Small cap domain registration stocks - an update (RCOM, TCOW, VRSN)

Will Holt, an Internet Stock Blog reader, wrote a summary of recent events impacting Register.com (ticker: RCOM) and Tucows (ticker: TCOW). Here it is; the disclosure of ownership at the end is Will's, not mine:

It has been a busy few months for domain registrars, heating up in the most recent two weeks.   

Register.com failed to file its 10k and was subsequently delisted. In May, just after filing its K, Barron's wrote up Register.com as being potentially undervalued and an attractive potential target for private equity groups. 

A few weeks later, Ramius Capital Group made a tender offer at $7.10 a share to take Register.com private. Last week, the offer was rejected by the company's management, which named a new CEO in David Moore and are now exploring their options. 

Register.com still has $100mm in cash. Aside from Ramius Capital Group, another group made up of Barrington Capital and James Mitarotunda (which attempted to acquire RCOM two years ago) has been steadily increasing its stake. RCOM is currently trading at $7.20, up from its mid $5 trading range at the time of the Barron's article.

Tucows was mentioned by Mark Cuban  as part of his portfolio in March, and reported excellent Q1 results, followed by a site redesign.  There was some concern Tucows was exposed to Spitzer's announcement that he was casting his legal glare on spyware, as the company has a software/shareware downloading segment. But  CEO Elliot Noss addressed the issue on the Q1 call as follows:   

…you may have seen Eliot Spitzer bring a little attention to the spyware space recently. We have historically had an extremely user-friendly approach to the files that we offered. First of all, they are all rated and reviewed, virus checked, checked for spyware, checked for adware. We didn't offer titles like -- and I don't mean to single anybody out -- but like Kaaza and dozens of other titles that bundled a bunch of third party stuff inside it.

A lot of our competitors did offer those titles and it was to their business benefit. We chose to have a much more user-centric approach. And that is something that we need extend now and help users deal with the problems that have come out of a bunch of the spyware related pieces.

(Quotes are from the CCBN StreetEvents transcript.)

   

Little activity had swirled around TCOW until thee weeks ago, when the company announced its intention to move from the OTC market to listings on both the AMEX and TSX.  The stock moved from $0.89 to its current levels around $1.00 during last week, spiking to intradays levels as high as $1.16 on heavy volume over the course of last week.

Rounding out the registrars, in June, Verisign secured a 6 year extension from ICANN to operate the registry of .net domains.  Verisign is trading at $29.73, sideways YTD.

UPDATE: Register.com's stock moved today (Thursday) on news that Mark Cuban owns 9% of the company (he bought around $7.40 right after RCOM rejected the acquisition offer from Ramius).

Full Disclosure: I'm long TCOW and RCOM.

Quick comment: I'm delighted to publish informative and thoughtful content about Internet stocks from readers. The goal of The Internet Stock Blog is to provide a forum for timely and thought-provoking information and analysis, wherever and whomever it comes from. Email me at [e-mail].

RCOM and TCOW charts below.