LiveDeal: 75% Downside This Time, The Thesis Is The Same

| About: Live Ventures (LIVE)

LiveDeal (NASDAQ:LIVE) has continued to put out almost daily press releases, although it appears that their effectiveness is diminishing. Three weeks ago, a bullish press release could have sent the stock up 10% in a day, but now the stock might be flat or only up a little bit. So what have all these press releases had in common? Well they all say nothing and use big numbers regarding the general industry, yet rarely say anything specific to LiveDeal. Additionally, the company reported earnings and announced a shelf offering in mid-February, which I will cover below.

Press Releases

2/19: "Groupon (NASDAQ:GRPN) Follows LiveDeal's Lead but Without Key Benefits to Users"

I'm not sure how this is supposed to be bullish. Groupon, which is better capitalized and already has a national presence, could easily replicate LiveDeal's business model. Also Groupon has a huge mailing list that it could use to promote its new service, something LiveDeal doesn't have.

2/20: "LiveDeal Inc. Launches National Media Rollout on the Howard Stern Show"

Interesting, and that will probably get LiveDeal some visibility. Howard Stern does have a target demographic that advertisers seek.

2/21: LiveDeal Platform to Reach 12 Million Listeners on Popular Howard Stern Show

Same message as the press release the day before. Except for this quote.

If you're a LiveDeal investor, you should feel pretty good that you're investment is getting the royal treatment with a media campaign that will begin with more than 12 million listeners from all over the country. There may not be a more powerful start to a rollout than to reach more than 12 million potential business owners and potential consumers.

2/24: LiveDeal Mobile Popularity Set to Explode with Addition of Apple (NASDAQ:AAPL) and Android Apps

This press release, using the big total industry numbers, said:

Gartner, Inc., the world's leading information technology research and advisory firm, predicts mobile phone shipments will rise to 1.91 billion units in 2014 while tablet shipments are expected to rise 42.7% to 263.2 million units this year. In a recent report from eMarketer, the firm said mobile transactions are on pace to drive 19% of all e-Commerce sales in 2014 which corresponds to $56.72 billion in sales. Forecasts also show mobile transactions will represent 26% of digital retail transactions in 2017, reaching an eye-popping $113.57 billion, an increase of close to $90 billion in just 5 years.

2/24: LiveDeal Inc. to Unveil Plans for Significant Enhancements to on March 12 in Light of Excess Demand and User Feedback

Due to excessive demand and enthusiastic feedback from consumers and restaurants, the Company today announced that it will unveil plans for enhancements in a forthcoming version of its successful mobile marketing deal platform on March 12, 2014.

That enthusiastic response from the restaurants must be coming from those 15 restaurants I called where only two of them had heard of LiveDeal.

How Was The Last Quarter?

On Valentine's Day evening, LiveDeal filed its 10-Q and announced a $50 million shelf registration. First the registration,

This registration statement includes $50,000,000 of securities which may be issued by the registrant from time to time in indeterminate amounts and at indeterminate times. Securities registered hereunder may be sold separately, together or as units with other securities registered hereunder.

This is a pretty large filing for a company with a $113 million market cap, but that's what happens when a stock goes up 900% and the value of it is much lower. The quarter itself wasn't much better.Yes, revenues were up 4%, as they said in a press release, but if one even bothered to look at the filing, then you saw a pretty bad quarter. Here are the highlights.

  • Cash on hand declined 32% from $761k to $511k.
  • Stockholders' equity decreased 10% to $2,849,470 from $3,169,733.
  • Revenues increased 4% from $572k to $593k.
  • Operating expenses were up 14% from $781k to $897k.
  • Operating loss was up 36% from a loss of $311k to $425k.

So What Is LiveDeal Worth?

I continue to think that LiveDeal is vastly overvalued. I decided to take an average of scenarios.

For the public multiples, I used GRPN, which is what many bullish articles compare LiveDeal to. For the stock sales, I used the prices that stock was sold at earlier this year. And then I looked at the 52-week low. If you take the average of the downside in each case, you get about 75% downside. I think this is fair, and would have the stock trading basically where it was when it started the year.


When I wrote my previous articles (here, here and here), there were no shares of the stock to short and a press release would drive it up 10%. Now there are shares available to short (at least at Interactive Brokers) and the press releases are not driving the stock up as much. In my last article, it was suggested that you should only short the stock when it was going down, especially with momentum stocks. While I disagree with that sentiment, it is now down 15% from its high, so this might be those traders' time to short.

Disclosure: I am short LIVE. 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.