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Executive Summary:

  • LiveDeal is not generating any revenue.
  • Investors likely believe that the website is generating revenue.
  • Over the next six months, a short is attractive.

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This article will focus on several new developments that have occurred since my last article. The main point of this article is that there is no way LiveDeal (NASDAQ:LIVE) is generating revenue. In press releases, LiveDeal has made LiveDeal.com the crown jewel of what the company is. Most people buying the stock are probably betting on this "deal-making" website. Here are some facts for longs to consider.

Here are the revenues from the past two years.

(click to enlarge)

Since LiveDeal's fiscal year ended on September 30th, investors have no idea how LiveDeal is performing. Additionally, LiveDeal recently changed its fiscal year to end in December. And since the LiveDeal segment launched in September 2013, investors really have no idea about the performance of the segment. Although I think most would probably think that LiveDeal is generating revenue. But I don't think it is.

If you go to LiveDeal, you can sign up and put a deal in your cart. Aside from giving them your email address, it's totally free. Then you print out the deal, take it to the restaurant, and they supposedly honor it. In my last article on the stock, I called 15 of the top restaurants in San Francisco, Los Angeles, and San Diego counties and asked if they used LiveDeal. Only three said they did. The deals, however, are being offered by the restaurants through other deal channels. If the restaurants don't know what LiveDeal is, then they certainly aren't paying LiveDeal anything.

To confirm this, I called LiveDeal's IR contact listed on the website. LiveDeal's IR firm is CorProminence, LLC, and I spoke to Scott Arnold. I asked him if LiveDeal was generating any revenue right now and he said that it was not. He told me that LiveDeal was targeting market share now.

I then called the LiveDeal main office. No one initially answered the phone, but a couple of minutes later I received a call from someone named, I believe, Sarah. I tried to set up a phone call with CEO Jon Isaac or any other member of management, but she did not seem to want to. I asked her if LiveDeal was generating any revenue and her response was "I imagine so." So someone in the main office thinks LiveDeal is generating revenue, while the IR spokesman says it is not generating revenue.

This leaves the legacy business of online marketing, for which it no longer accepts customers.

We continue to generate a significant portion of our revenue from servicing our existing customers under our legacy product offerings, primarily our InstantProfile line of products and services. Because of the change in our business strategy and product lines, we no longer accept new customers under our legacy product offerings.

So it is no longer accepting new customers, which means that revenue from this line is going to be slowly drying up. And with the new LiveDeal not generating any revenue, I think bulls will be in for a nasty surprise when investors are faced with LiveDeal numbers after the first quarter.

Bulls will probably say that LiveDeal said that traffic to its site was up 153% in January vs. December. While that's nice, according to Alexa, at least 35% of that traffic is coming from India.

Source: Alexa

Somehow I don't think that traffic from India is really helping a website that at the time was only in three counties in California, but you can make that judgment.

I tried to call Stock Market Media Group, LiveDeal main offices, the IR firm, and Isaac Corp. on Thursday, but no one picked up the phone at any place.

Goldman Research and New Promotions

On February 12th, Goldman Research (Not Goldman Sachs) initiated coverage on LIVE, rating it a speculative buy, and put a $12/ share price target on it. The main issue I have with the Goldman Research report is concerning intellectual property.

"The rights to intellectual property are maintained through a mixture of copyright and trademark laws, which have been utilized for its two integral businesses. LiveDeal's publishing system that provides its tools for website design is proprietary as well, as is its mobile app software."

This is simply not true. LiveDeal states pretty clearly several times in the 10-K that it has no intellectual property.

"We estimate that reliance upon trade secrets and unpatented proprietary know-how will continue to be our principal method of protecting our trade secrets and other proprietary technologies"-10-K

That doesn't exactly scream IP protection. It should also be noted that Goldman Research was compensated $4000 from a third-party to publish the research.

Goldman Small Cap Research was compensated by a third party in the amount of $4000 for a research subscription service.

Another piece of sponsored research I found this morning was from an article appearing on "$tockroach.com." The article opened saying:

Until yesterday's split, LiveDeal Inc. (LIVE) was way out of our league at $17 per share, so I wouldn't have even considered writing it up for you. But after a blockbuster bull run, LIVE management decided to go 3 for 1 in order to get the PPS back to a more "normal" level.

Because at $20 dollars a share pre-split that was apparently pricing out too many investors. The article went on to say:

Now even "down" here around $8, LIVE requires slightly special handling from us bottom feeders. For one thing, this stock has actual fundamentals! LIVE's online restaurant coupon business took in $2.3 million last year. For now, think of a baby Groupon that learned from big brother's mistakes. (Read more) Gross margin on that is tracking at a fat 60%,although admittedly LIVE is still a dot-com start-up and so the P/E (yes, it has one) is negative.

I'll address those claims point by point.

1. The author says that LIVE's online restaurant coupon business took in $2.3 million last year. This is simply not true, as the online restaurant coupon business was launched in September and LiveDeal has not reported numbers since that business launched.

2. That author said that gross margins on this revenue were 60%. These GM numbers are right if you only consider cost of services, but when you also include operating expenses, gross margins are actually negative.

3. I'm not exactly sure what the point about the P/E ratio is, but it isn't negative. A negative P/E would imply that it actually has earnings. This company barely has revenues.

There was also this tidbit in the disclaimer.

StockRoach.com is wholly owned by Global Oasis Group Inc. Global Oasis Group, Inc is currently being compensated seven thousand dollars from Cream Consulting LLC (a non-controlling third party) for LIVE advertising and promotional services. This compensation constitutes a conflict of interest as to our ability to remain objective in our communication regarding the profiled company. Because of this conflict, individuals are strongly encouraged to not use this newsletter as the basis for any investment decision.

So what is Cream Consulting, LLC? It appears to be an entity set up to promote stocks. You can see a history of all the stock it has promoted at stockpromoters.com.

I can't find much else about Cream Consulting, LLC on the internet other than the previous stock it has promoted, and most have ended badly. I expect that LiveDeal will end badly as well. This isn't a call on what the stock will do tomorrow, or the next week, but rather the next 3-6 months. If you want to be on LiveDeal, just remember that LiveDeal is not generating revenue.

Source: LiveDeal.com Is Not Generating Any Revenue