BAD NEWS>Theglobe.com Web Traffic in Question
J. Michael Pinson
MarketMavensReport.com
pinson@tfc.com
Posted on Wednesday, November 25, 1998 at 08:28 AM
Theglobe.com (NASDAQ:TGLO $40 1/2) reported on
Monday evening, November 23 that the number of unique users
visiting the company's Web site grew to 7.5 million during
October 1998. However, according to Media Matrix of New
York, an Internet audience measuring and market research firm,
theglobe.com had only 2.56 million unique visitors for October,
not the 7.5 million reported by the company. The term "unique
visitors" means that even though a person may enter a Web site
ten times during a month, that person is counted only once.
According to Susan Hickey of Media Matrix, theglobe.com
subscribes to the Media Matrix traffic reports as a commercial
client and is aware of these lower traffic numbers.
I spoke with Esther Loewy of theglobe.com who stated,
"…ABC Interactive has certified that we had 7.5 million visitors
in October." When Ms. Lowery was asked for ABC Interactive's
location and telephone number she added, "…they will not
disclose the traffic to you." Although Ms. Lowery could not
recall the telephone number or even what city ABC was located
during the initial interview, records show that ABC Interactive
is located in new York.
Thegloble.com filed with the U.S. Securities and Exchange
Commission on November 12 on Form S-1 that "…ABC
Interactive, an auditor of statistical information for the Internet
industry" has provided audited web traffic reports to include the
report of 7.5 million visitors for October.
According to Vicky Norris of ABC Interactive, Inc., "We
cannot confirm or deny the traffic numbers that theglobe.com is
representing." So, how can a public company tout Web traffic
numbers that are three times higher than the Media Matrix
report? How can ABC Interactive, as an independent Web
traffic rating agency, refuse to confirm their own web traffic
number? It is a bad thing when an independent auditor refuses to
confirm if the traffic report even exists at all.
Theglobe.com admits that they do not even have a copy of the
ABC Interactive traffic report in their possession. Nor is ABC
Interactive willing to admit that report even exists at all.
According to the Theglobe.com, the only copy of the audit
report resides at the law firm representing theglobe.com.
Neither the company nor their law firm had faxed a copy of this
independent audit report to our office for review as requested.
The story was held over to provide additional time for
Thegloble.com to respond. However, the company had not
supplied a copy of the ABC Interactive report, and had not
further comment.
Earnings Report
Theglobe.com (TGLO) released its earnings last Monday on the
Business Wire news service after the market had closed. The
day before the earnings release, the Miami Herald had stated
theglobe.com's third quarter earnings in a cover story that was
published on Sunday, November 22. So, how did the Miami
Herald obtain the company's earnings before they were released
on Monday evening to investors? Most likely by means of the
company's SEC filings which can be found on the SEC's
EDGAR Web site at www.sec.gov. According to SEC records,
the company had filed an SEC Form S-1 containing its revenues
and earnings for the six month prior ending June 30, 1998 and
the nine month period ending September 30, 1998 on November
12, the day before going public. All anyone had to do was
subtract the six-month sales and earnings from the nine-month
figures and there you have it- the third quarter earnings report
with over $5.6 million in losses for the quarter. Investors didn't
need to wait until November 23rd for the company to issue a
press release reporting they're third quarter earnings to find out
how theglobe.com was doing. So a select few who know about
the S-1 SEC filing actually knew the third quarter earnings
report that was officially released on 11/23, the day before the
Initial Public Offering on 11/13.
The company reported that revenues for the third quarter ending
September 30, 1998 were $1.6 million, compared with $0.2
million for the third quarter of 1997. On a sequential basis, this
compares to $0.8 million for the second quarter 1998, an
increase of over 100%, and $0.4 million for the first quarter of
1998. The growth in revenues over the preceding quarters and in
the third quarter 1997 is due to an increase in the number of
advertisers and the average commitment per advertiser.
Gross profit in the third quarter was $0.9 million versus $0.5
million for the second quarter 1998 and $0.1 million for the
third quarter 1997. Operating loss for the third quarter before
non-recurring charges was $4.3 million, compared to $4.1 for
the second quarter 1998 and $1.9 for the third quarter 1997. The
company reported a total net loss for the third quarter of
$5,689,000, including a non-recurring charge.
Regardless of the conflicting reports about theglobe.com web
site visitors, the bottom line is, how can Wall Street justify a
market value of over $420 million for a company that is
grossing less than $6 million per year and has no earnings?
There is no doubt that investors are looking at the Web traffic
growth pattern reports in anticipation of future earnings.
However, which web site traffic report is accurate? At this
point, investors should only rely on the Web traffic reports from
Media Matrix, which is willing to stand behind its report.
Especially since theglobe.com cannot seem to produce a copy of
the ABC Interactive report and ABC refuses to confirm its
existence.
More importantly, investors should remember to check the
SEC's EDGAR Web site for the filings of any company in
which they are considering investing. These filings can be
invaluable in making investing decisions. Theglobe.com went
public on 11/13/98 at $10 per share. The common shares soared
to $97 per share this first day of trading and then fell to $47 per
share within days. If investors had read the S-1 filing at the SEC
web site the day before the IPO on 11/12, they would have
discovered the third quarter earnings prior to their release to the
news wire services on 11/23. On fundamental value only, the
stock rates a sell recommendation at best. Speculative investors
certainly may wish to consider selling these shares short too
much lower numbers. A crash under $20 per share would not be
surprising at all. Rated SELL / SELL-SHORT |
