Citron clearly doesn't understand that people are stupid. It may be unbelievable to you that people check out reviews from doctors online, but that #$%$ happens. Also, just like any other subscription model, I'm sure there's a lot of inertia even if people are dissatisfied with the service.
Citron also doesn't address a central issue with Angie's list: the inflection point a market hits when it becomes established. They report it every quarter in the 10Qs/10Ks. All their losses are from markets they've entered in the last 5 years while the mature markets are very profitable. There's also a ton of operating leverage from these markets once you become established because you basically don't have any increase in marketing cost once you've passed a certain penetration rate.
I looked over the citron report, and I didn't find it completely compelling. First off, their presentation was kind of unprofessional and unbusinesslike, and their main argument is that Angie's list is not an independent rating system and not liked by its users.
Here is what I take issue with: there is minimal discussion of finances. Despite being disliked by customers, they have money coming in. There should be discussion of churn (customers quitting vs joining) and there should be discussion of the price structure for what both businesses and people pay. Neither were presented, unless i missed it.
The arguments that were presented could have been applied 5 months ago, at which point one might have shorted at 13 dollars and then been royally screwed. What is it about the company now that makes it a more compelling short? They haven't addressed it. The stock isn't moving in the direction that they predict, and so I am wondering if they have missed a factor.
I'm looking to short this stock. I just don't think now is the time. I believe that a lot of shorts here may have the right idea, but are 2 months too early. When it hits 26 or higher, i'll be entering a position. If it doesn't hit that and starts to nosedive past 20, perhaps I'll jump on board. But for now? Everything about this stock seems to say more short term upward trend.