INT Real Deal or Latest Internet Stock Swindle...
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Intertainment – The Real Deal or the Latest Internet Stock Swindle? (INT on TSX Venture)
Apr 20, 2011 9:29 AM
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On Tuesday evening, Globe and Mail author Shirley Won wrote about the latest stock hype sweeping through the TSX Venture exchange.
https://www.theglobeandmail.com/globe-investor/investment-ideas/simmons-sends-intertainment-stock-up-the-charts/article1991873/
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:
https://www.canadianinsider.com/coReport/allTransactions.php?ticker=int
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 websitewww.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):
www.Adsrv9.com
·It pretends to be a “portal” with links to various other “traffic generators”
·The site is also listed “for sale” on its homepage
https://mediatraffic.com/demo.php
·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 their stock
www.sellmeyourtraffic.com
·As per its statement on the homepage, the company pays “good money for your traffic based on its quality and the volume you can send. No matter how high or low the quality is, our system measures it and you will get paid accordingly.”
payperlead.co.il
·An Israeli site that generates traffic for businesses seeking new customers
The aforementioned websites are just a few of the numerous traffic generators for Ortsbo.com. However, they exemplify how Ortsbo may be directing what appear to be fake visitors to its website while claiming in public statements that Ortsbo.com is growing faster than Facebook!
If you ever used Ortsbo, ask yourself if you have or would visit any of the above sites. The answer again is likely no. So why are Ortsbo users tending to visit these sites? Because those are the sites that are likely redirecting people to Ortsbo.
So then you ask, how does a person get directed to one of those sites to begin with? Well there are many sites out there which have content which will not allow them to sell advertisements. What sites are those? Compete.com – one of the most reputable site analytics firms - tells us which searches by an internet user are most likely to result in a visit towww.ortsbo.com.
This is too funny to make up so I encourage you to open the attached link and check for yourself at the bottom of the page under the section titled “Search Analytics”:
https://siteanalytics.compete.com/ortsbo.com/
The link above shows that the #1 search that led to Ortsbo.com is a search for pornography (of a particular type)! Furthermore, the rest of the top searches have nothing to do with online translation.
Just for comparison purposes, check out what sites a person visiting a leading translation software site www.babelfish.com would likely be searching for:
https://siteanalytics.compete.com/babelfish.com/
In this case, over 65% of the searches were simply for a variation of the name “babelfish”. That likely makes a bit more sense than the pornography searches which appear to be leading users to the Ortsbo site.
Buyout Offers?
On February 8th just prior to the annual meeting, INT announced it was considering an offer from Lion Gate Capital to take the Ortsbo portion of the business and list it in the US. We are not sure why this is even worthy of a press release – Lion Gate Capital, Inc. is small shop, and even worse, they have a checkered history, having been involved with the SEC for manipulative short selling:
https://www.sec.gov/news/press/2008/2008-244.htm
https://www.sec.gov/litigation/litreleases/2009/lr21253.htm
Lion Gate Capital seems highly unlikely to be just the type of company an investor would want INT to do business with or even to give credence to.
Our CEO will lead us to the Promised Land!
For those of you have not met Mr. David Lucatch, let’s remind of you his successes as an entrepreneur:
Lucatch was the founder and CEO of Valu-Net Corp. which went public via a reverse merger of a shell company back in 1997. Valu-Net was described as “a marketing and technology company specializing in Internet marketing solutions, integrated retail and business strategies and electronic commerce and transaction technologies”. Valu-Net brought on big names like Wayne Gretzky and Don Cherry to help promote their various products. Despite the vast opportunities that were available to those with vision on the future of the internet, and after over 75 press releases, Valu-Net traded down to $.06 by October of 2001. It peaked at around $3 early in 1999 amidst much promotional fanfare. Lucatch left the company in May of 2000 to “pursue other interests”. Its’ deal with Gretzky ended up in a lawsuit which the company settled by paying $425,000 in cash and shares. The company hobbles on to this day, but after adjusting for a share consolidation it trades at the equivalent of $.004 a share. (GPS.V)
Until early 2010, INT used Agoracom financial as its Investor Relations firm – they are listed at the bottom of all old press releases. Agoracom was the Investor Relations firm that was fined and sanctioned by the Ontario Securities Commission:https://www.bnn.ca/News/2010/11/12/OSC-fines-Agoracom-imposes-sanctions.aspx
The Intertainment CEO vouches for Agoracom. This does not make him guilty by association, but it likely is not a coincidence: https://www.pinnacledigest.com/blog/edminnema/osc-says-agoracom-rigged-forum-discussions
Gene Simmons couldn’t back a company destined to fail, could he?
In early April, investors were excited to learn that INT had hired famed entertainer Gene Simmons to be the spokesman for Ortsbo. Simmons has rightfully earned a reputation as a savvy businessman for his successful merchandising of his band, KISS. So does the Intertainment/Simmons combination guarantee success? Not according to their past efforts.
In 2004, Gene Simmons joined No Good TV (NGTV), which planned to produce uncensored celebrity interviews. Simmons was spokesman and Chairman of the Board. According to regulatory filings, Simmons was to assist the company in "developing our branding and merchandising strategy." And he was also "instrumental in assisting us in capital raising activities." NGTV was so sure of their success, they filed for an IPO in February of 2006 with plans to register $125 million of stock. https://www.sec.gov/Archives/edgar/data/1283794/000095012906000953/a16366orsv1.htm
The company touted their long list of celebrity interviews and over 10,000 hours of footage. But surprisingly, they had not even generated a penny of revenue. Reality overcame even the great Gene Simmons, and NGTV withdrew its IPO a year later.
But that wasn't the end of NGTV. Just a few months later we find NGTV has signed up a familiar partner, INT. Touting itself as "the world's largest producer of uncensored celebrity news and entertainment programming" NGTV announced that Intertainment had agreed to invest up to $2.3 million. Intertainment's own President, David Lucatch joined Simmons on NGTV's board of directors. Once the deal closed, Lucatch exclaimed. "With over 100 Million video views and growing, Intertainment and Eye Rock Digital are very excited to be solidifying our long term opportunities with NGTV. The Internet community has quickly embraced NGTV through YouTube.com, NGTV.com and EyeRockDigital.com, and we are providing Canadian advertisers the same marketing opportunities as their US counterparts in reaching the young, hip, affluent and technologically savvy Internet and wireless public with music, video and celebrity content that is fresh, timely and the way the artist intended it to be viewed."
So with 100 million views from the hip and affluent crowd, Gene Simmons at the helm and INT as a partner, NGTV has to be a success. Or maybe not. Despite claiming to now have over 445 million views, NGTV filed for bankruptcy in March, of 2010. https://www.dmwmedia.com/news/2010/03/18/dmw-exclusive-gene-simmons039s-ngtv-files-bankruptcy. Ultimately revenue and profits matter, not just views. But Simmons did his part by luring investors to NGTV. According to placement agent Andy De Francesco, "We handled the Canadian component institutionally and through some high net worth people and Gene came and did the pitch himself with his team." https://www.thestar.com/business/article/926532--gene-simmons-marketing-genius.
Hopefully Simmons will also be there to support them if there are bankruptcy proceedings this time around.
So within a year of NGTV's collapse, we once again have Gene Simmons and David Lucatch working together to tout their venture. INT's stock has soared on the partnership and claims that Ortsbo now has had 116.9 Million Page Views. With only 1/4 as many views as NGTV had when it collapsed, investors have to hope this iteration of the partnership has much more success in turning views into profits.
Canada’s Top Fund Manager Would Not Support a Swindle
We agree. Steve Palmer, Portfolio Manager at AlphaNorth Asset Management has an enviable track record, as Canada’s top fund manager for the past 2 years. They say the smart guys get in first – Steve did that, buying shares 3 months ago at 10 cents per share. They also say the smart guys get out first – within 4 weeks of that acquisition, Steve Palmer sold 4,000,000 shares at a price well below $1 per share.
And Steve still owns millions more shares. Canadian rules prohibit him from selling many of those until the middle of May. Who knows what he will do, but if he was a seller under $1, one wonders what he might do.
So Where Does that Leave Us?
Would you pay half a billion dollars for a company with all of these question marks? The smart guys bought in at 10 cents. Does it make sense to buy at 25x that value?
Ironically, the Company even says it best themselves in the filings filed on SEDAR:
"…the Company licensed the world-wide rights for instant translation technologies from a third party and named them “Ortsbo”…"
They don’t even own their own technology. What do they own? Ortsbo.com, but what about Ortsbo.net? or Ortsbo.org. For a mere $10 per, you could buy these, amongst many others (including a number of international sites you would think
https://www.godaddy.com/domains/searchresults2.aspx?ci=16811&isc=gppt02C029
Note: by the time this circulates, the Company may very well have realized their own sloppiness and purchased these domains, or possibly they will have been acquired by a shrewd reader of this report.
Disclaimer: This report is prepared for informational purposes only and is not to be construed as an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. This report does not constitute or contain investment advice. We are not soliciting any action based upon this material. It does not take into account the particular investment objective, financial situation or needs of individuals. Before any action, an individual should seek professional advice. All expressions or opinions are subject to change without notice. The author may have a position in, and may from time to time, purchase or sell any of the mentioned or related securities including derivatives in such securities. Any photocopying or retransmission of this report without permission is prohibited and subject to liability. The author shall have no obligation to update or amend any information contained herein. The author does not guarantee any returns nor guarantee the outcome of what has been portrayed in this report.
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