Well, again, just when we went 'neutral' on a stock, news comes out that energizes investors to jump in. Of course, we recommended IACI when everyone was hating it. The Company announced that it is reorganizing and creating a new business called Match Group, which will be chaired by Greg Blatt, who, until Thursday morning, was the CEO of IACI. The Company will not have a new CEO. Instead, each business, which now includes Search & Applications and Vimeo, with its leader, or CEO, will report to the Chairman of IACI, Barry Diller. The market loved the announcement as the stock jumped nearly 14% on Thursday.
It appears that IACI is taking initial steps to push up the value of some of its assets, mainly the ones within Match Group. The Company may be planning a spin-off, which actually goes along with what we have been saying for nearly two months: there are opportunities to further monetize Match assets such as Tinder or OkCupid.
While this was good news, we think it will take time to realize the value of those assets. And unfortunately, given the very competitive online/mobile dating services space, we don't think Mr. Diller and Mr. Blatt can wait too long. These businesses can get commoditized very quickly, which is why IACI acquired a lot of them, with many at their early stages.
It appears that IACI is listening to us as it acquired websites (VCLK's O&O) to minimize risk of GOOG-dependence within its Search & Applications business, and is looking to monetize some assets more quickly. Maybe we should've gone into investment banking. Then again, that business is the same as selling cars.
IACI closed at $68.49 on Thursday. In our opinion, this news does not change the valuation of the company. We continue to value it at $61.35/sh, which is 7.5x FY '14 EBITDA plus net cash. And as we say that we remain 'neutral' on the stock ... watch it jump even higher. :)
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