RE:Vertical scope thoughtsHi extreme,
some points I want to present:
1) I contacted the company. Torstar is definitely not liable for the debt of Verticalscope in any way. So please don't spread this accounting theory / rumor further. BTW this completely makes sense from (a word that you mentioned) a corporate law perspective, because VS and Torstar are simply two different legal entities. If every parent company would be liable for the debt (which would theoretically also include payables, not only bank debt) of a majority owned subsidiary / investment there would be no reason to have a corporate structure with many subsidiaries / legal entities. With subsidiaries you want limit your liability in the case something goes wrong. I speak as a German, but this should equally be the case in every other modern, western jurisdiction.
2) Verticalscope has had some problems in the last 18 months with the traffic on its websites which has a high influence on its advertising revenues. Furthermore, it is (unfortunately, because of stupid acquisitions right before and while the drop off in ad revenue) currently relatively high leveraged with a net debt / adj. Ebitda ratio of about 4 (142 million net debt divided by estimated 2019 Ebitda of 35 million). As a consequence - as Media already mentioned - you can expect no more acquisitive activity for at least the next 12-18 months to bring the leverage down and pay off debt. But to give the goodwill from the websites no value is not right in a digital economy. Look at Google or any other Fang-company. The value comes from the discounted free cash flow that (any) asset brings in, not if you can touch this asset or not. The fact that VS is able to pay down its debt over time shows that it has free cash flow. This doesn't mean that VS has been a good investment, definitely not from today's perspective. But it should still have some value and perhaps (a big IF of course) improve its value if VS is able to stabilize or even moderately grow its future Ebitda while leveraging down.
I think we should't make the mistake - in a situation where pessimism with respect to Torstar is incredibly high - to (mentally procyclical) change facts with fiction. No question we have a problem here, but let's base our theories on facts.
Best regards,
Don