{
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  "docSlug": "40344b686c65",
  "documentTitle": "Houghton Mifflin Harcourt (HMHC)",
  "authorId": "27_Engine_Capital",
  "authorName": "Engine Capital",
  "documentKindSlug": "activist-deck",
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  "sourceTypeLabel": "Activist investor",
  "presentationDate": "2022-03-22 00:00:00",
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  "pageNumber": 9,
  "pageCount": 21,
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  "notes": "The slide uses a stock chart to visualize the gap between the current offer and the projected stock price based on fundamental performance.",
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      "text": "Engine believes that following strong Q4 results, HMHC stock would have traded at or above $19.50 per share, implying the Veritas offer represents an insufficient premium of 7.7% instead of the 36% premium the Company is advertising based on an artificial low point tied to a media leak.",
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      "kind": "chart",
      "text": "HMHC Stock Chart (11/4/2021 – 1/13/2022)",
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      "text": "From Q3 2021 earnings until the media leak, HMHC traded at a VWAP of $16.01, implying HMHC was trading at a multiple of 10.25x the midpoint of the 2021 UFCF guidance of $195 million\nOn February 24, 2022, HMHC delivered strong Q4 results with 2021 billings and UFCF ($1,110 billion and $203 million) well above the midpoint of its 2021 guidance ($1,085 million and $195 million). HMHC would also have provided strong guidance for 2022 given management's forecast per the Schedule 14D-9 and announced a refinancing. We expect the stock would have reacted very positively\nIf we apply that 10.25x multiple on 2022 UFCF of $220 million and use the Q4 balance sheet information, HMHC would be at $18.25 implying a premium of 15%. Since HMHC would have refinanced its debt and probably would have initiated a share buyback, we believe the multiple would have expanded. At 11x 2022 UFCF, the stock would be at $19.50 per share. At 12x 2022 UFCF, the stock would be at $21.2 per share.",
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      "kind": "metric",
      "text": "share price: $21.00",
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      "kind": "paragraph",
      "text": "Engine believes that following strong Q4 results, HMHC stock would have traded at or above $19.50 per share, implying the Veritas offer represents an insufficient premium of 7.7% instead of the 36% premium the Company is advertising based on an artificial low point tied to a media leak. Applying a 30% change of control premium to that $19.50 number points to a fair transaction value of $25.35 per share",
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      "kind": "source-note",
      "text": "Notes: (1) $16.01 VWAP calculated from 11/4/2021 to 1/13/2022",
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      "kind": "title",
      "text": "The $21 per share doesn't provide a sufficient premium when compared to where the stock would be following strong Q4 results",
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