Demand Media Considering A Separate Co. For Registrar, Registry & Aftermarket

Demand Media(DMD) today announced that its board of directors has authorized a plan to explore separating its business into two independent, publicly-traded companies:

A pure-play media company with a powerful outsourced content creation platform that organically grows its audience, leading web properties that reach over 100 million monthly unique visitors, and an integrated monetization platform that incorporates branded, network and mobile revenue streams; and

A pure-play domain services company that would be the only end-to-end provider offering registry services, expansive wholesale and retail distribution, and comprehensive aftermarket services.

This would be a very interesting move by Demand separating the content and traffic business away from the Registry, Registrar and domain Aftermarket.

Demand of course owns Enom.com the world’s second largest domain name registrar and recently acquired Name.com a registrar with around 1.5 million domains under management.

Demand also applied for 26 new gTLD’s in its own name and with Donuts for another 107 new gTLD’s.

Demand is also the back end provider for all of Donuts 307 new gTLD applications.

Demand Media, Inc. also owns part of NameJet.com a large domain name aftermarket channel that is also competing for business in the new gTLD landrush, auction and aftermarket space.

If all of these businesses were in a separate company from Demand’s eHow and content business would that part of the company be more attractive than the whole?

Comments

  1. Louise says

    @ MHB, You’re a tax attorney, right? Isn’t splitting stock a way of taking a write-off on the worth of the new shares, so that the capitalization will be tax exempt?

  2. Louise says

    @ MHB, you asked:

    If all of these businesses were in a separate company from Demand’s eHow and content business would that part of the company be more attractive than the whole?

    I’m trying to figure out, which business would be the “tax-free spinoff?” Would it be the registrar business, or the content business? So I can formulate an answer.

    You said the side that is NOT the spinoff would supply dividends in the form of new stock to owners of current stock. How does that work? Do the owners of current stock have to turn in the current stock, to be replaced by the new stock? Or, they keep their stock, and gain shares in the new stock?

  3. Louise says

    Taking a shot, then, if they’re sister companies, the content end can offer discounts to the registration end. That is, the content creation business could offer discounts to people who register domains through enom, name, namejet, and the new gtlds, making the registration end more profitable. It would be a win-win. I think it would work.

  4. says

    Louise

    Current shareholder of demand actually those holding shares on what will become the record date, will receive a shares in both companies in whatever proportion is proposed by the company.

    So for example if Demand says the value of the company is 50% in the content portion and 50% in the registrar, registry, aftermarket side then a shareholder would be 1/2 share in each company for each share in Demand they hold.

    Its tax free because shareholders are getting something in theory of identical value to the shares of demand they are giving up.

    Once the two companies start to trade shareholders can keep shares of both companies, sell one and keep one or sell both.

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