2014-09-15

New gTLD Registry Rightside, Rename It Wrongside?

Stock Chart on Rightside "NAME"
Rightside "NAME" Stock 
When a stock chart looks like this [at left; source: SeekingAlpha], it's usually not good. A trend as shown on the chart may indicate something is wrong--fundamentals, business model, projections, perceptions, performance? I'm not sure. But Thunder Capital Management, a financial blogger who also posts on Seeking Alpha, isn't mincing his words:

Thunder Capital Management: "My recommendation: stay away from the stock or even short the stock."

You can find his full analysis on Seeking Alpha, here's the summary:
  • On 8/1/14, Rightside (NAME) spun-off from Demand Media (DMD). The Company is relying on gTLD growth initiative that might not pan-out.
  • Based on recent purchase multiples, Rightside's gTLDs are worth around $60mm.
  • Rightside has reported two straight quarters of negative EBITDA. Aftermarket services revenue will continue to decline. The existing registrar business has no shareholder value.
  • There is at least 30% down-side in this stock as the Aftermarket services revenue erode.

Thunder Capital Management [TCM] is a former technology investment banker who graduated from the Wharton School according to his posted bio.

Rightside Group, Ltd. [stock symbol "NAME"] is a new gTLD registry as well as a domain name registrar and aftermarket reseller utilizing the following brands according to its website:
eNom, Name.com, NameJet, Rightside Registry.

According to TCM, Rightside has invested in new "gTLDs such as .Rocks, .Immobilien, .Attorney, and .Ninja. Rightside will operate around 30 of them...  Rightside has been growing its revenue base, but EBITDA has been falling quickly. Something must be wrong, right? Should we call this company the Wrong Side because clearly it has become unprofitable. Therefore, Rightside had to spin-off from Demand Media because it was unprofitable and find ways to raise capital to fund this unprofitable business...  If Rightside and its gTLD initiative has big success potential, I question the fact that it withdrew its applications. Why would Rightside withdraw gTLDs and get its cash back if this was such a successful initiative?... There is absolutely no shareholder value in the registrar business... I'll give Rightside credit of $60mm for the gTLDs it owns. If we assume no value for the registrar, $60mm (gTLDs) + $77mm cash = $137mm equity value, implying $7.44 per share. Therefore, there is 37% downside in this stock... There may be further downside if the valuation of the gTLDs is lower. "(source: Seeking Alpha, emphasis added)

You can download TCM's historical financials on Rightside at the TCM website.

As a counter to the conclusions and opinions of TCM, I would remind readers that Rightside has the backend registry infrastructure business of Donuts and the new gTLDs are just rolling out--it's early in the game! Depending on the terms of the deal with Donuts, that business and Rightside Registry's own new gTLDs could be very profitable. In addition, you might want to follow the comments to TCM's post at Seeking Alpha.

Update 16 Sep 2014--there's also a thread discussion here: Rightside Group (NAME) – A Quote And A Chart | Buyside Notes

Domain Names referenced:
rightside.co
enom.com
name.com
namejet.com

Notice: Domain Mondo has no interest or position in Rightside nor relationship with Thunder Capital Management. Note our Disclaimer which appears at the bottom of the web version of this page.




1 comment:

Thunder Capital said...

Please see my new article.
http://seekingalpha.com/article/2539255-rightside-the-sky-is-falling-down

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