Oracle announced it is buying another construction software company, Aconex, for about $1.2 billion or AUS$1.5 billion. It’s safe to say Oracle loves construction software as it has previously purchased Primavera, Skire, and Textura.
A Stock That Followed Textura’s Pattern
Textura was a public company that had a huge run-up in its stock price to a market cap of over $1 billion, before plummeting to a market cap of $350 million. Oracle eventually paid $663 million for Textura.
Likewise, Aconex went public at AUS$1.90 and had a run-up in its stock price to a valuation of AUS $8.0, or over $1 billion. Early this year when Aconex warned of lower growth than the market expected, its stock plummeted reaching a market cap similar to Textura’s at its bottom (see below). But for Aconex, Oracle was willing to pay a large premium–45% over the closing stock price before the announcement today. The proposed price represents a 9x multiple of sales and a huge multiple on the company’s small EBITDA.
What About RIB?
At that time that Oracle bought Textura, May 2016, I wrote about Aconex and a third construction software company that seemed like best value of all three, RIB Software in Germany. At the time, RIB was about the same size as Aconex, had half its market cap, sported 25% EBITDA margins, and paid a 1.77% dividend. (RIB did grow slower). It turned out RIB was a good investment. The stock has increased 2.5x in the last 1.5 years.
Textura remains the only stock I have ever successfully shorted at the top and bought at the bottom. It was completely dumb luck and I will never short a stock again. I hated the feeling of rooting against people. I never sold Aconex short despite the stock looking just like Textura at its peak and knowing really smart investors who were thinking it was a short. And worst of all, I never bought RIB, even when I reviewed all three construction software stocks and concluded it looked like the one to buy in May 2016. This is why I leave my investments to others with more courage in their convictions!