Cupid…the telephone number question

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On Friday I executed a volte face on online dating agency Cupid (LSE:CUP). I had tipped the stock but advised readers to sell and go short. Those who followed my tip on my Nifty Fifty website to buy at 185p would have sold at 112p losing 63p. Going short at the same price they would now be 63p ahead as the shares closed Friday at 49p. They have got their money back. But they will end up making money as this stock has a lot further to fall. In my view the potential downside per share is almost 49p.

If you did not get the call at 112p first thing on Friday but got the call at a lower price a bit later that is because you read me via a free service. Sorry: those who pay a subscription get my calls first. Subscribers to Nifty Fifty learned the value of that with Cupid on Friday.  If you pay nothing you do not get the premium product. You can get more details on my Nifty Fifty product here.

And so what of Cupid now? The company’s statement that it has commissioned an independent investigation into allegations in the Kyiv Post is dismal. Surely it knows full well whether the story is true or not? Why not name which big four accountant is doing the study? Are we really being asked to believe that senior managers had no idea about what is alleged to have gone on in the Ukraine? Meanwhile questions are now being asked about some quite amazing related party transactions involving CEO Bill Dobbie. And I have another question:

The churn rate on Cupid customers is high. It says that is the nature of its business. Ok. Whatever. But the way that Cupid operates is that when you sign up a monthly payment is automatically taken from you unless you follow a set procedure to cancel. That procedure includes making a phone call to a 0845 number and I am told that these calls can take up to 15 minutes to complete.

And so my easy peasy question for Cupid is “How much revenue and gross profit did you make in 2012 from this 0845 telephone number in 2012?” If the numbers is small that is one matter but if the company is making a large amount from customers who simply do not wish to use its service it strikes me that this is an unsustainable business model.

I am not sure what will be the final reason for Cupid’s downfall: customer revulsion or investor revulsion but it strikes me that this business now has no future as a public company. I am not sure of the timetable but this is heading a lot lower than 49p

Tom Winnifrith writes for 10 US and UK websites. You can get links to all of his articles by following him on twitter @tomwinnifrith

His premium service by the team that delivered an average gain per tip of 42.7% in 12 years at t1ps.com (himself and Steve Moore) and now featuring infamous bear raider Lucian Miers is the Nifty Fifty. You can access it HERE

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Comments

  1. Stalker52 says:

    I take it fatboy as still got his short open?

  2. miffy23 says:

    Hope you can back this up? Wouldn’t want another sefton scenario.

  3. Brando says:

    Are you very very sure match.com owners are not going to capitalise on this crash in the sp and launch a hostile bid?

    To call this so badly wrong once, would be clumsy, to call it badly wrong twice, would confirm you as something of a muppet.

  4. Dan

    I know you have my best interests at heart – your comments are so uniformly sympathetic. So far call 2 seems spot on the money. Yes owners could launch an MBO but somehow I doubt it

    Tom

  5. Stalker

    If you refer to EK – he has posted as much on BBs so I assume so too

    Tom

  6. That it uses an 0845 tel no? Yup of course – go to its site.

    So I merely ask the question. That is not libellous

    T

  7. Paul C says:

    I have sent the information you have published to Cupid as I think they may be interested in what you are posting. Also the FSA will be made aware of your strong opinions on this company. Perhaps it would be better to bring your findings to a regulator rather than encourage people to short the company. If you are correct then it would have been better to go through the correct channels.

  8. Rosie says:

    If you calculate the 2012 revenue using ARPU and average subscribers, this is just slightly over the reported revenues:
    ARPU X 12 X subscribers
    = £12.67 X 12 X 533,000
    = £81,037k
    Reported revenue = £80.9m
    So Tom, tell me, where is this money they’re making from an 0845 number? This is not the sort of argument I’d expect from a City Analyst.

  9. And so in your Orwellian world when a journalist has a strong opinion or, in this case, asks a question he is not meant to publish but is instead meant to send opinions to a State run regulator? Jeepers, Airstrip One indeed.

  10. damien says:

    dont get the 0845 angle its a local rate number
    caller pays the same as 0207/8/3
    0845 numbers are just used for filtering moner than one call etc

  11. Nathan says:

    The 0845 argument is one of the most ridiculous things I have read.

  12. Nathan says:

    It seems that in the US, now Cupid’s biggest market, the number is a toll-free 1-800 number

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