One of the best things - ie. most reassuring - is that the stock market is not exuberant.
Today, Yahoo! bought the 80% of Right Media it did not own for over $600M, valuing the entire company at over $800M. To put this into context, NBC bought all of iVillage for $600M, News Corp. bought Intermix (MySpace’s parent) for $580M, and all of IGN for $650M. All of these deals took place less than two years ago.
Just last month, of course, Google bought privately held Doubleclick for $3.1 billion, effectively raising the price for peers such as Right Media. When I read this, I thought “that’s a home run for Right Media,” because by staying independent it would invariably face competition for Google/Doubleclick, but I also thought: what would that do to 24/7 RealMedia, Valueclick, aQuantive and other publicly traded firms.
Disclosure: of the companies mentioned, I own shares in YHOO and AQNT.
While some people had called for heightened demand for TFSM, AQNT and VCLK amid the DCLK buy, it was a no-brainer that YHOO would not be in the running for TFSM, AQNT and VCLK, since it already owned 20% of Right Media and backing TFSM, AQNT and VCLK would have an adverse effect on its investment on Right Media… but nonetheless, seeing Right Media shoot up from a valuation of $200M to $800M in a matter of months suggested that the implicit value of TFSM, AQNT and VCLK would rise, and not fall.
Today, the stock prices of all three TFSM, AQNT and VCLK fell, but not because of the fact that YHOO buying Right Media translates to one elss suitor for these firms, but rather, because Citigroup analyst downgraded AQNT (bad analyst, bad analyst).
Jokes aside, this was a welcome move by any sane and rational investor. Sure, short term I would have liked an additional spike in AQNT’s shares, but having seen the stock spike 30+% year to date, this $1.86 fall in AQNT’s stock price suggests that it will be easier for it to surpass expectations and or up guidance. Please note that this is an observation - and at the very most a wish from an investor - and not a recommendation to buy or sell any of the securities mentioned above.
I know a few people at Right Media and began to track them all the way back when they launched when I was VP of Sales at a publisher, so I am very happy for them in this stock/cash deal, but the rapid spike in valuation in a matter of months shows - like the DCLK deal showed as well, that the private market for securities is a lot more irrational than the public markets…
Or, maybe, both markets are equally rational / irrational and ’tis the market for all things digital that is hot… I do wonder what this means to the valuation of companies such as Tribal Fusion, Blue Lithium and other privately held online advertising companies…
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