I own about 3,000 shares. However, I am
very confident of this company's value.
At this price of 12 and with 9.9 million
shares outstanding, the whole of CMGI can
be bought at a price of about $120 million
dollars. Now, CMGI's float is only 4.9 million
shares, so the float available is about $60 million
dollars. With such a thin float, it does not
take a lot to move the price up a lot and down
a lot. Witness the volatility, when news came
that Microsoft bought netcarta for 20 million
and bought an additional unissued 5% of CMGI for
about 6 million dollars, CMGI went up almost
40 percent in a week. (Granted that this is
negligible to Microsoft's fat cash, it still
indicates that Microsoft saw value in CMGI at a
price of 14 --their purchase price -- as you all
know, Bill Gates is known for flying coach despite
his wealth, and he is known to be very careful
with his investmentsm he kept their 8-10 billion
cash position steady, having the discipline not
to make any silly purchases.) From 20 it went
all the way down to 12 during this correction.
Well, if you look at the float available, it is
not so hard to manipulate the price with your
purchase and sales pattern. With 60 million
dollars (not much in these days of mutual funds),
you can buy the whole company's float!
So, the first step after you become a CMGI shareholder
is to ignore the fluctuations in the stock price in
making your decision to hold the stock or sell! So
now, what do you use to guide your decisions? You have
to value the whole business. Let's take a look at
the following breakdown:
Total market value of CMG at today's stock price of 12 = $120M
Let's Break down CMGI's balance sheet:
8+ million shares of Lycos (source: Feb 14,1997 SC13G, dailystocks.com) at Lycos price@14.00/share - $112M.
Say Lycos is overvalued, then let's use the book value@4/share
then this is worth - $25M. The intrinsic value is probably
somewhere in between, say $7 dollars, then the stake is
still valued at $56 million dollars.
Cash Position of $73M. Current Assets less all liabilities (the
total of current and longterm liabilities ) - $25M. Book Value
is $53M.
41 Percent of GeoCities - a Website with 500,000 homesteaders,
with initial seed financing now totalling about $12M. So 41%
of the seed funding is about $5 million dollars. This website
gets 1 billion + hits a month. What is this worth? a Piper Jaffray
report I once saw that GeoCities is valued at $50 million back in
June 1996, before the funding of the $9 million dollars. So let's
say it is now worth $50 million at the most conservative case then
the stake is worth $20M.
So, at the worst case:
25M(8M shares of Lycos at book value) + 25 million (CurrAssets-TotalLiab.)+5 million (% of Geocities using
initial seed funding of 12M as the total value of GeoCities) = $50M
for just these three items.
Then we have Pacific SalesLink which CMG bought for $17M.
Then we have 100% of Black Sun. How big could this be?
Let's add them up:
At worst case, Lycos stake + Net-Net Current Assets + GeoCities=50M
Pacific Sales Link=$17M
that leaves (120M-67M=53M) for the rest of the companies:
Then there's the rest:
60% of Ikonic Interactive,100% of PlanetDirect, 100% of Adsmart, 100% of Engage, 40% of Parable LLC, 40% of Vicinity, 38% of Silknet, 100% of Infomation, and then 100% of its mailing list division.
NOW, let's think now. Using our worst case scenario.
We valued the entire Lycos at $40 million, the entire GeoCities
at $12Million. Do you really think it only takes this much
to build lycos and geocities ($52 Million=40M+12M)? What about
the brand name of lycos and geocities? Both of which add up
to about 2 Billion Hits a month.
At this price of $12 per share, CMGI really looks like a steal. |
