FriendFinder Networks' Restructuring Working: EBITDA Up And Insiders Are Buying More

| About: FriendFinder Networks (FFNT)
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FriendFinder Networks (FFN) recently announced their restructuring to optimize their business has increased their EBITDA and they have also launched new mobile games for Apple's (NASDAQ:AAPL) iPhone and iPads and Facebook (NASDAQ:FB) platforms.

In light of these new developments, one should take a closer look at FriendFinder Networks and you will notice that two majority shareholders, Marc Bell and Daniel Staton, bought more shares on September 6th, 2012.

As of now, three insider individuals, Bell, Staton and Andrew Conru, control over 51% of the common shareholding and the majority of the bonds, the main balance sheet item which has created downward pressure on the stock.

I believe we will see significant gains in market capitalization. Specifically, if I take the new EBITDA figures @ 8 million for July and adjust for a future rolling 12 month view to average about 10 million or 120 million per year, it would equate to about $3.70 per share (with 32.4 million shares outstanding). Using a very low multiple of 6x, I believe the valuation should be about $22.22 per share.

Aside from various valuation ideas, here are some other short term catalysts which can increase the market cap:

1) Increased Revenue and EPS guidance, which should be arriving given the material changes and new revenue streams.

2) Debt (refinancing, elimination or equity swap)

3) Takeover offer (management or third party). This was speculated by CNBC on March 28, 2012.

Here's the bottom line, FFN has over 500 million members, 300 million in annual revenue, increased EBITDA and new mobile games for Facebook and Apple products. How can you bet against this one when 3 main insiders are "all in"? With the new EBITDA figures arriving at $8 million in July, I see the market cap trending back to the original IPO range fast once more confirmation is announced.

Disclosure: I am long FFN, FB. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.