Myspace on the stock market
Give a fast-growing asset some independence. That's what Intermix Media did this week by turning its star property, MySpace. On Thursday, shares of Intermix extended their gains. The stock is up nearly 28 percent since the company was first profiled in this column Monday. MySpace is the latest hot spot. But again, Intermix traded below that level just last week.
As for MySpace, it'll become part of a new, independent subsidiary, with additional funding from Redpoint. Redpoint signed a nonbinding agreement that lets the VC firm invest in a newly organized, independent subsidiary of Intermix.
Under those terms, Redpoint said it would buy a minority stake in MySpace; Intermix would maintain a majority ownership. What's not disclosed is how much Redpoint is investing in MySpace and how much MySpace is valued.
The terms of that deal are expected to be revealed in 30 to 45 days. After all, MySpace has twice as many unique visitors than Friendster had when the social network site was valued. That's assuming the 3 million unique visitors go to the site times, on average.
That would be million page views. Whatever the valuation, Intermix has unlocked value, according to Bill Martin, who founded Ragingbull.
FindProfit, the newsletter in which Martin opines about stocks, accounts for the bulk of the subscriptions. Read below about Martin's undiscovered pick, Tucows. Here's how he sees it: MySpace contributes very little of that revenue pie, said Martin.
By giving MySpace some independence, the company can say the following to Wall Street: And we still have this fast-growing pie worth X, which is MySpace.
For investors who might get carried away, keep in mind that Intermix is barely profitable. MySpace may likely incur larger losses as it builds its business, Martin speculates.
Since Intermix will own a majority stake, it will still have to consolidate those losses on its books. But Martin thinks MySpace can go to Wall Street and spin this tale: Intermix can separate the two.
Getting independence is one catalyst; getting venture capital investing is another. Soon enough, Intermix will get sell-side analyst coverage. Then it'll get a distribution deal, and so on. Another potentially undiscovered and unloved company is called Tucows TCOW which provides services to Internet service providers.
The Toronto-based company has been profitable for the last eight quarters and has no debt. It's now trading at six to seven times cash flow. It has a clean balance sheet and clean story.
It's been widely speculated that Amazon. Today, the Seattle retailer confirmed that speculation. Even adjusting for postal rates, the Netflix deal is "still less expensive," wrote Unemployment rate impact on stock market. You can receive this column via e-mail.
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But unlocking value is one thing, and maintaining it is another. Tucows FindProfit's Martin first alerted CBS MarketWatch about Intermix. You can also subscribe to Net Sense, her weekly commentary.
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