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Summary

  • The company acquired Saatchi Art for $17 million and picked the startup’s CEO to replace its interim CEO.
  • We still remain bearish on the company for the long term and the new CEO doesn’t change our thesis.
  • We knew a new CEO was coming but didn’t expect it to be done via an acqui-hire.

Since updating readers on Demand Media (NYSE:DMD) and its 2Q earnings yesterday, shares continued to tumble. The stock is now down 10% since the start of the week and down 20% for the last week. The company completed its spinoff of Rightside (web services/hosting unit) earlier this month. We covered the company back in October and noted that the separation was a last ditch effort by management.

The latest news is that Demand bought Saatchi Art for $17 million and named its CEO, Sean Moriarty, as its own. Moriarty is replacing the company's co-founder Shawn Colo. Its other co-founder resigned last year.

Demand has struggled with generating website traffic for a number of years, in part, due to Google's ranking system. The Saatchi acquisition will only add up to $1 million in revenues to Demand's some $330 million on a trailing twelve-month basis. Saatchi Art is a website that allows artists to sell their work. However, it is worth noting that Moriarty was the CEO of Ticketmaster for a couple of years, helping drive a merger of that company and Live Nation Entertainment. It'll be interesting to see what he can do with the floundering Demand Media, but we remain very cautious.

Source: Update: Demand Media New CEO