Perion trades at 6x EBITDA, and Babylon trades at 3x EBITDA. Both of these are very challenged businesses.
We believe IAC will face similar challenges. Even if we give them the benefit of the doubt, this is a 6x EBITDA business. Without this channel, EBITDA drops to $160 million, and applying a 6x multiple gives a value of $960 million. The company has $200 million of net cash so the total value would be $1.16 billion. The current market cap is $4.7 billion so there is a 75% downside risk to IAC that has not been realized by investors. We believe a fair value for IAC is $14. There will also be knock-on effects from slowing cash flow that will affect other lines of business that are funded by their search division. If IAC is unable to finance their expenditures using ill-gotten gains, then IAC will be forced to cut investment in areas like other segments which will further reduce growth and apply pressure on their growth thesis. Like Babylon, IAC is at risk of losing three-quarters of its market cap overnight.