[Logan]

Thanks @vgsatwork and @nitin_asce for sharing your opinions with us.

@nitin_asce, as they say, “being too early is the same as being wrong.” With Lycos Life, BCG was quite early compared to many companies (not earlier when compared to FitBit etc). If you see now, almost everyone has a smart watch and that trend has accelerated because of the pandemic. Everyone wants to stay healthy and smart watches helps a lot in that. If the company had launched it a few years later then we could’ve seen good growth rates in that.

The same case in the stock market too. Back in 2012, when BCG came to the market, everyone wasn’t that interested in tech companies as they are now. Back then BCG had great growth rates but that didn’t reflect on the stock price. Imagine where the price would be if BCG had come to the market in the last 2 years and if it had the growth rates like it did in the 2010-16 period. Even the issues wouldn’t have impacted that much. Affle came to the market at a great time. Same with TTD but Criteo, Rubicon Project, RocketFuel etc came too early and went unnoticed for a longer period of time. Obviously growth rates do matter but now the market is highly valuing all the technology companies even if those companies don’t have good growth rates.

Sometimes being early is good too. In the online advertising field they were early compared to many others and that helped the company a lot. They bought OMS, Israel for just 50-60crs back in 2007-08 and now its making more than 1000crs revenue and profits are little over 200crs. BCG is getting 4 times profits what it paid for in a single year. If anyone wants to buy OMS now, they should be ready to pay 5k to 10k crores at least. OMS is profitable and if it is given some liquidity it’ll have great growth rates too.

Pubmatic with revenues of $120M or little more (with revenue growth rate of 14-15%) is trading at $1.80B valuation. That’s 15 times the revenue so OMS can easily get valuation of 5-10 times revenue. Magnite Inc now is trading at 20+ times revenue. When it was trading at 3-4 times revenue, Motley Fool website said Magnite is undervalued. We have BCG trading at 0.13 times the revenue and the market is completely ignoring it.

So whatever decisions the management takes, we should just hope that it’ll benefit us in the short and long terms. AI is growing like crazy and all the companies are investing heavily in that. If you don’t invest in that then you’ll end up missing out on the opportunities and the business may go down but if you do invest in that there’s no guarantee that it’ll result in growth of the business. It may end up like Lycos Life or it may end up like online advertising. Nobody knows what will happen.

[Logan]

Thanks for the reply @nitin_asce.

Could that be the reason he didn’t want the LOC to come to the parent company? If it came to the parent then Axis could’ve blocked it till the matter was closed?

So maybe that’s why they didn’t concentrate on the standalone business all these years, if they showed profits then he’d have to pay more to the banks. Now since they are settling with Axis he can start concentrating on the standalone business again and maybe that’s why he’s raising funds? Maybe acquire that company Tryan where Mr.Pisipathi is the CEO. He did say that Mr.Pisipathi is working on a hardware related project and because of the pandemic they are taking it slowly. It’s an agritech company.

Also, what if both parties don’t come at an agreement? What happens then? In many other cases they end up liquidating the company right? Will the same happen here or will the judges order BCG to pay that 41crs with some penalty?

If he didn’t want to show cash then why is he raising PW money? Axis can block that also right?

Sorry for asking these many questions.

[Logan]

@nitin_asce, I think the original loan amount was 41crs or something and the ots was 24crs. Including interests, BCG maybe has paid more than 1.5x (60-80crs) the original loan amount. Will the judges consider this?

Out of 24crs, 8-9crs are pending and the date has expired. If they put some penalty it should not be more than 12-15crs right?

In one of the orders (the lengthy one) I guess it states that Axis wants that 41crs but in the December order it states Axis is asking BCG to pay the full ots amount. I maybe wrong in understanding this but what amount is BCG supposed to pay?

[Logan]

@dileepvn, you are 100% right.

My observation was about what he’ll do with the PW cash. Obviously the price was manipulated and there’s no denying that.

What I observed was that he hinted that they are looking at acquiring companies like how they did in the past (once all the issues are resolved). Maybe he wanted cash to do that and maybe the first tranche from the LOC will not be sufficient.

Yes, the AGM was a total disappointment and he avoided all the important questions. The callers also didn’t ask him any important questions.

[Logan]

And the last amount that they raised, it was equity not debt. Valuation matters more while raising money through equity sale than debt. With the LOC, he’s keeping the receivables as collateral so I don’t think they consider the valuation part of the company. If you see many mergers and acquisitions in the past (mostly in the US), many smaller companies have bought bigger companies maybe twice their size using debt (leverage). That time most of the banks will look at the size of the business more than the valuation.

Also You are not harsh at all. I don’t mind us having these discussions. It’s very important that we have these meaningful discussion so that we understand the situation well enough. If my views are wrong then I’ll change them in a second.

[Logan]

@dileepvn and @Rathi_b, I’m not denying the manipulation of prices but my point is why go through these legal processes if he doesn’t need that cash? If it is shares that he wanted he could’ve simply asked those people to buy it for him and later he would’ve got them.

If you remember in 2015-16, he wanted to buy MySMS for 100crs and he was ready to give them shares instead of cash. That time also he didn’t care about the valuation.

Warrants approval requires legal actions. There are many rules and regulations for that.

Also I don’t think he wants the LOC to come to the parent company. If you remember in one of the calls, he said the same to a caller.

[Logan]

@Rathi_b, do you think Axis is keen on settling with BCG or do they want to drag it further? (Until BCG agrees to their demands)

Everytime in those NCLT orders, BCG’s lawyer says the company wants to settle and they are having negotiations with Axis but with Axis the reply is always the same.

What are your thoughts on this?

[Logan]

I think if he has to use that PO money then he should pay 24crs or something (the first agreed ots amount).

I don’t think he’s ready to do that and even Axis won’t agree to the amount that BCG is willing to pay (8-9crs).

[Logan]

These things have a timeframe right? The court has to give a verdict within that period?

[Logan]

I think they neglected the software business all these years and saw it only as an holding company but now they may have found opportunities to revive the business.

The CEO talked more about AI and ML in the AGM than about online/digital advertising so my guess is that they may scale up the existing AI business (Dyomo) or maybe they’ll acquire an AI company.

We should just hope that whatever he does it won’t end up like Lycos Life where even though the products were good, the company burnt a lot of cash. In one of the calls he said they’ll take things slowly with AI and ML and won’t rush it like Lycos Life which is good. They must have learnt a lesson on not to rush things.

[Logan]

Finally connection to BCG’s website is secure (https). First they changed the logo’s direction from \ to / and now this. Something is happening for sure.

[Logan]

@drjaysee, I don’t think he’d go for buybacks because if he did want to reduce the free float he’d have asked those people to buy shares from the open market instead of giving them the PW. Even if they were to buy shares worth 65crs at price 5-6, they’d have got more than 20% of the company – that’s not small.

In the last call he said that bringing in stable investors was a personal endeavour of his and he’s making good progress on that and he also said he won’t consider buybacks at this stage but maybe later.

In the AGM he talked more about AI than about digital marketing so maybe he wants to acquire an AI company with this PW money (just a speculation). Nothing is clear as of now and only the company/CEO can provide us proper details (which they haven’t till now).

We all hate the issuance of warrants but others (almost all the other market participants) won’t care about the warrants because all they care about are results. If by issuing warrants if the company improves and if the share price rises then most of the people won’t care about dilution.

I read an article on Indo count industries where before the warrants it was trading at lower prices and later it shot up. There the promoters got shares at cheaper prices but the market didn’t care about all those and all it cared was results and the results were good so the market rewarded Indo count. I’m not saying the same will happen with BCG – my point is that the market cares more about results than about execution.

[Logan]

@Adi, I’m just sharing information about companies in Adtech industry. We should know where the industry is going and how other companies/stocks are doing. Since analysts don’t cover BCG we should rely on reports on other companies to know more about the industry. Adtech business is very competitive and if companies lose focus then they’ll go out of business.

Motley Fool was very bullish on Magnite but Spruce Point is negative. Spruce Point has mentioned that they are long on TTD, Pubmatic and Roku which means it’s not the industry that they are bearish on but this specific company. It’s good to see both positives and negatives of a company/industry. Our aim is to make money (good returns on investments) and if we focus only on negatives or only on positives then we won’t take good decisions.

[Logan]

Spruce Point Capital Management Releases Report and Strong Sell Research Opinion on Magnite, Inc (NASDAQ: MGNI)

[Logan]

This was written by Scott M.Stolz on Quora.

What would a world without advertising look like?
The world would be a very different place.

1.Most free content and information would be gone. You would need to pay for everything now. No more free articles, websites, online newspapers. No more free TV over the airwaves either. And most free services like Google Maps and Gmail would disappear too. Certain things might persist, like Wikipedia and public broadcasting (PBS), but they would be constantly asking for donations to stay alive.

2.Products would deteriorate in quality and be packaged in plain packaging. It would be like the former Soviet Union, where factories did not advertise their products either. If you wanted them, you went to the store and bought whatever was on the shelf. Without advertising there would be no way for consumers to compare what products are better. This means manufacturers can make deals with retailers for exclusive distribution deals, and retails would accept them, since there is no consumer pressure to carry other brands (mostly since they are unaware there are other brands since there is no advertising).

3.It would be easier to form monopolies, since competitors cannot advertise. Some back room deals with suppliers and distributors, and it is easy to put a new competitor out of business. And without advertising, no one will even know the new company or product or service even exists, making it almost impossible to launch. So the lack of advertising would give an incredible advantage to incumbents. And incumbents would start behaving more and more like monopolies, increasing their prices, reducing the quality of their services and treating their employees poorly.

4.Depending how far the ban goes, it may even be difficult to find businesses. For example, one neighborhood near me has a ban on outdoor signs. One day I tried to find a business. I spent 1 hour looking for that place, and gave up, because there were no signs. And even if signs were still allowed, if a new shop opened up the next street over, I would never know unless I happened to drive by it.

5.Any business that does not have a prime location would have a harder time staying in business, since their only source of customers would be drive-bys. Real estate prices for prime property would probably skyrocket as a result.

6.Freelancers and independents would have a hard time making extra money, since they can’t get the word out about what they offer. They would have to get corporate jobs, if they could find it. Some of these people would have to go on public assistance since they can no longer support themselves.

Many people hate advertising, but without it we’d be handing money and power over the the incumbent corporations who are already in retail outlets, and are already known in the marketplace. It would effectively kill any competition and any startups, and force freelancers and independents to go back to work for the very corporations they were trying to break away from.

Advertising may not be pretty, but a world without competition and innovation is pretty ugly too.

[Logan]

Excellent analysis @hw_tw. Thank you for sharing it with us.

[Logan]

The Trade Desk Stock Tripled Last Year. Is It Still a Buy?

2020 was a phenomenal year for advertising technology stocks. The Trade Desk (NASDAQ:TTD), the leading demand-side platform (DSP), racked up a gain of 208%, as the company wowed investors with its ability to deliver strong growth even in one of the worst advertising environments in memory.

2021 looks set to be one of the best years for the business. Here’s why.

The economic reopening

In all likelihood, the coronavirus pandemic will reach some sort of end this year as the vaccine rollout continues, and that means the economy will normalize. The economic reopening is likely to unleash a wave of pent-up demand in areas like travel and hospitality, restaurants, and entertainment that have been affected by the social distancing requirements during the global health crisis.

For platforms like The Trade Desk, that’s likely to mean a surge in ad spending from those affected industries, as well as a desire to better target customers so these cash-strapped businesses can maximize their return on investment during a crucial time.

The Connected TV revolution

The brightest opportunity in ad tech today is Connected TV (CTV), or ad-driven streaming television. CTV appears to be at a turning point right now, poised to disrupt linear TV, which accounts for about a quarter of the U.S. ad market. That presents a massive opportunity for The Trade Desk and its peers.

Streaming consumption has surged during the pandemic, with significant growth at platforms like Hulu, YouTube TV, and Sling TV, as well as new ad-driven services like Peacock and Discovery+ that have also jumped into the fray. Meanwhile, cord-cutting appears to be accelerating, with traditional pay-TV services losing more than 1 million subscribers in the most recent quarter, and eMarketer estimates that cable TV subscriptions declined 7.5% in 2020.

[Logan]

Thanks @Rathi_b for your reply and sharing your thoughts with us.

In the November conference call he said the loc is for sorting out all the issues and not necessarily for growth- I think he meant to close off Daum issue. He also talked about bringing in stable investors and it was a personal endeavour of his and he had made a good progress on that.

(Maybe get the price to 5PE and then stable investors start coming in and he can’t say this in public?)

Also in the September call, if you remember, he gave a speech at the end about where he thinks the industry is going and he was very confident that the company has a great future and he also mentioned that they have great plans for the future (didn’t say what those plans are).

Don’t know what to take out from these but maybe after many years (2016) they are finally looking at growth again. The industry is changing so much and if he takes good decisions then it’ll benefit us. Whatever he does, he should not keep investors in the dark.

[Logan]

@Rathi_b, please don’t mind me asking this – why do you think the LOC is getting delayed?

We were hoping the company would get the first tranche by last quarter (Oct-Dec) but still there’s no update on that. Since they are getting cash by issuing warrants, do you think they’d still be interested in LOC?

[Logan]

One thing I’ve noticed is that people were frustrated with BCG for not closing off Axis issue and that may have led many people (maybe not the g gang) to exit or trim down their holdings. Except for this recent rally, the price didn’t move for many months and all the other tech companies’ shares were making all time highs and this led people to look at other companies.

Many will think why should I hold this laggard when I can find many other opportunities.

Also the g gang is not doing their usual frequent trades like they did in the past – maybe for the last 3 months or more. They’ve stopped it in BCG, Subex, Moldtek and Intense Technologies.

[Author]

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