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GSI Technology, Inc. (GSIT) Shares Spiking Amid Renewed Acquisition Offer, Activist Pressure

One spike just wasn’t enough. Shares of GSI Technology, Inc. (NASDAQ:GSIT) spiked early yesterday morning following the news that GigOptix Inc (NYSEMKT:GIG) had renewed its pursuit of the company, offering to purchase it for $6.50 per share. This morning those shares have performed an encore, spiking again following a 13D filing by Eric Singer’s activist fund Vertex Capital Advisors, which puts pressure on GSI Technology to accept what the fund believes to be an attractive offer considering GSI’s lengthy history of underperformance and undesirable market position. Vertex Capital Advisors owns 2.35 million shares of GSI Technology, a 9.9% stake in the company, with the fund invested at a cost basis of about $5 per share.

GSI Technology (GSIT)

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New York-based activist hedge fund Vertex Capital Advisors was founded by portfolio manager Eric Singer in 2014. Singer previously managed activist campaigns while with Potomac Capital Management, with a focus on hardware-based technology companies. His successes include winning a board seat at PLX Technology, Inc. (NASDAQ:PLXT) in December 2013 and facilitating a sale of that company, in which Potomac was the largest shareholder, to Avago Technologies Ltd (NASDAQ:AVGO) for $309 million in 2014. Unsurprisingly, he has shown activist interest in companies in which Potomac is still invested as well, including Axcelis Technologies Inc (NASDAQ:ACLS), with whom Singer reached an agreement in March to have two independent directors added to that company’s board.

Singer’s involvement with GSI Technology, Inc. (NASDAQ:GSIT) began in January when he first disclosed the 9.9% position that he holds today. In the middle of March he nominated four directors, including himself, for the company’s board following GSI adding two new directors to increase its board composition to seven members. Those additions were seen as a way for the entrenched board to further insulate its position against Singer’s activist involvement.

GigOptix Inc (NYSEMKT:GIG)’s own involvement stretches back to August 18 of last year when it made an identical $6.50 per share offer to purchase all of the outstanding common shares of GSI Technology, Inc. (NASDAQ:GSIT).  Rather than engage with GigOptix on any level, GSI refused the offer, which was eventually withdrawn in November. Not only that, GSI’s board then proceeded to structure a more than $2 million management compensation plan for the company’s executives in the event it was acquired and they lost their jobs.

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