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Shares of Angie's List (NASDAQ: ANGI)were up 66.3% as of 1:45 p.m. EDT Tuesday after the local business review website announced it will merge with IAC's (NASDAQ: IAC) HomeAdvisor in a deal valuing Angie's List at roughly $505 million.
For perspective, IAC's HomeAdvisor and Angie's List together generated roughly $17 billion in transaction value over the past year for over 200,000 paying service providers. The combined companies will be called ANGI Homeservices Inc., and -- as the press release puts it -- "will offer unparalleled scale and product breadth to match homeowners with service professionals in the $400 billion domestic home services market."
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Per the terms of the agreement, Angie's List shareholders will be able to choose whether to receive either one Class A share of ANGI Homeservices Inc. or $8.50 per share in cash for each Angie's List share they own. Note that the total amount of cash available in the transaction is capped at $130 million, with any cash elections above that amount to be prorated with ANGI Homeservices shares.
So why are Angie's List shares currently trading at $9.59 as of this writing? For one, as MarketWatch pointed out this morning, IAC's offer is well below Angie's List's initial public offering price of $13 per share back in 2011. It should come as no surprise, then, that several law firms have already announced investigations into the sale, questioning whether Angie's List shareholders are getting their money's worth.
To be fair, we should also keep in mind that Angie's List hasn't exactly thrived since its IPO. Shares declined 12% last year as revenue fell and the company struggled to achieve sustained profitability. And this merger has been approved by both companies' boards of directors, marking a culmination of Angie's List's decision to begin exploring strategic alternatives almost exactly six months ago.
It's up to you to determine whether you'd like to hold for a better offer or -- assuming waiting a little longer to sell won't result in more favorable long-term capital gains tax treatment -- sell with shares trading well above IAC's agreed price. But given today's mammoth spike, it would be hard to blame Angie's List investors for taking their profits off the table and putting them to work elsewhere.
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