LENSAR Inc

We re-established a position in LENSAR after previously exiting when the proposed transaction with Alcon was terminated. With the merger-arbitrage overhang largely cleared, investors are again evaluating the company on its standalone fundamentals. We believe LENSAR can rebuild the operating momentum and valuation that were obscured during the extended transaction process.

LENSAR was a merger arbitrage trade that was going on for almost the better part of a year. Despite what would be a large share of the femtosecond laser-assisted cataract surgery (FLACS) market, a new FTC under the Trump administration seemed to be pro-merger. However, not even a month after extending the merger, LNSR announced that the deal was being terminated. We exited that position the day after the announcement, but we’re still optimistic that the company could get a second chance at life once management gets back on track.

LENSAR was a recent name that we pitched long near the end of February, calling it deeply undervalued and having many characteristics that were ideal for an outsized return in the coming years. The company’s number of procedures jumped by ~24% y/y between 2023 and 2024, and that was mainly from the drive domestically. Since getting additional clearances internationally in Q3’24, we should be seeing a meaningful uptick in system sales in FY’25, which should fuel additional growth in the international markets. The bright side, we think LNSR should be a standalone company, as the buyout price doesn’t reflect the full value of the company, in our opinion.

LENSAR is positioned favorably following Alcon's announcement to acquire the company for $14.00 per share in cash, which includes an additional non-tradeable contingent value right offering of up to $2.75 per share. This total potential consideration of $16.75 represents a significant 47% premium to LENSAR's average 90-day trading price. The acquisition reflects strong market confidence in LENSAR's business prospects and aligns with the Fund's strategy of capital appreciation through investments in undervalued companies.