Livestrong.com, Demand IPO exposed

[Velocentric]

That the value of the warrants, after the split, is still $6,375,000?

I appreciate that, but now what about the "beneficially owned" stocks which weren't mentioned before appearing on the 12th Jan filing and then don't appear in the Jan 24th filing?

 

[MacRoadie]

I appreciate that, but now what about the "beneficially owned" stocks which weren't mentioned before appearing on the 12th Jan filing and then don't appear in the Jan 24th filing?

I was just messin with ya...

 

[D-Queued]

There are a total of 7 amended S1-A's filed with the SEC (click here)

I'm going to have to go over each one comparing the details to see exactly what changes have been made. At 200 pages a piece that's going to take me a few days. IPO is slated for next week, anyone got a few hours to spare to help out?

Hog, if you've got addresses, yes please.

Please inbox me as well. I have some friends (already alerted) who just love to see this kind of stuff.

Dave.

 

[thehog]

Fear not. I have it good authority that Sport Illustrated handed over the Livestrong business shenanigans to the Time-Warner business division to publish the next story. Word is that it required further investigation from those more qualified in the business world and from people who carry more clout in this field. Timeline 3-6 weeks.

 

[Velocentric]

When I spoke with the SI writer liaison before the article went public last week I was told they had no interest in Livestrong and were purely looking into the doping and Novitzky thing. I realise that the piece went (slightly) beyond that but the conversation I had gave the distinct impression that it wasn't an element of the investigation they wanted to take on.

If that's not the case - great. But it's a pretty major shift in less than a week.

 

[BotanyBay]

Fear not. I have it good authority that Sport Illustrated handed over the Livestrong business shenanigans to the Time-Warner business division to publish the next story. Word is that it required further investigation from those more qualified in the business world and from people who carry more clout in this field. Timeline 3-6 weeks.

That's what I'd expect them to do. Those extra 5,000 words are not going to get thrown away. They paid a lot of money to put that content together.

 

[BotanyBay]

When I spoke with the SI writer liaison before the article went public last week I was told they had no interest in Livestrong and were purely looking into the doping and Novitzky thing. I realise that the piece went (slightly) beyond that but the conversation I had gave the distinct impression that it wasn't an element of the investigation they wanted to take on.

If that's not the case - great. But it's a pretty major shift in less than a week.

Honestly, they were trying to do too much in that one article. It was 10 pages as it was. And they brought MANY things to light in those ten pages.

The Livestrong content would have been completely lost amongst the HemAssist and Catlin crap. Like "tears in the rain".

 

[Dallas_]

too close for comfort

My gut feeling is Velocentric is getting too close for comfort. Demand would be monitoring this thread closely. Would Demand create any ammendments(200 pages)to throw Velo off the scent until after the IPO? - just thinking! Botany??
cheers

 

[Polish]

No matter how much cash Lance gets for the IPO,
the Livestrong Charity will get more than that.

Gosh, I sure hope the IPO is a success

 

[BotanyBay]

My gut feeling is Velocentric is getting too close for comfort. Demand would be monitoring this thread closely. Would Demand create any ammendments(200 pages)to throw Velo off the scent until after the IPO? - just thinking! Botany??
cheers

No, because SEC pays attention to IPOs, especially those who have a seedy business model.

 

[Je ne sais quoi]

Skipping over the vanishing "beneficially owned" stock for now and just sticking to the warrants issue:

In the 2010 filing Lance was shown as having been issued with warrants for 1,062,500 shares at $6/share.

In the January 24th filing Lance now holds warrants for 531,250 shares at $12/share.

What am I missing here?

At first glance, normally that would appear to indicate a 2:1 consolidation or "reverse-split" of the shares outstanding, affecting all shares equally - nothing very exciting. (This observation is not well-informed, just based on your post, not having read anything further.)

Or on second thought, if it turned out his position was re-structured and substantially cut back in number, strike price and value, then the question might arise: were warrants canceled, or did he "dispose" of them, perhaps to an offshore entity, in the meantime?

 

[MacRoadie]

Or on second thought, if it turned out his position was re-structured and substantially cut back in number, strike price and value, then the question might arise: were warrants canceled, or did he "dispose" of them, perhaps to an offshore entity, in the meantime?

I believe that is his real question. It appears (?) that the structure of the IPO has changed several times. The most significant change as it relates to Armstrong concerns "beneficially owned stock" versus "stock warrants".

In other words, is Armstrong receiving shares of common stock, or simply the rights to purchase stock? How much of each and at what price also play into the equation.

 

[BotanyBay]

I believe that is his real question. It appears (?) that the structure of the IPO has changed several times. The most significant change as it relates to Armstrong concerns "beneficially owned stock" versus "stock warrants".

In other words, is Armstrong receiving shares of common stock, or simply the rights to purchase stock? How much of each and at what price also play into the equation.

Options will be called options (unless he's already purchased the options, at which point, he already owns the stock). If they're un-exercised, then they are referred to as options. I believe warrants pertain to options.

"Beneficially owned" means he owns it. They gave or sold it to him.

As you dig through the various filings, and think you're seeing them handing him more and more stock, make sure you've been keeping-up with internal pre-IPO stock splits. It is not uncommon for a hot IPO to split ts stock a LOT in the month before it hits the market (with its underwriter's permission, of course).

BTW, who is underwriting this POS?

 

[MacRoadie]

Options will be called options (unless he's already purchased the options, at which point, he already owns the stock). If they're un-exercised, then they are referred to as options. I believe warrants pertain to options.

"Beneficially owned" means he owns it. They gave or sold it to him.

Right, I understand that. I've had both over time.

The question being posed by Velocentric is WHY do the details of the IPO change between the two. In one filing Armstrong has warrants (options), then in the next he owns stock, then in the next it's back to options again.

If you look at the split, the numbers make sense: it's a simple 2 for 1 reverse split. It becomes a bit murky when you start mixing warrants versus owned stock.

 

[AussieGoddess]

I have said it before - and again I will ask ..... who exactly would buy this kind of stock?

I know the system and markets are different in the US and Aus ... but here, shares are valued on a variety of methods

- asset backed .. where the market capitalization is based on the net assets held

- income based - where the market capitalization (no of shares x shares on issue) is based on the profitability of the company ... and expressed usually as an income times estimate (eg 7 times income or 10 times income .. dependent on the stability and strength of the industry usually)

- speculative (eg mining) where long term profits are based on a predictable future even

I guess the best fit here is speculative .... but how exactly can you value a company at 6 BILLION dollars when it has no real assets (goodwill is intangible), has never made a profit, has dodgy accounting practices and the future profitability is based on another company (Google) NOT changing their method of operation.

I honestly cant believe they are being admitted the the exchange????????

 

[Shortleg]

Beneficial ownership, amended IPOs etc

"Beneficially owned" means he owns it. They gave or sold it to him....BTW, who is underwriting this POS?

I'm unclear about the precise definition of "Beneficially Owned" in US securities law but to my mind it is somewhat less than full "legal", or outright ownership - but it still confers substantial rights to exercise control etc over those shares.
I may well be wrong. I suspect that, as appears to have happened here, fundamental changes to the nature of ownership and disposition of shares (however held) would have to be notified to the SEC - this may not show up on the face of the amended IPO Form S-1s but would most likely be buried somewhere in the voluminous paperwork - see the latest SEO "Filing Details" here.

Lead underwriters are Goldman Sachs & Morgan Stanley. See page one of the latest version (01/24/11) here. Goldman Sachs has 11,666,667 shares in Demand Media & the conflict of interest is noted in the IPO at p. 9, hence Morgan Stanley's involvement. There are a few other firms involved.

Finally in a discussion yesterday with someone who knows more about these matters than I do he said that notwithstanding what happens at the IPO (i.e. shares offered etc) that LA & LAF will retain their interest in the whole of the share nominated as held by them. That is, unless the whole thing tanks bigtime, LA & LAF still look set to make a "killing" from the Demand Media IPO.

Interesting few weeks ahead...

 

[D-Queued]

I'm unclear about the precise definition of "Beneficially Owned" in US securities law but to my mind it is somewhat less than full "legal", or outright ownership - but it still confers substantial rights to exercise control etc over those shares.
I may well be wrong. I suspect that, as appears to have happened here, fundamental changes to the nature of ownership and disposition of shares (however held) would have to be notified to the SEC - this may not show up on the face of the amended IPO Form S-1s but would most likely be buried somewhere in the voluminous paperwork - see the latest SEO "Filing Details" ...

Interesting few weeks ahead...

W/out checking legal definitions, 'Benefically Owned' means held by a trust company or other legal structure where the shares are still under the (majority) control of the Principal cited.

In years past there have been shares passed through such vehicles w/out having to report on Insider Trading, etc.

Other clarifications:

... as for previous dialog on pre-IPO splits, yes these are common and 'Preliminary Prospectus' can change before 'Final'. Even so, it is hard to market the securities if the no. of shares outstanding and no. of shares being offered are not known. This doesn't mean that they are in potential violation of SEC rules for splitting the stock, but the 'Final' will have to be the 'Final'. (there are all kinds of rules about stock splits for public co's)

...as it appears in this case, there can be a mix of both Primary (i.e. new shares from Treasury) and Secondary (i.e. shares/options owned by other parties).

Hopefully that clears some things up, even if it might lead to more questions.

Dave.

 

[Shortleg]

More re the Demand media IPO - The LA Times says demand has pushed the price up to $17 (up from $12) and number of shares on offer up to 8.9 million (up from 7.5).

Daring Minds outlines the perilous situation for both Google and Demand:

"But I certainly wouldn’t want to invest in Demand Media shares. The company is too precariously dependent for its lifeblood; and its spotty content quality has badly undermined its ability to earn brand loyalty. That’s a tough setup for a public company, and it makes for a very high-risk stock.
Google, on the other hand, bears more blame. As its quality of results goes down, so does its users’ quality of experience...The big question is how long Google can hold on to its revenues at the expense of its consumer experience. Demand Media’s new shareholders will want to be the first to know. That way, they can get out front and sell."

Maybe some Demand Media investors - particularly those already holding - will dump their stock before the bubble bursts...

 

[D-Queued]

Pump and dump baby. Oldest trick in the book.

Dave.

 

[Shortleg]

Pump and dump baby. Oldest trick in the book.

Couple updates - seems that despite the informed press dumping a load on Demand the punters - apparently institutions etc - like it...for now at least:

From Vator TV: "Shares soared 40% to $23.61 in early-morning trading. The stock of the digital publishing company was priced at $17 a share—$1 more than what many estimates had placed it at. Demand Media sold 8.9 million shares for $151 million, giving the company a valuation of $1.5 billion. It will hit the New York Stock Exchange floor Wednesday under the symbol DMD."

Elsewhere Demand Media has been valued at $1.9 billion. The NYT is valued at $1.2. Draw your own conclusions.

 

[BotanyBay]

Couple updates - seems that despite the informed press dumping a load on Demand the punters - apparently institutions etc - like it...for now at least:

From Vator TV: "Shares soared 40% to $23.61 in early-morning trading. The stock of the digital publishing company was priced at $17 a share—$1 more than what many estimates had placed it at. Demand Media sold 8.9 million shares for $151 million, giving the company a valuation of $1.5 billion. It will hit the New York Stock Exchange floor Wednesday under the symbol DMD."

Elsewhere Demand Media has been valued at $1.9 billion. The NYT is valued at $1.2. Draw your own conclusions.

Thanks Shortleg.

Now start the "real" clock. Count 180 days. That's how long the insiders (such as Armstrong) must wait before selling. And they'll need to file SEC paperwork when they do. The public will know just how confident they really are in this hack business model.

Today was a short-term profit grab for the investment bank's preferred clients (high-rollers, institutional investors, etc). As they sell, the price will drop. The insiders are in for a LONG wait.

My prediction? The price will be below $15/share in July. It will be taken private again by one of the early holders of preferred stock. The CEO and a few others will make money. Everyone else will be screwed.

 

[Shortleg]

Thanks BB for that background.

And a nice picture (still haven't worked out how to get it in) at CNN here

And I see insiders pumped 50% more into the deal...

"Existing shareholders sold another 4.4 million shares -- a last-minute boost over the 3 million shares they intended to sell."

 

[BotanyBay]

Thanks BB for that background.

And a nice picture (still haven't worked out how to get it in) at CNN here

And I see insiders pumped 50% more into the deal...

"Existing shareholders sold another 4.4 million shares -- a last-minute boost over the 3 million shares they intended to sell."

They remind me of Scient's IPO back in '99 or '00. Scient was a large collection of arrogant "right-hand-side of the bell curve" types who briefly convinced dozens of F500 clients to take over the design their websites. They had a google-like IPO, and they were a multi-billion dollar WEB DESIGN company (by market cap) (Think Razorfish, think Agency.com, think USWeb). And then it all went away in like 6 weeks after Lucent fell from grace. The ride was over.

My opinion is the Demand Media is a self-contained dot-com bubble.

 

[Shortleg]

Today's Crikey.com.au piece on the Demand Media IPO, Google and LA here

 

[thehog]

Thanks BB for that background.

And a nice picture (still haven't worked out how to get it in) at CNN here

And I see insiders pumped 50% more into the deal...

"Existing shareholders sold another 4.4 million shares -- a last-minute boost over the 3 million shares they intended to sell."

Looks like .org was used to beef up and hold the price.

http://mo.statesman.com/business/demand-media-ipo-delivers-windfall-to-the-lance-1212492.html