* Posts by gtardy

4 posts • joined 4 Nov 2011

Activist hedge fund Taconic ups CA stake


your numbers don't add up

If "CA has a market capitalization of $10.3bn" with "$2.3bn in cash and equivalents and $1.3bn in debt", how do you come to the conclusion that "CA is a roughly $5bn company"?

I am afraid that your numbers don't add up.


Motorola Pro+ Qwerty Android smartphone


This deserves at least 80% given the price!

I found this review a bit harsh.

Granted, 512MB of memory, a single 1GHz processor and 5MP camera is on the weak side given the latest crop of smartphones. The latter point is of lesser importance to me because no phone camera could rival my 12MP dedicated camera (a Panasonic).

But, for God's sake, this is the only Android smartphone with a non-slide QWERTY keyboard like the Blackberry. And given the price - a mere C$350 + taxes (total: C$400 without a contract)! - this is a great deal. Add $25 to unlock, and you are ready to enjoy this unique form factor worldwide! By comparison, the latest crop of smartphones I was referring to earlier cost nearly double (e.g. Samsung Galaxy S II at C$600 + taxes).

The review says one thing right: the battery life is great. One day and a half of intensive use, maybe. But in my normal (less intensive?) routine, it lasts 3-4 days easy.

So, coming back to the above title, if you judge this smartphone on its qualities (e.g. VGA screen, battery life, serious apps and admittedly nothing more than decent performance) relative to its dirty cheap price, I would say it deserves at least a 80%.


Groupon shares plunge: Drain in sight


The bankers who sold Groupon for $20 must have smoked the carpet!

It is only natural that Groupon's share price tumble. A week before the IPO, I had publicly warned of this and set a target price of between $8.22 and $10.25. How did I come to this number?

Well, Groupon has a rather simple business model that can be modeled as: margin x average price of product x number of products sold.

The former is about 40% and decreasing (with large differences in geographies such as China where we are talking no more than 10%). The latter can be estimated from the number of users and merchants, of which no reasonable forecast could explain the IPO price of $20 per share.

In my analysis, I pointed at the small float as a reason for the seemingly high IPO share price. I now expect another huge drop after the IPO lock-up period ends!


Groupon's IPO: don't get too excited about 30% rise


I can't wait for the hype to dwindle and the stock to crash

If "independent analysts such as Morningstar Inc. have valued Groupon at as little as $5 billion", this is for a good reason. And according to my own valuation:

1- poor execution in several key international markets (e.g. ranked #10 in China, #4 in India)

2- fierce competition encouraged by an easily replicable business model

3- a dual-class share structure

4- dubious reasons behind this IPO

For the record, my valuation - based on fundamental analysis assuming Groupon's withdrawal from China and a quick turnaround in other international markets - came to $4.8-$6.2 billions ($8.22-$10.25 per share), still at a premium compared to some other companies such as eConversions (in the UK).

There will always be a debate on the "value" of a company, but I can't resist to give you an extract of my report on the latter two items listed above:

<< A notable risk to public investors comes from the dual-class share structure designed for Groupon's founders to continue controlling the company with 58.1% of the voting power, yet less than 35% of the outstanding shares. In our opinion, this fosters poor corporate governance and should have been avoided.

We also question the reasons behind this IPO. Groupon stated that net proceeds of this offering will not be used to fund operations during the next 12 months. About 85% of the $1,113 million from past private sales of common and preferred stock were used to redeem shares, hence the press's accusation that Groupon is a Ponzi scheme. We expect this IPO to serve the same purpose of transferring wealth from new public investors to existing stockholders. The fact that very little equity is made available to public investors - a common way to maintain a steep valuation in an IPO - reinforces that sentiment. >>

The latter paragraph refers to the float that is so small (Groupon only offered 5.5% of its capital to the public) in order to push up the price per share - following the law of supply of demand. Obviously, every sale of a new block of stock will have the opposite effect.

And when people realize that Groupon has no competitive advantage (thanks to an easily replicable business model) and never manages to turn a profit in the most populous, highest growth markets of China and India, the stock will crash.

I can't wait.