Internet Business Share Discussion Threads

[valustar1] 25/4/2007 09:56

very interesting AGM yesterday.

Not much to add on the strategic review as all covered above.

I did get to ask one question afterwards to Maz who confirmed that the USA has broken even as expected in Oct/Nov time.

On the PR front explaining more about the USA would help.

Although Maz is obviously very excited about opportunities elsewhere the City likes transparent easy info and there must be a very good story USA side building that would help. Not much mention of the USA in announcements recently.

One thing that is interesting is that the ground work on the strategic review has allready started. I guess they will decide on the best option and then announce not the outcome of the review but that they have put in place that option.

Things could move quite fast.

[old boy returns] 25/4/2007 09:43

Thanks to those who attended the AGM for their feedback. It certainly helps me to understand the situation. Reading between the lines I suspect Stemis has hit the nail on the head with the following. Maz and the other key directors must have most of their wealth tied up in IBG and so embarking on a big expansion financed by debt (I think £20M was mentioned earlier) would be extremely risky for them personally as if it failed their personal wealth would be decimated whereas if it could be financed by new equity at, say, 50p a share failure of the new venture would have a much more modest impact on their fortunes. I am completely with them on this prudent appraoch and one of the attractions in holding a large number of IBG shares long term for me has been the fact that the directors' wealth is pretty much tied up in the value of those shares. The institutions may not like the structure but I feel a lot happier holding shares in a small cap where the founder CEO has 30% of the equity and a modest salary than one where he has 0.5% and a huge salary, bonus etc.

"Clearly such a strategy would involve an increase in risk and maybe Maz's financial prudence is such that he is wary of going this alone with the current capital base of the company.

I suspect in these circumstances they've decided to have a look to see what the company is worth now. If someone offered them silly money (and the recent corporate activity in the sector could lend some credence to that), maybe they'd think it better to cash in now and realise their ambitions for the business with a bigger partner.

...

I guess I trust Maz not to do anything silly. As he says, most of his personal wealth is tied up in IBG (and I guess the same for the other directors) so he isn't going to give it away for 40p if he could hold on for double that in 3 years."

[stemis] 25/4/2007 09:26

I don't know if one of the problems is the lack of information/publicity on IBG. I guess most of us who've grown up with IBG on this board assume that its not too difficult to understand the basic IBG business (even if not all the bells and whistles). Clearly that's not the case.

The accounts are very superficial and IBG are obviously constrained by their nomad in putting out information which is not specifically price sensitive. As PIs we never see the Altium research so its hard to judge how good (or bad) it is. There is little on the web site to really help. Maybe IBG could do a newsletter. Its an irony that a company involved in internet marketing seems so reluctant to market itself!

[spacecowboy3] 25/4/2007 08:42

I attended the AGM yesterday and would echo the Analyst's and Aleman's comments. Maz's message seemed to be as follows.

1) The Board have seen a new opportunity which, if successful, would make a very material difference to IBG (i.e. it's not just an incremental improvement on the current business).

2) Their problem is that they can't finance this opportunity (whether by using their paper for an acquisition or by issuing shares to raise cash) at the current shareprice without having a detrimental effect on short-medium term EPS growth. It was implied that if the share price was 'where it should be' then this would not be an issue, or at least not a major one.

3) They are thus very frustrated since they seem to be in a situation where the market's reluctance to give the current business the rating it deserves is preventing them from going for this new opportunity.

4) They have therefore initiated this strategic review to look at all the options open to them. These include -

a) trade sale of the company
b) MBO (I specifically asked about this, Maz said it was a possibility but definitely not a front-runner)
c) forget the new opportunity, carry on with the existing business and wait for the share price to catch up
d) go for the new opportunity and try to convince shareholders that a short-medium term EPS hit will be worth it for the enhanced long-term business.

5) They expect the strategic review to be relatively quick - 2-3 months at most.


My observations -

* I was surprised that they seemed prepared to accept that the current rating was just a fact of life that, in spite of their efforts, isn't going to change

* As someone pointed out, there is a huge difference between the very bullish commentary in the prelims and Monday's statement. It was difficult to avoid the impression that something changed between those two dates. Just to be clear, however, Maz and co still seemed very bullish about the current business - there was no indication of any problems with current trading.

* I don't think this is intended as a precursor to an MBO - Maz said that option was not the front-runner and I don't really see that it would be a solution to their problem.

At least we should know the outcome fairly quickly.

Good to meet SteMis, Lord Buffet and Aleman yesterday.

[yump] 24/4/2007 23:03

the analyst

"but a good example is the huge amount of work Nick Robertson has put into PR and gaining institutional support. It's certainly paid of for him imo."

Bizarre how you can get a rating like ASC using good PR for the men in suits, while at the same time bungling the PR for the people who helped you build your business.

Somewhat disillusioning, and a lesson in why one should remain cynical, but a way of the world I guess !
;-)

[aleman] 24/4/2007 22:37

Lord Buffett led the charge to the pub even if I was ahead of him. I'm not so keen on midday drinking because the diners slow the service down!

I was puzzled by the meeting. I left under the impression that there still seems to be very good growth ahead but there was clearly potential for much more at a cost that the board were not prepared to accept at the moment. It is the detailed reasoning behind this that seemed difficult to convey. Debt would supress eps for a while and shares would bring dilution unless the shares pick up some time soon to come into line with peers. I think debt might be okay myself if you could forecast even more years of stellar growth but the board don't seem happy with the thought it could keep the shares down until new revenues made up for the interest. There could be a differing views on this depending on how many shares and options were owned.

I fail to see why the institutions are so important to the shareprice myself. The usual argument is that they raise and stabilise the shares but that is not my experience. I have seen them get preferential access to discounted shares at fundraisings and then sell some early to lock in a bit of any good performance for their quarterly or annual performance figures. (I don't think Cornell's involvement was popular for long.) Institutions also sometimes aid the shorting industry by lending shares out for a fee. Shareholders trading in nominee accounts should be aware that their shares are sometimes lent out so you are getting undermined by your own broker for a painless (for them) quick buck. Does anyone know if it is possible to short IBG at all? The share price fall on short term technical reasons has not surprised me except it has been slightly worse than I expected with higher volume. I have been presuming IBG was too small to get extra sell volume from shorting but I could be wrong.

I'm rather tired tonight and would appreciate more input from others. (Thanks, the analyst. It's a shame we didn't get a chance to chat.) I am vexed on several issues and regret the lack of opportunity to ask more about how the bits of the business were doing. Can we go back to 2 or 3 shareholders next year, please? I don't feel too worried about the shares in the short term since the strategic review was expected to take 2 or 3 months and there should be interims in about 6 weeks which we are told will be in line with only a week left of H1. I don't plan to sell mine as we could end up with a bidding war potentially with all the consolidation in the industry, although that could be a short term gain at the expense of a bigger one lost in the longer term. I take it from the rise in the afternoon on a bad day for lots of other shares that the market did not particularly disagree with my wait and see attitude.

[liarspoker] 24/4/2007 20:38

Another BERKSHIRE?.....'nough said. :O)

[hirschnathan] 24/4/2007 20:34

Another BOOTS?....LOOKING AT £11.00 For starters maybe

[guythomas] 24/4/2007 20:27

Another QXL?..LOOKING AT 100P For starters maybe

[the analyst] 24/4/2007 19:49

Yes, hirsch, I think Maz is a brilliant man and has done a great job too. I have a huge amount of respect for him.

I agree with you on the PR front, though. He can't do everything and good PR takes an enourmous amount of time if it is to be done correctly. I'm not sure if you follow ASC, but a good example is the huge amount of work Nick Robertson has put into PR and gaining institutional support. It's certainly paid of for him imo.

The funny thing is that it seems that Maz is the most frustrated out of all investors with the low share price. Yet he's looking at a possible sale instead of improved PR. I'm puzzled by that move and I think other investors are too.

Right, I really must stop posting, don't want to bore too much more than I already have.

Back tomorrow...

[the analyst] 24/4/2007 19:41

I think there are a few more than that floating around Ken. A lot more are in nominee accounts. For example, the TD Waterhouse holding will be mostly held by PIs that can buy or sell without the market knowing. My shares are in that account.

[hirschnathan] 24/4/2007 19:38

Ta

I have been told off in the past by Maz for being critical about ibg. My response to him was that his vague rns are of little value.

For eg, the statement where maz said that 2nd half would kink in the profits, you could either imply that first half is going to be rotten, or like we now know that the yoy growth will be seen in the first half as well, but the travel sector, af main profit will only kick in 2nd half.

Maz has led the company great guns, he's conservative, doesnt splash money, has tight control over everything and most things seem to be working to plan, but I think he could do with a replacement in regards with his the pr side of things

[kenatbabken] 24/4/2007 19:26

Stranger things have indeed happened,What I can,t understand is the high turnover of shares when there are only around 27 million floating and the sellers prepared to take mid 20,s even at the close today there were 2 sells

No I did,nt attend

[the analyst] 24/4/2007 19:12

lol!

I wouldn't be best chuffed either, Ken, but even a 50% return over two years is a fantastic yield for many investors that have bought at 20p. I must say though, I'm certainly not expecting the price to still be that low by late summer, let alone 2008. Stranger things have happened though.

If it is 30p in June 2008, then I'd say your overall annual rate of return since you first bought would still not be bad!

Did you attend? I think your name was mentioned by Maz.

[yump] 24/4/2007 17:55

IBG had the same relative lack of inst. support before the dgm problems though I think ?

So perhaps the initial selection by the institutions that are interested in this market sector originally happened to choose the wrong company to invest in (this imo probably would have been because of the level of 'corporateness' in the presentation of the companies - which has been apparent from both TD and DGM's spoutings).

Now that their first investment in an aff. network company has gone badly wrong, it is understandable that they might not be very keen to have another go. Especially if they were a little hazy about the exact nature of the business.

Possibly the shareholding % and control may have had an influence as well ?

[hirschnathan] 24/4/2007 17:41

Blackster

I am reposting for the fourth time, I asked maz and his reply was that since af is now big into travel, the first half only has 1 travel month (Jan) the second half has May, June July & Aug, so its 4 versus 1.

[the blackster] 24/4/2007 17:36

The institution issue will be coloured by the dgm story. dgm had and still has some sizeable institutiuons on board and the stock went from 24p at its height to 1.8p at its nadir. Now at 3.7p its still undervalued and well off where many institutions would have come in. At 30p ibg is maybe 30% undervalued at the max and that's probably a better deal for a complementary business who wants to get into this space rather than an institution who's got one eye on the dgm story. IMO.

By the way - did anyone at the AGM get a steer on that seasonality issue in the results - I couldn't understand that either considering the first half has some of the big end of year months in it. Ta.

[muffinhead] 24/4/2007 17:19

Ken...can you make an offer to get the show on the road

[the analyst] 24/4/2007 16:26

Yes, reggie, Ken, that's what a lot of the discussion revolved around. People were really confused as to why they were having so many difficulties getting institutions on board.

Did either of you go?

I should probably log off now and let others discuss the meeting in more detail when they get back to their keyboards, I don't want to create an entirely biased view of the AGM based just on my opinion of it all.

Cheers

t.a.