I have been following The Friendly Bear's work on MeetMe (NASDAQ:MEET). I'm not going to make estimates based on new findings, rather, this is an analysis of the BRAND NEW RISK FACTORS within the 8-K filed on October 3 rd, 2016.
Before getting into the disclosures, it's news worthy that management also gave a pre-announcement that is in-line (potentially a slight miss) with previous guidance and met expectations. This is the first time they haven't BEATEN in recent history:
Without further ado, on to the added disclosures!
Source: Company Filings
The first two risk factors seems overly bearish, but relate to the acquisition of Skout and are the sort of thing an attorney would require you to add upon an acquisition. Please find the full detail of the 8-K -Current report posted on the 4 th of October here. The first relates to MEET's potential inability to realize synergies in relation to the acquisition, and the second through fourth relate to the fact that integrating Skout's operations could result in challenges that require significant resources.
The fifth is very odd in my opinion and commentary regarding management's intent would likely be speculative. I'm wondering if management thinks they could be held liable if hedge funds short their stock (that can't be right)? Or perhaps they don't want people to think they're responsible for "propping the stock up (with a repurchase plan)? Or maybe they simply want to tell the world that their stock is only declining because they're a victim of a "baseless short attack"? I'm confused, but investors should consider what management's intent is here:
Source: Company Filings
Regardless of your beliefs regarding intent, The Friendly Bear earned a shout-out!! Congrats my friend, short sellers can't receive a bigger compliment. Although the risk factor is amusing, it's also worth noting that when management blames short sellers, it's typically not a great sign for shareholders. That being said, if you've done the work, and you've decided to own this stock, this disclosure shouldn't concern you; in fact, you should thank The Friendly Bear for the great buying opportunity! The next disclosure may be a little concerning though:
I've highlighted additions and changes since the last quarterly filing, and underlined those that are particularly notable.
In his/her last article, The Bear suggested that MEET may end up being able to "fill the void" with gaming companies, which would likely result in a significant hair cut regarding CPM and revenue expectations:
Source: The Friendly Bear
The company's recent 8-K now warns against "… inconsistent ad rates…" which seems consistent with The Friendly Bear's projections. MEET then adds the language"…and potentially demands for rebates." What does that mean? I'm trying not to speculate but given the graphic images within The Bear's first article, my only guess is that advertisers saw their ads next to these images and demanded a concession? Your guess is as good as mine, but I can say with confidence that this addition isn't a tailwind for the bull case.
The next 8-K addition worth noting is"objections to the content of our apps and websites". According to Roth's Company Note dated August 23 rd:
Which makes me wonder why this was added:
I connected with sources who listened to the MEET/Roth Q&A that took place on 8/18/2016. Management stated that no explicit pics are allowed, EVERY PIC is reviewed by a human, who removes offending pics (drugs, KKK, swastika, nudity, etc.). In fact, management said that 40% of the workforce is dedicated to reviewing material on MEET apps/websites.
Therefore, an investor can assume that not only has management already been monitoring content, they are extremely dedicated and there is no reason for concern despite The Friendly Bear's reporting, right? But if there is no additional concern post The Friendly Bear's article (I.e. this is a "baseless short attack without substance"), then why did you add the additional disclosures!?
MEET management has led us to believe that they're a victim of a "baseless short attack", while adding risk disclosures that are consistent with risks of which the short reports have warned!
Source: RTI Graphics Department
Source: RTI Graphics Department
An extra-credit bonus
A source who uses the app with regularity has said that ad load times have gone up dramatically. He said he has to wait for about 20 seconds for ads to load, and it used to be nearly instantaneous. Obviously, his experience may mean nothing. If I were long this stock, I'd worry that bidding has declined-- which would be consistent with the disclosures discussed above. Management could certainly counter these concerns with more transparency.
Disclosure: I am/we are short MEET.
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.
Additional disclosure: Additional Disclosure: I am/we are short MEET. All information for this article was derived from publicly available information. Investors are encouraged to conduct their own due diligence into these factors. Additional disclosure: This article represents the opinion of the author as of the date of this article. The information set forth in this article does not constitute a recommendation to buy or sell any security. This article represents the opinion of the author as of the date of this article. This article contains certain "forward-looking statements," which may be identified by the use of such words as "believe," "expect," "anticipate," "should," "planned," "estimated," "potential," "outlook," "forecast," "plan" and other similar terms. All are subject to various factors, any or all of which could cause actual events to differ materially from projected events. This article is based upon information reasonably available to the author and obtained from sources the author believes to be reliable; however, such information and sources cannot be guaranteed as to their accuracy or completeness. The author makes no representation as to the accuracy or completeness of the information set forth in this article and undertakes no duty to update its contents. The author may also cover his/her short position at any point in time without providing notice. The author encourages all readers to do their own due diligence.