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ModusLink Global Solutions, Inc. Message Board

  • ariff1 ariff1 Sep 7, 1998 7:20 PM Flag

    Brad: Valuation Issues

    Hi Brad,

    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.

    2) The
    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

    @Ventures Companies:

    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

    Privately held

    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

    Total @Ventures
    Assets: $662.4
    Less 20% Mgmt Carry: 132.4
    Less 35% Tax: 185.5
    Total @ Ventures:

    100% owned Assets:
    OMKT - 1.3 mln sh@ 10 1/4 =
    $13.3 mln
    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

    Less 20%:
    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,

    Ariff Alidina

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • wrong again, my friend. stick to investing, i'll provide the tax advice. your messages reak of shit.

    • It made me laugh all the ways !

    • Overhang is a more important issue with the price action.

    • 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
      economic growth.

      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,
      calculate the
      revenue per employee to see the revenue growth.
      in the
      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
      the projection.

    • It's an investment board for CMGI, so you should
      know how
      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,
      and you
      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
      not to
      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
      other companies.

      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
      at the
      tax that CMGI has to pay down the pipe.
      By that
      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
      short the
      stock as it is overvalued. Valuing an
      Internet stock
      is not a simple task, and it is even
      harder for a pure
      momentum one like CMGI.
      If you
      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,
      they might
      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
      at this
      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
      me out here, you'all.

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