On Tuesday evening, Globe and Mail author Shirley Won wrote about the latest stock hype sweeping through the TSX Venture exchange.
While Shirley did an excellent job describing the hype, the devil is often in the details, so here are a few of those details that might make the article, and Tuesday’s very odd price movement in the stock, make a little more sense.
Intertainment – The Real Deal or the Latest Internet Stock Swindle?
Intertainment Media: TSX-V: INT
Share Price: $2.25
Market Capitalization: $540 million
Although Toronto is Canada’s finance capital, if you ask many people in the city and the surrounding region about the stock market, very few know much. Yet one stock is seemingly getting the attention, and being bought, by even the least suspecting investors. Intertainment Media (TSX Venture: INT) is that stock. For those of you who remember the technology bubble of 2000, welcome back! INT has brought in a whole new set of investors who may not remember Nasdaq 5000!
For investors, sophisticated and otherwise, we take a look behind the company to determine what exactly is the story with INT and why this time things may end badly for thousands of first-time investors if INT proves to be more hype than reality.
Half of a Billion Dollars
For a moment, let us forget about the share price of INT, which as of Tuesday April 19th, stood at $2.25 per share. The key to any company is the total market value. By our calculation, INT has 240 million shares outstanding on a fully diluted basis, giving it a total market value of $540 million. Seems odd when they financed the company less than 3 months ago at a total value of under $25 million.
For a Canadian comparison, Forzani Group, owner of Sport Chek has a market value of $500 million, but with numerous stores and $1.5 billion in revenue and over $50 million in operating profit. Anyone think INT could be way overvalued?
Whose Shares are You Buying?
It should come as a surprise to nobody that the CEO David Lucatch bought shares in January at 10 cents per share when the company did a Private Placement, but take a look at the shares he is selling:
This is only the free version. Assured for those of you who buy the premium option, there are many many more who sold 100% of their position under $1.
Lucatch and other insiders have been selling millions of shares near or under $1 - what do they know that you don’t?
Look at All that Growth…..
All any investor has to do is open up a news release from INT to see how fast the traffic is growing at the company’s main website www.ortsbo.com. The company demonstrates Ortsbo’s impressive track record based on internal data only – none of the statistics are verified by a reputable third party. But why trust the company when Google and Compete.com (benchmark industry sources) give us tools to determine where the traffic is coming from?
For those of you who do not understand the underbelly of the internet, it is very easy and completely possible to BUY traffic to your website. What is the point of a Pop-Up window? That is someone buying your traffic. First let’s establish that “purchased traffic” is not what makes a successful website. How often do you look at a pop-up window and actually use the website that popped up? The answer for most is never!
So why do we believe that www.ortsbo.com is buying paid traffic? We would expect Ortsbo users to visit sites such as Facebook, YouTube, and other translation sites. According to Google Ad Planner (link here), the vast majority of visitors to www.ortsbo.com have also viewed the following websites (note: click on each hyperlink below to view each site):
·It pretends to be a “portal” with links to various other “traffic generators”
·The site is also listed “for sale” on its homepage
·Check out how it works. Companies can buy international traffic for a mere
.015 cents per visit! This means that their 12.2 million unique visitors may have cost INT a mere $200,000 – not a bad investment to create $500 million in market value for