In October 2012, Investview (OTCQB:INVU) had completed its acquisition of Instilend Technologies, Inc.; a provider of technologies to the securities lending industry. Through this acquisition Instilend became a 100% owned subsidiary of Investview. However, at the beginning of May 2013, Investview, Inc., its wholly owned subsidiary, Instilend Technologies, and Fortified Management Group, LLC entered into an Asset Purchase Agreement, pursuant to which Instilend sold all of its assets, including its proprietary Matador, Locate Stock, and LendEQS platforms to Fortified in consideration of $3,000,000.
The details of the transaction include the following:
- 250,000 shares of common stock of the company which were returned to the company for cancellation
- $2,500 per month commencing on the 90th day after the Closing Date which will be increased to $5,000 per month as of the 270th day following the Closing Date.
- A Secured Promissory Note in the principal amount of $1,250,000
- The assumption by Fortified from the company of 5% Convertible Promissory Notes originally issued by the company to Todd Tabacco, Derek Tabacco and Richard L'Insalata (the former shareholders of Instilend) in the aggregate amount of $500,000.
- Additional monthly royalties of 5% after the payment of the $1,250,000 Secured Promissory Note up to $4,000,000 as set forth in Schedule 3 of the Asset Purchase Agreement.
Additional details of the transaction can be found in the May 8-K filing.
This earlier acquisition of Instilend seemed to have been looked at as a positive for Investview. In a co-contributor article, "Acquisition Of Instilend Transforms Investview", the author expressed that based on the Instilend acquisition, Investview would now be a takeover candidate. The basis for the "takeover" argument was that at the time, there were only a few companies, which provided technology to the Securities Lending Industry, and none of them competed with the Instilend subsidiary. The company itself was not taken over but it was able to sell a valuable piece of its portfolio and therefore I would agree that the product mix, specifically Instilend, did appeal to outside parties for a buy-out opportunity.
Though there are several levels that Investview competes at, I think that by far, the biggest competition lies within the online brokerage firm arena against companies like TD Ameritrade (NASDAQ:AMTD), E*TRADE (NASDAQ:ETFC), Charles Schwab (NYSE:SCHW), and even Interactive Brokers Group (NASDAQ:IBKR) all of which offer members education services and investor tools most if not all are free of charge. Investview is an investor technology and education company that provides a broad suite of state-of-the-art products that allow the individual investor to find, analyze, track and manage his or her portfolio.
Investview offers its products direct to customers as well, charging subscriptions to use the suite of education and trading products. The prices for these, range from $49.95/month for its 7-minute manager suite to $199/month to access the complete suite of education and trading products. Some packages also require clients to pay a $199 set-up fee. So when I saw this, my question became, "How can they compete with online brokerages like those above and could the company remain profitable with such an attractive product no longer in the mix?"
One train of thought would be that Investview would have the potential to be "white labeled" or simply contracted out to handle these education and investment tools. In fact, in the October 2012 8-K shows Investview announced a joint venture with ChoiceTrade Holdings Inc., an online brokerage firm. Investview provides its investor education platform in return for a cash fee from ChoiceTrade. So, it does become evident that the company is actively exploring "farming out" its products.
Additionally, Investview has rolled out a suite of "7-minute" products, which have been highly favored by its customers. In a June 2013 press release, company CEO, Dr. Joseph Louro stated, "The 7 Minute product line has been widely received and we believe our customers want similar product offerings. We view this as a significant achievement with our clients solidifying their satisfaction and commitment to our products."
This being the case, not only has Investview been able to capitalize on the previous acquisition of Instilend but it has also freed up operations to focus on marketing this product even further. It has even been stated in the recent 10-K that the company has moved its primary sales focus from the broader educational offering to a more specific and actionable weekly newsletter strategy (the "7-Minute" product line). According to the company, this change has produced a lower overall cost of sale as well as greater long-term retention of customers. How this breaks down in the eyes of Investview is this:
- The broader educational offering brings in more revenue up front due to its set-up fee and monthly subscription. However, Investview has found that the life-time value of the 7 minute products, even at a lower price point (i.e., $49.95 per month per subscription) tends to be higher.
- Significantly longer average subscribership duration of a 7-Minute product client.
- The reduction in the monthly subscriber cost has resulted in a lower cancellation rate and, thus, improved long-term retention.
- The effect is an increased projected lifetime value of a subscriber over what Investview has seen in the past with its broader education offering.
Additional benefits of the change from selling the Core product to the 7-Minute products include:
- 7-Minute products have a reduced cost of sale and, therefore, a better gross profit.
- A larger ongoing billing subscriber base provides a greater opportunity for future cross-selling and up-selling revenue.
- Investview has the opportunity to cross-sell to the original 7-Minute Trader subscriber base
Even though Investview's acquisition of Instilend may have been short-lived in some eyes, the company has not only benefited from the sale of its assets but now has the ability to completely focus on building and expanding the 7-minute brand of products. The proof of this new focused effort may already be realized in some of its financials. For the year ending March 31, 2013, Investview showed a 24% drop in total revenues compared to that of 2012. A closer look at the company's response will show that it was a direct result of Investview's continued transition to the online based model, providing subscription based services that include trading ideas, tools, and education through live and recorded webinars.
According to the company, based on measured attrition rates of the trading and education offerings it had determined that the lifetime value was approximating Investview's cost of acquisition for the education products. Moving forward, they found that as clients maneuver through the education modules they tend to exhaust their interest and either attrite or shift to the lower priced 7 minute products. A final result is a better adoption rate, a markedly improved retention rate, and significantly lower acquisition costs.
During the same year ending period, Investview realized a decrease in its overall cost of sales by 30%. Attributed to this was the fact that most of the expense was composed of stock market data feeds to the company's core educational product line's stock analysis tools. Being that the 7-Minute products do not use data feeds, the company was able to lower its COS while managing to further build its 7-minute brand. A final point of interest was depreciation and amortization, which increased from $210,869 to $371,472 or an increase of 76%. This was directly due to the acquisition of Instilend Technologies, Inc. during the fiscal year. I wouldn't be surprised if the next quarter's filings look better after the sale in May of Instilend's assets to Fortified Management Group. But what do others think? Was the sale of Insitlend beneficial to the future success of Investview's 7-minute brand and future investing products and how will it translate to the fiscal quarters ahead as it pertains to growth?
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.