DigitalBridge Group (NYSE: DBRG) is getting pressure from activist investor Legion Partners Asset Management, to consider selling if current transformation efforts fail to deliver value to shareholders, according to Bloomberg.
DigitalBridge under CEO Marc Ganzi has transformed from a diversified real estate investment trust (REIT) to an alternative asset manager specializing in digital infrastructure, including cell towers, data centers, fiber and small cells. As of 3Q22, the company has over $50 billion in digital infrastructure assets under management (AUM), up 33 percent on a year-over-year basis. DigitalBridge is sticking to its game plan for investing in digital infrastructure and delivering superior, long-term value, Bloomberg reported. In its 3Q22 presentation, the company stated that its sole key performance indicator is to double AUM over the next three years.
Legion Chief Investment Officer Chris Kiper said he supports DigitalBridge’s leadership under Ganzi and its moves to transform the company over the past two years. In fact, Kiper estimates that the company could triple in value in the next two years as it continues to raise new funds and make new investments. But if those efforts fail to see the company’s shares re-rate within the next 12 to 18 months, the company should consider a sale, Kiper said during a presentation at the Bloomberg Activism Forum last week.
Despite the vote of confidence in Ganzi’s leadership, Kiper said that if the company cannot reach an incentive goal of $40 per share by mid-2024, then it should consider selling to one of several big PE firms also operating in the digital infrastructure space, including Blackstone, KKR, EQT, Brookfield Asset Management and Macquarie.
DigitalBridge’s share price was $11.17 at the stock market close on Monday, down over 8 percent from Friday’s close, giving the company a market capitalization of $1.8 billion.
Inside Towers’ Take
In our Q3 2021 issue of Inside Towers Intelligence™, our quarterly wireless infrastructure market analysis publication, we profiled DigitalBridge and dubbed the company ‘The Prototype Infrastructure Company.”
From our assessment, DigitalBridge has the depth and breadth of digital infrastructure assets, (towers, fiber, data centers, small cells, edge infrastructure) in 22 portfolio companies and two operating companies, on a global scale that no other company in the business can match.
Nota Bene: Inside Towers does not recommend the buying or selling of any security. However, it is important to keep in mind several key points about DigitalBridge:
- Demand for digital infrastructure will continue unabated for years, even in the face of inflation and high interest rates. Mobile data consumption is escalating. Nobody is giving up their smartphone and people who don’t have one, want one!
- Consequently, DigitalBridge is very well positioned with diverse infrastructure assets to capture a share of that growth that will continue for a long time.
- DigitalBridge’s current stock price is being buffeted by the macroeconomic environment and belies the underlying financial and operating strength of the company’s portfolio companies. Surprisingly, many investors still look at DigitalBridge as a REIT.
- DigitalBridge’s leadership and portfolio company management teams are experienced and are executing well from a comprehensive strategy playbook.
- Selling assets to a PE group might yield the 1-time gain that current investors seek but in the big picture, nothing else changes.
By John Celentano, Inside Towers Business Editor
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