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The Active Network, Inc. Message Board

  • harboursnug harboursnug Nov 4, 2012 1:02 PM Flag

    Trading below book value

    Balance Sheet
    Total Cash (mrq): 78.50M
    Total Cash Per Share (mrq): 1.32
    Total Debt (mrq): 2.75M
    Total Debt/Equity (mrq): 0.81
    Current Ratio (mrq): 0.83
    Book Value Per Share (mrq): 5.73

    Sentiment: Strong Buy

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    • "Trading below book value"

      The lament of many a bagholder. Rather than taking the ACTV debacle as a valuable lesson, bags lash out at anyone but themselves. Ironic that bags are targeting people that have actually done analysis on ACTV. The problems were obvious and there for all to say. One need only look at the torrent of insider dumpage on a near daliy basis since the IPO lockup expired.

      Now here is your lesson regarding your numbers:

      "Current Ratio (mrq): 0.83"

      Do you know what this number means? It means that it's short term assets aren't enough to cover the short term liabilities.

      "Total Cash (mrq): 78.50M"

      With registration fees payable of $72.6 Million - these must be remitted to customers within a few weeks. I.e. the company has almost no cash cushion whatsoever. My analysis is they will need to raise cash soon (i.e. huge dilution at these levels) or will hit the cash wall soon.

      "Book Value Per Share (mrq): 5.73"

      This is a real doozy and not surprising bagholders who can't do any analysis get pasted again and again in these things. Please go to the balance sheet in the 10-Q and note the folloinwg:

      Software development costs: $50.4 Million. Now you may be wondering why historical software development costs appear as an "asset" on the company's books. You would be right to wonder. It is because rather than expense all of this as R&D like most credible companies, they are aggressive and book it as an asset (this inflating their "adjusted EBITDA" that they get bonused on).

      Goodwill: $244 Million. This simply comes from paying big prices for acquisitions - "goodwill" is how much they paid in excess of the actual assets of the businesses being acquired.

      Intangible assets: $69.6 Million. These are similar to goodwill in that they aren't real assets. It's basically what they can convince their auditors what is a legitimate "asset" in acquisitions, and anything over this gets dumped into goodwill. For example in the Starcite acquisition of $57.4M, $22M was goodwill and $36.5M was "intanible assets". That's right bags, a $57.4M purchase price and $58.2M of intangibles LOL.

      Now look deeper in the 10-Q and see what types of "intangile assets" are there. For example in Starcite $17.3M of the intangilbe assets are "customer relationships" LOL.

      In summary, the book value of ACTV vastly overstates the tangible book value as most of it is in goodwill and intangibles. Let's do a real calc:

      Step 1: Take assets of $567M

      Step 2: Deduct Goodwill, software development costs, and intangibles of $364M

      = Real assets of about $203M (propably inflated also as $35M of property and equipment would be liquidated far less than that).

      Step 3: Look at the liabilities - $199M of real current liabilities. (That's right bags ,their total assets are barely more than just the current liabilities).

      Step 4: Add the capital lease obligations and other LT liabilities of $6.2M (ignore deferred tax liability for now)

      So total real liabilities of $205.2M

      Total real assets $203M minus total real liabilties of $205.2M = NEGATIVE $2.2M

      So IMHO the real book value per share is about negative 4 cents.

      IMHO based on some grade 2 math the company is practically illiquid and practically insolvent.

      Keep grasping at straws.

      Sentiment: Strong Sell

      • 1 Reply to bonkthegrups
      • Based on a 10 minute review of 10-Q/K I'd make the following points:

        1) Liquidity. They are not in a position where they are going to have to raise cash. Current liabilities just means the payments are due in the next year (not next quarter) and they really don't decrease unless you shut down the business. There will be new payables in the next quarter.

        We'll call the above your business 101 lesson.

        2) Software development costs. How much did those increase over the year? How much were these costs relative to the R&D? Contrary to what you imply they are not capitalizing substantial development costs.

        3) Goodwill. What can one say? I don't like acquisitions but when you are putting together a software company you have to pay a premium for the parts you are missing. Book value means nothing for a software company but they are putting something together here that might or might not succeed. My question to you is why do you not think that someone else might just be willing to pay a similar premium to acquire them and what would it mean to your short position if they did?

        4) Torrent of insider trading. Yep there was a good deal of selling at substantially higher prices. Any selling lately?

        I get that you are short and you've made a fair amount of money. Good for you; wish I would have shorted it too but you are posting misleading information and I don't think that isn't the right thing to do.

    • dude do your homework

      the cash in not really cash, it's already got a claim against it.

      this company has negative working capital which means it's practically broke

      Sentiment: Strong Sell

    • this is insane

      still 8 is a reach

      7 in bag

      Sentiment: Strong Buy