SeekingAlpha.com published what can only be described as a brutal assessment on shares of Demand Media, Inc last yesterday after Demand said it would spin off its Rightside division into a separate public company on August 1st as well as on Rightside.
The post entitled; Demand Media: Titanic Will Hit The Iceberg
Here is are the conclusions from the article:
“eHow.com and Livestrong.com continue to decline in page views and will have lower EBITDA in Q2 2014.
Rightside reported negative EBITDA in Q1 2014.
Google entered the registrar space in June 2014.
Expect even more margin pressure in the near future.
Both businesses are a melting ice cube.
The Company needs to be taken private to implement a turnaround. Otherwise, expect 15-20% declines in the stock.”
The post goes on to say that:
“Demand’s current stock price of $4.53 will become $3.78 post spin-off.
Demand’s current market cap of $416mm will be split $69mm Rightside and $347mm Demand.”
“Google announced they will become a registrar. ”
“It is impossible for Rightside to compete in this space now and in the near future.”
“Rightside will have to increase sales and marketing to compete against Go Daddy and now Google. The secular dynamics of this industry are not in the Rightside’s favor.”
Interestingly the article does not even mention Rightside as a new gTLD operator or as the backend provider for its new gTLD and the 200+ new gTLD’s that Donuts will be operating. SeekingAlpha only looks at Rightside as a domain name registrar.