CompoSecure Inside Out Spinoff

Kris Tuttle -

Today CompoSecure $CMPO completed the spinoff of Resolute Holdings $RHLD.

It's a weird setup. Resolute spent $372M to buy 60% of the outstanding shares of CompoSecure in September of 2024 to install Mr. Cote and take over the BoD. Now Compo is trading at an EV of $1.5B after spinning off RHLD at the ratio of 1 share for each 12 of CMPO.

Many investors know and respect David Cote of Honeywell $HON fame and his subsequent role at Vertiv $VRT. His investment firm bought a large minority stake in Compo, took over the board, and is now spinning out Resolute with him as the CEO.

Using the shares out as of September 2024 that would mean the float for RHLD is ~7M shares. At the current $40 share price that puts the float at a value of $275M.

We haven't seen any pressure from selling yet but as it is a taxable event it's possible there may be some incremental supply. Still people really like David Cote.

CompoSecure reports earnings on March 5th so we will get more information then. Keep an eye on the WhatsApp room for sh0rt-term updates.

CompoSecure $CMPO is a name we covered at SPACvest in 2021 (before we folded it back into IPO Candy). You can still see the original deck here.

Compo makes those fancy metal credit cards. You probably carry one if you're a gold or platinum American Express customer. It's been a durable trend at the higher end of the market to give consumers an "elevated, premium experience." Many prefer the cards for their durability and better tactile experience. There's a "cool factor" as well versus traditional plastic cards.

Metal cards have become mainstream for higher end consumer offerings.

Compo also has been investing in building a digital asset business called Arculus that offers a mix of platform features that could be used by issuers and a cold storage wallet for consumers to store a broad range of digital assets. So far this has been a "platform in search of a problem" but it could be more valuable in time. We do see more current adoption of "crypto rails" but so far Arculus isn't really in the conversation.

Most investors expect that post-spin we will see a more aggressive M&A strategy for CompoSecure and more investments made by Resolute Holdings.

This is a new kind of animal so we'll be studying it and looking for ways to play it.

Given that Cote comes from Honeywell and Vertiv might those investments be more in the industrial and datacenter infrastructure space?

Also of interest here is Blue Owl Capital $OWL and Patria Investments $PAX.