved further to 12.6% (Q3 was at 13.9% – top range of the runaround plan). In Q3’21 management expressed confidence in achieving the 2022 turnaround goals and expected further margin improvements in 2023:

Pablo Sanchez

Most of them have already been answered. And the last one is without providing 2023 guidance, do you think you might be able to increase EBITDA margins even further in 2023?

Carlos López-Abadía

Yes, absolutely. I think one of — I don’t know if that question comes from the same investor that put that to me on an e-mail not too long ago and something that I took note to cover at length in our investor conference. The answer is yes.

So the new management seems kind of competent and their track record so far inspires confidence. One way they were able to increase profitability is through exiting lower-margin contracts and looking for markets with higher margins, such as the US.


32 thoughts on “Atento (ATTO) – Rumored Merger – Upside TBD”

  1. Atento shares dropped after Q4 results and now stand 6% below Lukas’s write-up levels.

    I am guessing this was driven mostly by two factors, none of which actually changes the thesis much:
    – Probably the main one was the absence of sale / strategic review announcement – I am guessing quite a few were expecting this before or together with the release of the annual results. Management refused to comment on this during the call as well.
    – The second issue was $42m EBITDA impact from the cyberattack last fall (mostly due to revenues lost as client services had to be temporarily suspended). This was a surprise as the company completely downplayed any impact when the cyber-attack was announced in mid-Oct’21 as well as with the Q3’21 result release three weeks later. However, on the call management kind of explained the reasons for the far-larger-than-expected financial impact and assured that this was a one-time occurrence, that is already in the past, and almost all of the clients are already back pre-cyber-attack revenue levels (or even higher). Otherwise results were in line with the previous trends. In the acquisition scenario, this cyberattack should not make more than a dent in companies valuation.

  2. Atento has adjourned Q4 results (were scheduled for the 27th of April) to 11th of May. I think this is a very positive sign that something is indeed brewing up behind the scenes. I am expecting an official update on the rumored strategic review shortly.

    By the way, just to add some additional color on the recent events. Kyma Capital and people affiliated with it have been accumulating shares in Atento over the last several months and now hold a 9% stake. Last month, Kyma Capital urged the board to explore strategic alternatives as well:

    “On March 14, 2022, The Reporting Person(s) delivered a letter to the Issuer demanding that the Board of Directors of Atento immediately undertakes a process to explore strategic alternatives with the goal of selling the company to the highest bidder via a competitive sales process. These same shareholders will seek to nominate three independent directors to the Board at the upcoming shareholders’ meeting in May to ensure a full and transparent sales process. Finally, upon reaching 10% of the outstanding shares, these shareholders intend to invoke Art 1400-3 of the Luxembourg Companies Law to formally request information regarding specific management acts.”

    Apparently, over the last two years, Kyma has issued multiple letters to the board pointing out mismanagement which led to the current undervaluation by the market (in Nov’21 Kyma considered ATTO to be 50-70% undervalued vs peers). Moreover, the activist also claimed that large shareholders are acting in the consortium and therefore according to Luxemburg’s law (33.3% ownership threshold breach) should’ve resulted in a mandatory offer for the minority shareholders at $47/share (highest price “paid” by ex-debtholders).

    • Thesis still in tact?…ugly results…looks like the cyber attack impact was much greater than we thought…would love to hear your thoughts on whether this management team can lead them out of it…

  3. Definitely a weak quarter, but I think this 50% sell-off might’ve been overblown, in part due to the low free float and liquidity of ATTO shares. Despite the cyberattack impact and inflationary pressures, management remains confident in the business performance rebound. Although they’ve clearly lowballed the negative effect of a cyberattack in Q4, historically management has been pretty good at meeting their forecasts. Therefore, the reiterated 2022 guidance, the business uptick after Q1, and the expected 80%+ transfer of inflationary costs to clients provide some reassurance on improved performance going forward. I think I will stick around for another quarter to see how this develops.

    The business is cheap, trading at 4x EBITDA guidance for 2022 (vs IBEX’s 5.1x adj. EBITDA guidance for 2022).

    The non-sale provision of the major shareholders is expiring in June. The risk of them dumping shares in the open market is virtually non-existent due to limited liquidity, but there is a chance that shareholders will be inclined to push for the company’s sale at currently depressed price levels. Given management’s commentary in Q1 conf. call (see quote below), I think this risk of that happening is low. If an attractive sale offer doesn’t materialize shortly, it is more likely major shareholders will return to the sale process after the business performance rebounds later on in the year. During the call, management has even hinted about negotiating some kind of a further commitment from the major shareholders (which might be an extension of the non-sale provision):

    “I mean I am in constant discussions with my major shareholders, as you can imagine. And I have approached this question through a number of them. I can tell you with confidence that the above expressed confidence in the company and confidence in the value of the long-term – the long-term value of the investment. So, that I can tell you unambiguously. I have also approached the specific concern of some as you are right now expressing, and I am in discussion with some of them about the possibility of them making for the commitment that we could make public. Stay tuned, and we may have something to talk to you about that.”

    A bit more details on the Q1 results:
    – Revenue decreased by 2.3% YoY to $357m due to cyberattack and COVID spike in January and February;
    – EBITDA decreased 10% YoY to $35m. EBITDA margins were at 9.8%;
    – Inflationary pressures – management commented that they are at 60% cost transfer to clients and are on course to achieve 80% or greater cost transfer to clients by the end of the year;
    – Rising interest rates and increasing financing costs – the company has a lot of debt ($650m net debt), but only less than 10% of it has a variable rate;
    – Losses were mostly from a non-cash change in fair value of derivatives (currency hedging) – $63.3m out of $79.8m net loss;
    – 2022 guidance has been reiterated – mid-single-digit revenue growth, 13-14% EBITDA margin, 2.7x-3x target leverage.

    From conf. call on the outlook:

    “Now, we have seen a clear month-to-month improvement achieved in the quarter with higher margin in March than we had in Q1 last year, which again gives us the comfort, the action that we haven taken and improvements that we see, puts us in a good position to continue the improvement through the year and to achieve the guidance that we are giving.”

    “As we regain the momentum built during most of last year, we expect revenues and margins to improve and to meet our performance targets for this year, which we still plan to exit with strength. Soon we will communicate a date for our postponed Investor Day, when we will have the opportunity to provide greater details about the various growth initiatives under our Three Horizon Plan and to unveil our strategy for the next phase of Atento’s growth.”

    Press release:
    Call transcript:

  4. Price down another 30% to 9.58 without any news! Unusually high volume.

  5. It’s really puzzling what’s happening to the stock. Still no news from the company, so I guess it’s a combination of low liquidity/recent market sell-off and some larger holders or arb desks exiting the position.

    I think this is oversold even in the no-sale scenario. The company is cheap. Most of the current issues regarding the cyberattack will most likely fade away going through the second half of 2022 and should not matter to a buyer with a long-term horizon. The current inflationary environment results in some headwinds for the company from an operational and financing point of view. However, management has already started addressing the former issue and is on course to achieving their plan by the end of the year. The latter financing issue should not provide significant hurdles for a potential larger acquirer.

    Management is still confident in the ongoing turnaround and cash generation potential of the business. Excluding the recent cyberattack, management has been delivering on their 3-year plan. The core thesis here has not changed, only that the timeline likely got extended. I am still waiting for management’s announcement regarding the top 3 shareholders’ “commitments” as mentioned in the Q1 call. Lock-ups will likely get extended and the announcement should come out shortly before the lock-ups expire on the 7th of June.

  6. Atento’s (ATTO) share price jumped up +28% since the beginning of June as management reached a cooperation agreement with the activist fund, Kyma Capital, nominating their candidate to the board of directors. Kyma owns 8.5% and has been pushing the company sale agenda for over half a year now. In the most recent announcement, the activist said it believes in ATTO’s capability to deliver 2022 guidance and will explore options to drive shareholder value:

    We have been net buyers of Atento stock and have built a meaningful position. We believe in Atento´s growth potential, market penetration and the capability to deliver guidance during 2022. I am excited for this next chapter in Atento’s future and am personally committed to working with the Board to explore all options in pursuit of driving maximum value for shareholders.

  7. H1’22 ended up weaker than expected for ATTO with its share price down 21% yesterday after Q2 results. Recovery in client volumes was indeed slower than anticipated. This was mostly due to clients being cautious in business expansion or just cutting costs due to uncertain macroeconomic conditions. Q2 EBITDA margins fell 44% YoY due to lower volumes and inflationary pressures. On a positive note, the cyberattack issues have seemingly subsided, though it took a bit longer than management initially expected.

    The company now trades at 6x TTM EBITDA (TTM numbers include the awful Q4 cyberattack results), mostly in line with peers on a TTM basis. However, management believes they’ve seen the worst already and says that the positive inflection point has been reached for H2’22 guiding a return to strong EBITDA margins at year-end.

    New cost-cutting initiatives are being implemented and in June/July sales rebounded to record levels. Management also said they are ahead of the plan for inflation pass-through, which is expected at 80% by year-end (expects to transfer 80% of inflationary costs to clients). That said, the company now has a long way to go to reach its 2019 turnaround targets, including EBITDA margins and net leverage.

    ATTO has significantly slashed its 2022 guidance (flat revenue growth, EBITDA margin of 11.5% to 12.5%, and a leverage ratio of 3.0 to 3.5x). This still implies a 4.2x 2022E EBITDA multiple, below peers (though not many peers provide 2022 guidance).

    Despite weakness in current earnings mostly due to inflationary pressures, I will most likely continue to monitor this for at least one more quarter to see how ATTO’s situation develops. The company trades in line with peers and still has a sale catalyst (though the expected sale date has been pushed). The big 3 shareholders are also underwater with their positions and are incentivized to create a liquidity event sooner or later (most likely a sale). So it is most likely their intentions are aligned with minority holders. By the way, I do not see any updates from Kyma Capital as of now. The latest update was in June when one member from Kyma Capital joined the board to maximize shareholder value.

    Regarding the strategic review, management hinted it is interested in M&A, however, provided no additional details. Obviously, in the short term, ATTO’s sale doesn’t look very likely.

    Hernan van Waveren Atento S.A. – Director of IR
    Thank you, Sergio. Another question from our webcast. Any updates or any color you can share on the strategic transactions?

    Carlos López-Abadía Atento S.A. – CEO & Director
    My answer to that is the same as always. M&A is one of the data I mentioned that all companies, and Atento included, have to create shareholder value. And this is something that we always look at. And it’s an important dimension, but we will only comment when we have — on anything specific when we have to — something specific to comment on. So same answer as I gave you before. We don’t, as a policy and as a matter of fact, we don’t comment on ongoing activities or rumors. So that will continue to be my answer.

    More details on Q2 results:
    – Revenues were down 4% YoY but increased 2% QoQ;
    – EBITDA was -44% YoY on the back of lower client volumes, slower sales early in the year, one-time severance costs and inflationary pressures. EBITDA margin fell to 7.8% versus 13.3% Q2’21;
    – FCF was at $4.5m versus -$65.4m in Q1’22, reflecting a leaner cost structure;

    Would be interested to hear other opinions.

    Press release –
    Conf. call –

  8. A positive development from ATTO.

    As expected, the lock-up agreements were finally extended. However, this time Kyma Capital (the activist) is included in the lock-up extensions. Now, 70% of shares will be locked-up till June 22, 2023. As another positive, Kyma Capital bought a bit more shares in August at just below $6/share (owns 9%):

    “[…] Our recent buying of Atento shares in August reflects our expectation that the company will continue to improve financial performance over the second half of 2022, in line with management guidance.”

  9. Several updates on ATTO – stock is up 90% since the beginning of this month. The leverage is now clearly working the other way around catalysing an outsized positive impact on the stock. Last Friday ATTO announced a tender offer for 10% of outstanding shares from MCI Capital. To remind, 70% of ATTO shares are held by major shareholders and are locked up, so the tender is for 30% of the free float. The offer is priced at $5/share and there is a condition that at least half of the tender must be filled (5% outstanding shares). The tender came at a minimal premium to pre-announcement price ($4.70/share) and ATTO now trades at 40% above the tender price. The offer is clearly doomed to fail, unless the buyer raises the price. Another interesting thing is that the buyer indicated willingness to buy the whole ATTO. Proxy background states that MCI Capital’s letter to Kyma Capital (ATTO’s activist investor) and the board apparently ‘mentioned that separately the possibility of combining the Parent with the Company might be discussed.’ At this point further developments are difficult to guess. Not a lot of information is available on MCI Capital and the way it priced the tender at a minor premium seems s bit strange. Its quite questionable whether ATTO’s major shareholders, which previously had agreed to lock-up shares until June 2023 would now be willing to sell at a big loss. ATTO is visually cheap – trades at 4.7x E2022 adj. EBITDA vs peers IBEX (6.7x E2022 EBITDA) and TTEC (9.3x). However, ATTO is much more levered – for example 2x increase in equity value (from current $5.5 to $11/share) would lift ATTO’s EV by just 11% and EBITDA multiple by 0.5x. Overall, I think the company is going to get sold sooner or later and if the current interest from MCI Capital doesn’t move any further, the sale process is to be expected around June 2023 when the lock-ups expire (assuming the financial conditions improve by that time).

    Earlier last week, ATTO had also announced somewhat of a mixed bag Q3 results. Inflationary pressures are still weighing on the stock, while management is trying to cut costs. Revenue was flat YoY, while EBITDA margin increased to 11.1% this quarter (vs 7.8% in Q2 and 13.9% Q3 last year). EBITDA guidance for 2022 was lowered but just slightly – by 1% to 10.5%-11.5%. On a positive note, the cyberattack issue seems to have subsided and management’s inflation pass-through is well on track (88% inflation pass-through YTD). Cost savings are proceeding smoothly – YTD management has managed to achieve $10m of $15m in total targeted cost reductions for this year. ATTO is expected to increase annual cost savings to $45m, though management does not provide a timeline on when they will be able to achieve this. For reference, $45m of cost cuts constitutes 30% of E2022 EBITDA. Worth noting that while the debt overhang is substantial, short term debt maturities shouldn’t be a problem. The company has around $650m in net debt ($66m cash). ATTO will have to repay $12m of debt in 2022, $77m in 2023 and the remainder in 2026.

  10. Yesterday ATTO announced a change of both CEO and chair. Both positions had been filled through internal resources. The new CEO is a former South America Regional Director and the new Chairman used to be a non-executive board member. The company has not provided any concrete reasoning for the change. Meanwhile, the former CEO will stay on as an advisor and the former Chairman will take a non-executive board seat. It seems that something is brewing at ATTO, especially considering the recent offer from MCI.

    • Anyone willing to speculate on why MCI would extend a tender trading significantly below market? Makes little sense to me

      • Not anymore. Market price now $4.70. Below $5 tender price since Tuesday.

  11. Lukas and DT, are you tendering? Price now $4.15, substantially below the $5 tender price. Tender is for only 10% of outstanding shares, so if want to, good chance can buy back later below $5 after tendering. Of course, price might pop if undersubscribed again.

  12. Hi, I am personally not tendering. Hard to see long-term shareholders tendering at this price and I’m not sure arbs will be able to fill the required minimum 5% threshold. If the tender fails, ATTO is quite a volatile stock and not sure how it would react near term. I am more interested to see how the potential sale of ATTO plays out given the share lock-up expiration next year.

    • Thanks, Lukas. I also decided not to tender yesterday, but it is helpful to know your thoughts. I understand it might be up or down right after the tender.

  13. Not sure how they get much more than zero like last time unless tender significantly higher.

  14. By December 30, about 3.6% of shares were tendered and the offer was extended again to January 9. Most importantly, the minimum acceptance condition (5%) was waived eliminating the risk of the tender failing. The spread has been promptly eliminated and ATTO currently trades at $5/share. MCI will now become a large minority shareholder and it will be interesting to see its next move.

  15. ATTO announced a successful capital raise from Kyma Capital, MCI affiliate, and other investors that were not specified. This capital raise was hinted during ATTO’s Q3 conference call – management noted that additional financing was not necessary but would provide reinsurance to investors.

    Management also guided strong Q4 EBITDA margin growth and noted 2022 ending cash balance to be close to $84m (vs $66m in Q3).

    Kyma Capital definitely looks pretty confident in Atento’s perspectives. Previously the activist was pushing for ATTO’s sale due to the undervaluation. Later, Kyma got a board seat and said it will try to “maximize shareholder value”, then voluntarily locked its shares til June 2023, and now has provided additional capital to the company.

    Financing press release –
    Q3 conference call –

  16. If you like the equity, the bonds must seem even more attractive? They trade on IBKR in the 20’s.

    So if you believe the equity has any value at all, upside for bonds is 300% and a yield of 30% if they keep paying interest.

    • FYI, no position here. I have no idea what equity holders see in this business. $500m of debt, about $40m of LTM adjusted operating income. But in the past 5 years this company had average annual negative working capital movements that were just under $40m. Despite shrinking revenues.

      And gross margins seem to be on steady decline since 2014.

  17. Yesterday’s filings shed some more details on ATTO’s recent debt financing and 2023 guidance. After sifting through the new disclosures, I’ve decided to finally close down this idea.

    Lukas, thank you for sharing this pitch and for the continuous updates over the last year. Let me know if you have a different take on the latest developments.

    The terms of the new debt financing are atrocious and highly dilutive to existing equity holders. ATTO issued $40m of new 2025 secured notes with over 20% interest – 10% interest payable in cash + 10% interest payable in additional new notes. In addition, ATTO issued nearly 8m warrants with an exercise price of $3.78 (these at the money at the time of issuance). If exercised, these warrants would increase the share count by almost 50%. The agreement allows ATTO to issue another $20m of these notes + warrants with similar terms over the next six months.

    Furthermore, buried among yesterday’s filings was ATTO’s cash burn guidance for 2023. The company continues to burn large amounts of cash, with -$16m expected in March and -$18m in April. In the absence of the financing above, the cash balance of $87m (as of the end of Jan) was set to evaporate to -$13m by August this year. The guidance +$3m FCF for the whole year is clearly geared toward some kind of recovery in the second half of the year.

    Overall, I am marking 91% loss in 1 year.

    ATTO marks one of the biggest losses for SSI and I’ve definitely waited way too long to close it. Here’s what I noted in my 2022 review:

    “ATTO looked cheap and bankers were hired to explore the strategic alternatives. But then, deteriorating financials and some unexpected developments diminished the prompt sale prospects. That was the right time to take losses and close out the position. However, the stock continued to look cheap/potentially oversold and the involvement of the activist/another large shareholder gave hope of a rebound. The investment thesis has clearly shifted. Aside from sticking through this shift, I’ve clearly underestimated the effect of high leverage on equity valuation.”

    Deal terms:


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