Alteva Inc (ALTV) has a legacy partnership with Verizon Wireless worth $50 million on a pretax basis, and its thesis is exhibiting reasonable risk/reward in the unified communications business, which is experiencing double-digit growth, says Eric Kuby, Chief Investment Officer of North Star Investment Management Corporation and Peter Gottlieb, Chairman and CEO of North Star Financial Services Corporation.
“This is the type of situation that we find interesting, because though we don’t typically invest in tech companies due to their inherent unpredictability, in this situation we feel that our downside is extremely well protected in the near term due to the Verizon Wireless partnership, with a call option that we are paying very little for at these prices, in the unified communications business, which is growing at double-digit rates,” Kuby said.
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ALTV‘s stock is currently inexpensive due to the uncertainty surrounding how the current CEO will handle capital allocation policies, maintain the company’s high-yield dividend and allocate the proceeds from the VZ partnership, Gottlieb says. However, he sees positive risk/reward at the company’s current prices.
“There is some uncertainty surrounding how the current CEO, who has a background in unified communications, will dictate future capital allocation policies, including if the current dividend, which has an 11% yield, will be maintained, as well as how the proceeds from the Verizon Wireless partnership will be allocated. Ultimately, though, we believe the ALTV thesis possesses a reasonable risk/reward ratio at these prices,” Gottlieb said.