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Velti plc Message Board

  • stitchntime2013 stitchntime2013 Mar 1, 2013 1:38 PM Flag

    Velti, the more things change, the more they stay the same- why I am holding through earnings

    Not much has really changed with the underlying business in the last few years. Yes, there have been hirings, firings, acquisitions, divestitures etc. but, in reality, not much has changed. Velti is the same company that IPO'd in January 2011. It is easy to forget that this issue is so new sometimes with the daily whipsaw stock movements.

    When Velti IPO'd, there was a lot of hope from the investment community. The IPO was enlarged due to demand and then bid up 30% in the first trading day! This hope has quickly given way to reality. I would argue too quickly but now is not the time for that discussion. For all those believers in 2011 to stop believing to this extent now is truly fascinating to me.

    You see, Velti operates in an emerging market segment, mobile advertizing/marketing. Standard operating procedure for companies in emerging segments is to grow first and figure out the specifics later. Sometimes this works; sometimes it does not. These are high risk, high potential reward businesses.

    One reality that businesses face during the high-growth phase is that scaling businesses is very expensive. Acquisitions are ultra expensive. General and administrative costs balloon quickly when no carefully controlled. In fact, a main point that short sellers focus on is that costs have risen faster than revenues (some post titled "pdate" like “update” without the U, had a clear, cogent short thesis a few days ago, I recommend reading it). The weak balance sheet is another point of attack as all of those acquisitions have traded cash for goodwill. I understand where the shorts are coming from, but I think they are wrong. This is still one of the premier independent companies in a burgeoning space.

    The "pivot" that Velti is attempting to enact in 2013 is mainly to reduce capex and control costs. Yes, they are also refocusing on shifting their business to “quality” contracts, but overall the “pivot” is to make Velti cash flow positive. If Jeff Ross is successful in doing

    Sentiment: Buy

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    • Amen to a great post!
      I would add that Velt should receive more focus as a SaaS company, which ultimately it is. As a company it has valuable information on "who, where, what, why and how long" mobile behaviour. So, even with competitive prices offered by its competitors, Velt has the upperhand for EVERY COMPANY, because Velt can and will deliver!

      Sentiment: Strong Buy

    • Thanks for the great overview, stitch, but allow me 2 counter point. If I had believed the story early on and then enjoyed a return of -85%, I'd have been gone regardless of belief or lack of. Just look at the chart and imagine how painful the numerous failed rallies were.

      Further, shorting every rally has been a great strategy and is why so many millions of shares are shorted - so to that extent the shorts have been right and the longs have been hammered. We hope this is changing and we've seen evidence of what looks like short covering, but I wish I'd been as clever as the shorts were 2 years ago; whether they continue to win going forward is the question we cannot answer today.

      Sentiment: Strong Buy

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