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Asked to comment about the reports, Lightspeed pointed ºÚÁϳԹÏÍø to its Wednesday statement, which noted it has long had a policy not to comment on "market rumors" and "does not intend to issue or disclose developments" unless required to by regulations.

The rumours pushed Lightspeed shares on the Toronto Stock Exchange up 12 per cent midday Wednesday, but they were up only modestly on Thursday.

While reviews are common across businesses and carried out periodically at Lightspeed, many investors interpret them as a prelude to a sale.

Lightspeed's review comes as the company is marking a new chapter focused on profitability — a priority founder Dax Dasilva has emphasized since he returned to the role of chief executive earlier this year.

Dasilva, who handed off the top job to JP Chauvet in February 2022, was reappointed to the role on a permanent basis in May.

When he returned, he faced a valuation that is "heavily discounted" because Lightspeed is "underperforming" its peers, said Todd Coupland.

Yet the CIBC analyst felt the company's recent efforts would "meaningfully improve" its revenue growth, making it more attractive to investors and potential acquirers.

The efforts Coupland was referring to include Dasilva's work to boost the company's bottom line in part by uncovering cost efficiencies.

Under his watch, the business cut about 280 jobs in April, shifted its sales summit from an in-person format to a virtual event and reduced how many days staff work from the company's offices in order to decrease bills associated with feeding employees.

Dasilva also promised to accelerate software revenue growth and advance the adoption of Lightspeed’s financial services products.

Back in March, he even said he was open to the possibility of taking the company private.

Given Dasilva's musings about going private, the review Lightspeed is carrying out "is not entirely surprising," said Richard Tse, a ºÚÁϳԹÏÍø Bank analyst.

Also likely fuelling the review is Lightspeed's realization that it's "challenging" to keep growing its merchant base, especially because the company has fixated most recently on targeting "complex" clients, he wrote in a note to investors.

These clients tend to subscribe to more services or have higher location counts, making them more lucrative than small businesses.

If Lightspeed pursues a sale, Tse estimated it might be able to land between US$18.50 and US$21.30 per share.

The most likely suitors, he said, would be "legacy" software brands like Clover, NCR Voyix, Global Payments and Intuit, but newer firms like Toast or Shift4 might also be interested.

"Given Lightspeed’s recent focus on profitability with a more disciplined approach to capital efficient allocation, we wouldn’t rule out potential private equity interest as well," Tse wrote.

This report by ºÚÁϳԹÏÍø was first published Sept. 26, 2024.

Companies in this story: (TSX:LSPD)