***NEWS - TSQD "Plan" Unveiled - NEWS***
To the best of my knowledge, information I obtained from TSQD management regarding their plan for the DRIV shares has never been posted anywhere in any more detail than tonight's earnings report. I had actually planned to share this information as part of my 1Q earnings estimate (which was for a loss of -$0.01 +/- .02; my fourth straight accurate forecast), but I was surprised earnings were released this early - I was expecting them around the middle of the month.
If you call TSQD, and ask what their plan is for the DRIV shares, they will give you all of the info I am posting here today. The key is to ask for the details, which are not confidential information, but is info that they are not at liberty to use to hype the stock. I hope you all enjoy the following clarifications, I know I did....
TSQD's PERSPECTIVE
TSQD is amazed at the reduced price of TSQD w/r to DRIV, they feel strongly that the discount is due entirely to the fact that most investors are not educated as to the details of TSQD's plan.
THE PLAN
STEP 1: TSQD plans to sell off the two catalog businesses (DTP and Net Direct) and all other non-DRIV holdings (2 gold mines in Montana - yes you can call and ask for a prospectus, they're going at very reasonable prices). They hired Bay View Capitol to make the sale (they also hired a real estate agent in Montana). The sale price is not going to be anything too impressive, maybe ~$2-3 million, which is only ~$.25 per share (this surprised me since they made at least that much by selling 200K DRIV shares, maybe they should have closed up shop?). Finally, it DOES make sense that TSQD follows DRIV only, and does not react to its own earnings. I love predicting TSQD's catalog earnings, but now it appears they only matter in the context of making it easier for TSQD to find a suitor. This deal should take place SOON, it is a major focus of the company. IMO it will happen within the next 2~3 months, and former CEO Rick Apple may be a suitor. It may only be a matter of time (weeks/months) before this happens.
STEP 2: Once TSQD is stripped down to DRIV shares only, they will do their best to be bought by someone who wants to own 15% of DRIV. As mentioned in the earnings report, it has now been established that TSQD can be sold (as the DRIV shares alone) to someone for stock in the other company and TSQD WILL NOT BE SUBJECT TO THE 40% CORPORATE TAX!!! This is BIG, this was a major unknown until very recently. TSQD expects that they will find a suitor, and TSQD shareholders will get shares in the takeover company - WITH NO TAX DISCOUNT. I'm kinda bummed we won't get to have any DRIV shares, but I'm willing to take shares of AMZN, CMGI, MSFT or whoever wants to buy the DRIV shares. The price for the sale will be the price of the DRIV shares, minus a SMALL discount TSQD anticipates to be ~10~15% at MOST, to "sweeten" the deal.
TSQD FLOAT
The value of TSQD w/r to DRIV depends primarily on the float of TSQD. TSQD will not sell anymore shares of DRIV, so the 3 million DRIV shares are a known quantity. The float of TSQD, which was ~11 million, was recently increased to ~12.5 million when 1.5 million employee option shares were exercised. One more registration MAY take place before the deals are done, but this will be a VERY small number, definitely no more than 500K. So, for my calculations, I will assume the maximum float to be 13 million shares.
TSQD INSIDERS
TSQD CEO Chuck Reese recently registered to sell ~234,000 shares of TSQD (his full vested amount). He recently sold 50,000 of those shares (MAY sell a few more this year). 1 million of the 1.5 million shares registered recently were his, which comprise his entire available holdings - 1 million shares. This scarred me at first, but the explanation I received put me at ease. Chuck doesn't like to sell his shares, but he has decided it would be wise (especially considering that he believes TSQD shares will be worth a great deal more very soon) to establish a record of selling ~50K shares per year so that if he were to do it after a run up, or at any time later, it doesn't look like he's jumping ship. Former CEO Joel Ronning (owns ~49% of TSQD, now CEO of DRIV) did the same thing while he was CEO. So, the CEO of TSQD is not trying to sell all his shares, he simply registered the 234,000 of the total 1 million which have vested so far. He has no plans to sell all 234,000.
TSQD RATIO TO DRIV
So, have you all seen this before...
The old TSQD ratio was 3M DRIV/11M shares = 27.3%
The new ratio would be 3M DRIV/13M TSQD = 23%
minus ~10~15% discount, plus ~$.25 for catalog businesses
23%*(1-.15)+~.25 = ~20%
So there you have it, IMO TSQD shareholders will obtain ~20% of the DRIV's share price on the day that the final deal is made. TSQD currently trades at less than 10% of DRIV's share price. A great buy, right? I think so, but this is not an investment for every style of investing.
TSQD STRATEGIES
There are plenty of ways to look at this play. If DRIV is doing poorly on the day the TSQD deal, TSQD gets only that price (the opposite could be true as well). This in not a deal that will happen tomorrow, or next week, in fact TSQD would be happy to ink this deal before the end of the year - this is my hope. But, IMO, TSQD will gradually increase its % of DRIV over time (maybe tomorrow with news of "the plan" and earnings), until it finally reaches 20% of DRIV price stock dividend sometime later.
My best estimate of how TSQD COULD behave (+/- 3%):
[% of DRIV Price : SITUATION]
7-8%:current, lots of uncertainty, DRIV volatile, deal along ways off
9-10%:TSQD makes "the plan" public; someone posts details (today?)
12-14%:TSQD sells catalogs, Step 1 done, things looking less uncertain
15-16%:Stock swap deal becomes imminent (buy on the rumor)
19-21%: final deal is made, TSQD shareholders receive stock of suitor
So where will DRIV be when the TSQD deal is done?
[Buy TSQD at 7%:TSQD at 20%:DRIV Price: Situation]
2.1:6.0:30:DRIV's current low end range
1.4:3.5:21:DRIV crashes
0.6:1.7:8.5:DRIV's IPO price
2.8:8.0:40:DRIV's Recent fair price
4.2:12:60:DRIV's all-time high
6.0:17:85:DRIV's target price for end of year from analysts
7.0:20:100:My own personal goal for DRIV;)
0.35:1:5LDRIV's all-time low range, let's hope this doesn't happen:(
Take your best guess....
Buy TSQD today for $3, and sell for $20 in a year?
Wait for a big internet correction and buy TSQD at $1.4?
Buy TSQD at $4.4 (that would be me), and hope not to sell at 3.5?
One last bit of data about buying TSQD as it goes up:
[buy at% of DRIV:gain from selling at 20% if DRIV doesn't change]
10%:100% gain at 20% of DRIV
15%:33% gain
17%:18% gain
7%:186% gain
13%:50% gain
A ~100% gain over a long period of time (~6-9 months IMO) is not as sexy as getting in and out of stocks on a daily basis, but there is something to be said for finding a good deal and sticking it out. For now, my goal is to get that longterm capitol gain by holding the shares I have now. I'll be tempted to buy more if TSQD gets below $2. I EXPECT huge volatility in TSDQ and DRIV, but when all is said and done, I will hopefully enjoy coming back to this post and find that all my DD has not been wasted.
That's all from me for now folks. Let's see if we can't get a little discussion going, eh? I love responses, especially the negative ones;) |
