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For a profile of CMGI, see biz.yahoo.com which will also give you links to a stack of links to wire stories going back several months.
The Profile linked above will reveal that CMGI, which trades about $15 recently, has $7/share in cash. What it doesn't reveal is CMGI's shareholdings in several development stage Internet commerce companies and in other publicly held companies, such as Lycos (LCOS).
The thing to remember about CMGI is that while it is nominally an advertising fulfillment services company, its real value is as a closed-end investment company that specializes in Internet related stocks, and which has a working relationship with Microsoft, which bought about 5% of CMGI for $14.50 in January. While its current regular earnings are negative, from time to time it sells or spins off to its shareholders parts of the growing companies in which it invests, for substantial capital gains.
One example was its early investment in AOL, of which it sold 1 million shares in October 1995, for a realized gain of $30 million.
Another example is its ownership of a majority interest in Lycos (LCOS). When LCOS went public in 1996, CMGI was the principal selling shareholder, and recorded a $19.6 million gain, (about $2/share on todays' 10 million share float).
In June, CMGI announced it would dividend a small part of LCOS to CMGI shareholders. CMGI holders of record June 5 get 1 LCOS for each 16 CMGI, payable July 31. LCOS is recently trading around $16, so that in essence is a $1 dividend for each share of CMGI stock (recently itself at $15). A nice 7% stock dividend.
And CMGI still holds a majority interest in LCOS, which according to a profile at Yahoo has a market value of about $200 Million. So, the 10 million shares of CMGI own about 50% of LCOS, worth $200 million. About $10 per CMGI share. On top of the $7 cash and all the other stuff above.
With the LCOS dividend announcement, CMGI announced its intention to do this same dividend thing from time to time with other of its holdings (which include GeoCities, Blaxxun (formerly Blacksun Interactive), Planet Direct, Freemark Communications, Ikonic, Vicinity, Parable, Silknet, ADSmart, infoMation and others. This is a shareholder benefit similar to something that Safeguard Scientifics (SFE) has done for a number of years.
CMGI took a $15 million pretax gain ($1.50/share) on its sale of NetCarta Corporation in January, and sold its equity interest in TeleT to Premiere Technologies in exchange for cash and 320,833 shares of Premiere, which unless I'm wrong, it still holds.
In first and second quarter of fiscal 1997, CMGI bought back 100 thousand shares of its stock at an average of $9.84. On January 21, 1997, the company sold 470,477 of its common stock, including the 100,000 shares bought for $9.84, to Microsoft at $14.50, representing about 4.9% of CMGI's ownership, bringing CMGI $6.8 million cash.
CMGI is a complex company which, in my opinion is undervalued because it is not easily understood by ordinary valuation terms. Apparently MSFT found it a worthwhile investment at $14.50.
The above remarks are in part paraphrased from the user-friendly format of the 10Q filed last month, which includes management's discussion of the business and its investments at sec.yahoo.com
Doug (long CMGI) |
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