As we first discussed on this board in late January, Mandalay (MNDL)is on the verge of tremendous revenue growth. Last Thursday's conference call cemented our investment thesis, with the announcement that Verizon (NYSE:VZ) is going effectively 'All In' after less than 1 month of sales of the LG G3 phone. The size and the scope of the VZ announcement is almost too big to fathom, but make no mistake it is huge. On the conference call, it was made clear that this agreement with VZ alone has the potential to drive revenues from app developers and advertisers in excess of $100 Million per year, each year of the multi-year agreement. That's right-Multiple 9 figures over the course of the deal and still MNDL trades lower than it did last month with a market cap of ~$150 Million.
This begs the question… who the hell is selling at these prices, in light of this news? On Friday, MNDL traded 2.5 Million shares, more than 10x its Average Daily Volume. In looking at the top holders list there are only a handful of institutional shareholders with more than a couple hundred thousand shares and most of them are either at the Company or on the Board and thus were/are restricted due to blackout rules. Of the top 10 non-affiliated holders, there were only 2 sellers in the June quarter (Verition and Trinad). As no one is over 10%, we won't know for certain who was/is selling until they file their Q3 holdings reports.
However, why should we care? If VZ has just agreed to a several $100 million arrangement with MNDL, then surely the Company's other carrier customers are going to take notice and follow suit and this Multi-9 Figure Deal is just the tip of the iceberg. Management has promised to provide a more thorough analysis and projection of its expectations for this fiscal year an FY 16 (ending March) within 30 days. This period of analysis creates a huge window of opportunity for new investment in Mandalay Digital.
It is our opinion that many investors are missing the point should be focused on the enormous potential of where this Company is going and take the currently liquidity as a gift. Worrying about who is selling or how much more is coming for sale is extremely short sighted when we know we have a deal in hand that completely changes everything. We believe Verizon alone should drive CY:15 revenues of $100 Million and the current business is running at $35 million (and growing nearly @70%) this Calendar year. So, if one wanted to be super-duper conservative and assume that no other carriers follow VZ's lead, they would be still looking at >$150 million in sales in CY:15. MNDL should be trading at multiples (peers trade in excess of 10x Sales) of where it is today, and thus waiting for the 'cleanup' trade is rather pointless given where it should be trading when the world wakes up to what is occurring.
Disclosure: The author is long MNDL.
The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it. The author has no business relationship with any company whose stock is mentioned in this article.
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