Que Pasa At Quepasa Corp.? A Need For Revenue

I was perusing the list of the day’s biggest decliners Thursday afternoon and noticed a 15% drop in shares of Quepasa Corp. (QPSA), an old dot-com era company that operates a Hispanic-focused Internet portal and community site. I remembered them from my Industry Standard days, but was frankly a little surprised to see they were still around.

It may be a micro-cap (the company has a $54 million market cap) but a 15% move on no news seems curious. I got in contact with the company, and they got me on the phone with CEO Robert Stearns, who has been running the company for about a year. Stearns said he didn’t know of any fundamental news that would cause the stock to drop, but he did say that the firm had been contacted by a broker for his predecessor, company founder Jeffrey Peterson, to find out if the company was in a quiet period or not. (It isn’t.) Stearns says Peterson has been periodically selling off large blocks of stock since his departure as CEO. Stearns says Peterson is starting a venture in another sector. Stearns says he isn’t certain that Peterson’s selling is what pressured the stock, but it seems to be his best guess. “The stock is thinly traded,” he says. “When a big block comes on the market, the stock gets hammered.”

Stearns contends Quepasa is turning around. He says traffic and membership has quintupled over the last year (he says the site now has over 1 million members); the company is launching a redo its Web site on June 15. Stearns says Quepasa is the largest Hispanic community site on the Web; he notes that most users are in the U.S., with about 35% in Mexico. What he really needs now is some revenue: in the 10-Q the company filed this week, Quepasa showed revenue for the first quarter of just $52,482. (Eek. Roger Clemens can earn that much by issuing a walk.)

Stearns, it turns out, has a deep background both on the Street and in larger companies. He was a banker at both Lehman and UBS; he served as CFO as Columbia Healthcare, Pacificare and Dial Corp. He also ran a surgery center roll-up called Vascular Genetics that was sold to Baxter.

Stearns notes that he personally “hates to see the stock go down,” since he takes no cash compensation from the company - he says all of his pay this year will be in the form of options with a strike price of $10, or about twice the current price. “I have to produce a double before I get a nickel out of it.”

So maybe he should go sell some ads.

Quepasa on Thursday fell 80 cents to $4.45.