I have been reading your post on
and off for many months now. First, I want to state
that I no longer hold a position in the company, but
it has made me sufficient money. I purchased near
the lows in the fall of 1996 and sold at prices as
high as $80.
Here is the major issues I have
with your valuation:
1) CMG Ventures owes about 20%
of the upside in their investments to the management
of the funds. This should reduce your value on
investments like GCTY and LCOS among others.
company has terrible tax structuring. As they realize the
value of their investments, especially companies held
in the Ventures subsidiary, they will have to pay
significant taxes - 35%.
3) Holding companies tend to
trade at a 20% discount to the underlying
In my analysis below, I have used your (Brad's)
numbers on the various individual
Publicly traded assets:
- 9.8 mln sh@ 20 7/8 = $204.5 mln
LCOS - 8.0 mln
sh@ 25 7/16 = $203.5 mln
HLYW - 5.0 mln sh@ 12
7/16 = $62.2 mln
AMZN - 225,000 sh@ 86 1/4 = $19.4
USWB - 330,000 sh@ 10 1/4 = $3.4 mln
value right now = $493.0 mln
Silknet - 24% ($60 mln. est. cap in Bus. Wk.) = $14.4
Softway - 9% = $5 mln
Vicinity - 50% = $20
Visto - 18% = $10 mln
Parable - 42% = $20 mln
various others w/ huge potential = $100 mln
Value of Private assets: 169.4
Less 20% Mgmt Carry: 132.4
Less 35% Tax: 185.5
Total @ Ventures:
100% owned Assets:
OMKT - 1.3 mln sh@ 10 1/4 =
Engage/ Acc. - 100% ($300 mln. est. cap in
Bus. Wk.) = $300 mln
Planet Direct - 100% = $150
Navisite - 100% = $100 mln
SalesLink - 100% = $150
CMG Direct - 100% = $15 mln
Total 100% owned
@Ventures + 100% owned: 1,072.7
Discount for holding company structure
$858.4 ($37.50 per share)
My investing strategy
looks for companies with a potential to return 100%
within 1-2 years, and I don't see that in CMGI anymore.
I look forward to your reply,
If you believe in the bullshit valuation with tax
against CMGI assets, then whenever CMGI is above 37,
short a lot of them but you should be aware of the
float number from SEC initial filing and SEC 144
If you are long, then you can have more confidence
obtaining the report from Pres. Advisor Ira M. on
growth of Internet sector, and how it contributes to
If you own CSCO, you should look
at what kind of expansion
CSCO applied to the San
Jose Planning commission, then
figure out how many
more employees CSCO will add. Next,
revenue per employee to see the revenue growth.
next 5 year. It will blast your mind.
So, when I
analyze something, I just don't look at one piece
information as there are many pieces of information to
It's an investment board for CMGI, so you should
CMGI got their revenue. The major revenue
for them came
from the sale of equities in LCOS,
and other holdings.
And, they did not pay any tax
on the gain they got.
How, you should figure it
Any way, not all the stock sale can be treated as
gain nor loss, especially when you are day traders,
are qualified day traders under IRS eye,
they have a special
provision to treat the
transactions as business transactions.
So, a lot of rules
applied to the equity investments would
not apply. I
knew a lot more about IRS rules than you did
file the returns but to take advantage of the
holes and their interpretations.
i didn't say that they did or didn't pay tax on
lycos - maybe they had enough costs to offset that
gain. what i am saying is that if you chose to value
the company based upon its portfolio you would do so
after tax - so if the portfolio is worth $1B, the
potential tax is $.4B, so the company should be worth $.6B.
i don't care if you value this way or not - if you
do, then this is the way that it is done by numerous
as to the rest of your message
i don't know what you are talking about. i know of
what i speak, so try to keep an open mind.
So, Did CMGI pay any tax on LCOS gain ?
course not. I challenge you to find the proof
CMGI pay any tax on LCOS gain or gain from
Your knowledge about tax is for individual
most of the time, but the investment vehicle
have many ways to diverse the gain.
Any way, did
you make any money in investment by looking
tax that CMGI has to pay down the pipe.
time, may be capital gain tax has been abolished.
i didn't say i was valuing the company. i'm just
trying to straighten out your understanding of the
company's tax posture. when you look at public companies
that hold investments, oftentimes they trade close to
the after tax value of those investments. if this
trades differently then fine, but you brought up the tax
issue, not me.
again, if they sell a stock and
have a gain, they'll pay tax. if they reinvest the
proceeds in a new stock, they don't get a tax deduction
UNTIL they sell the stock. there isn't an immediate tax
deduction when the amount is reinvested. they cannot delay
gain by reinvesting proceeds.
I looked at the income statement of CMGI from the
report, and they turned their sale of investments
revenue and the investments in the new companies as
cost of revenue. So, the gain in one company will
the investments in other companies. In a few years,
already accumulated over 20 holdings. Whenever they
off GCTY, there will be more new companies under
If you believe the stupid valuation of ARIFF, then
stock as it is overvalued. Valuing an
is not a simple task, and it is even
harder for a pure
momentum one like CMGI.
want a value play, then you don't see any thing in
Internet stock. I don't care much about the tax issue
long as CMGI does not pay any tax, and turn that
into the investment to delay any gain down the
Someday, may be the end of the universe,
decide they want to pay their due, but
I'll be out of
CMGI by that time so who cares.
Many people who buy
CMGI might not keep it longer than a week
time to enjoy their champaign and caviar. You
worry about the tax for yourself.
Looks like you all could use the services of a
good tax accountant. It would seem logical that before
you invest your hard earned money that you would know
how that investment is valued. Or are you all DEMAND
and MONENTUM DRIVEN market specialists. aka THE BIG
MO and/or THE BIGGER FOOL THEORY of INVESTING? Help
me out here, you'all.