David Marcus: Why Evermore Was Short Match.com

David Marcus: Why Evermore Was Short Match.com
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An excerpt from ValueWalk’s interview with David Marcus, Co-founder, CEO, CIO of Evermore Global Advisors discussing why he was short Match.com and now sees opportunity in it along with Angie’s List. Read the full interview on ValueWalk Premium.

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Opportunities In Special Situations

Well, for the opportunities are really in. I would say for us we’re seeing a lot to do in Europe. And we’re also seeing a few things here. I’ll mention one that’s based here, and then I’ll mention as many as you want in Europe, but the one that’s here IAC is interactive Corp. That is the group created by Barry Diller.

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Why is it compelling as investors are not as fully even though people know the company, this is a business look over quite a number of years dealer has created a what was once just a I think it was started off with something called Silver King Communications. It owned 12 UHF stations and then evolved into something so much bigger. And what they do is they buy, build a to scale and then spin off businesses.

They’ve done it with TripAdvisor, Expedia. Pick it. I should take a measure. And I think I said Ticketmaster, I’m in a whole bunch of businesses where they have transformed it and forced them to scout and really embraced of course technology. And it’s remarkable that they’ve been able to do it and spin these off and they become very successful businesses.

So right now the opportunity is that I see which owns Match.com and Angie’s List, among other things, but those are the two listed holdings that they have They have announced that they will sell a spin off Match to shareholders, which should happen in the next month or two.

If you look at it, so today, I think I see is about 200. And, you know, 284 or 285 per share. Once they spin off a Match, you have a stub that will trade at 7574 or 75. net of Match. We think that the value of the remaining assets is worth, not quite double that, but it’s worth maybe 140 bucks a share.

We’re gonna have a stub that’s trading at about 74-75 by the way of which about $44 will be in net cash. So what are they doing the spending Match to shareholders, but before they do that, they are going to have a dividend from Match. And as at roughly 80%, owner of Match, they will have 80% of the dividend. And they’re also selling about a billion and a half dollars worth of Match shares before the spin happens. So between the dividend and the and the cash from, from the sale of shares, we’re going to get a big chunk of cash here.

That should put the dot plus other cash. We’ll have about 3.8 billion in net cash 44 bucks a share, roughly a $74 stock. And we have what’s left you’ll have Angie’s List. You’ll have Vimeo you’ll have dotdash mozaic Turo care, calm a bunch of other things. So they’ve done this before where they where they peel out one of their larger assets. And the market really doesn’t focus on it. And yet, there’s this bubbling up of value within their portfolio. So this is a well honed process that they have done over And over and over. And I think that it’s right in front of people and they’re not looking at it.

The Match Short

Now, we did short Match against our investment. Initially, because we were creating the stub, we subsequently covered the Match short, in the last, let’s say a month or so, it sold off during the crisis. So it helps protect the investment on a net basis. We were long the parent short the subsidiary and they both went down but it was very muted because Match really drives the price currently, once matches out of the picture.

So we covered the short so we will get mad shares, which we may or may not keep, but I will tell you, our investment focuses on what’s left behind and again, dealer has created a wonderful group of not only have these holdings and has the ability to buy compelling businesses that can be with a lot of nurturing management effort, capital, they scale up so aggressively over the next few years.

We just see them doing it again and again and again and again. And we see a window here to become part of that compounding effect at what we think is a ridiculously bargain level, because of the whole Match piece currently, and I think, just maybe investors are just not as focused on the fact that his businesses will be separated in in the very near term. And so then you have to value what do you have left? So that’s one in Europe.

We own a stake in a company called MTG “Modern Times Group.” MTG so earlier in your podcast, I talked about Nordic Entertainment and the CEO Andrew Johnson. Well, that company and this company MTG were once part of the same company. We bought it before they broke into two companies. And what MTG is today it’s a small cap. It’s a call it about a 700 and $90 million market cap of which 180 5 million is net cash. They have a tonne of cash now what’s the business? This is a group and they have no debt. And this is this is they just have a pile of cash. This is a company that has businesses in gaming, online gaming, mobile gaming, and eSports.

They own 82 and a half percent of a company called ESL. ESL is one of the largest or the largest competitive gaming operator in the US really globally. They have proximately 20% market share of these competitive games and eSports. Now, guess what? The gaming side is exploding currently because people are stuck at home. And so online and mobile gaming are growing rapidly. The eSports side has been crushed, because you’re not getting 20,000 kids going to a stadium to play and the big competitive game event, whatever, where this part of the business was extremely high growth for up until the pandemic, especially with the cash prizes coming in.

Read the full interview on ValueWalk Premium.

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Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)www.valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver
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