Capital Calls: French M&A risk makes Atos a tricky short

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A woman waves a French flag in Saint-Mande, near Paris, France, May 5 2020. REUTERS/Benoit Tessier

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BEARS BEWARE. In a world of inflated tech valuations, Atos (ATOS.PA) has proved to be a lucrative exception to the rule for canny short-sellers. The beleaguered $8 billion French IT provider fell by 6% on Tuesday after first quarter sales undershot analyst expectations. It follows a failed approach for New York-listed DXC Technology (DXC.N) and revelations of an ongoing audit into two U.S. units linked to potential revenue misstatements. Such bugbears mean shares have slumped by 23% this year, compared to a 15% rise in the STOXX Europe 600 Technology index.

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Even so, those still betting against boss Elie Girard should be wary. Including debt, Atos is valued at just over 4 times forward EBITDA, according to Refinitiv data, compared to peer SAP (SAPG.DE) on 17 times. A rock-bottom valuation may attract rivals, particularly those vulnerable to arm-twisting by the French government if it decides to “rescue” a local tech champion. Last November, telecoms operator Orange (ORAN.PA) denied it was working on a takeover. IT consultant Capgemini (CAPP.PA) is another potential suitor. Atos carries risks whichever way one bets. (By Christopher Thompson)

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