[Logan]

Facebook Users Interacting With Misinformation Way More Now Than In 2016, Study Finds

During COVID-19 times and election year, it’s very important to read genuine information.

BCG signing reputed publishers for their B-Local initiative is a very good move. People trust news that’s published in local newspapers/publishers more than they trust news shared in social media platforms.

Business wise we don’t have many complains but we always have issues with BCG’s corporate governance. If they improve that and if they are more transparent then price will catch up with intrinsic value sooner than later.

[Logan]

@buffet, that amount is not hard cash (reserves and surplus), BCG doesn’t keep any reserves, they always put it to work. After balancing assets and liabilities you get a figure that some people say other equity and some say reserves and surplus.

You have to understand where the assets are used for. In BCG’s case, they buy media space from publishers (bought for advertisers), spend on product development (Compass platform and other products), pay advances to collocation centres, develop a number of databases etc.

Please read the Asset Impairment presentation to understand more.

Growing companies won’t keep assets in reserves, they always put it to work. The loans and advances that BCG gives are for buying media space and other things that I’ve mentioned above.

BCG doesn’t report it properly in the annual report and that’s causing many people confusions, when they see loans and advances and other assets, people think those assets are cash, bonds etc but that’s not the case. They should report it properly in the annual report to clear confusions and that’s what we (suggestions that we sent) asked them to do. Hopefully in this year’s annual report they’ll report everything properly.

You have to take out cash from the operations to pay off those loans and to pay Daum. You have to be ready to take a hit on the revenues and profits to do that. All these years BCG paid off loans from free cash flows. If they had better free cash flows or large reserves then they wouldn’t have waited all these years to resolve the outstanding issues. The main reason they are going for the LOC is because they want to improve free cash flows which helps in growth, pay dividends or for buyback of shares etc.

[Logan]

@Antu, I’m not questioning your writing here or I did not misunderstand you, it was you who wrote that the meeting was a waste and I gave my opinion on that. You have also mentioned about price.

There’s no denying that the management has to improve on transparency and in fact we all have been putting pressure on them to improve that. If you see the topics we are discussing, most of them are concentrated on improving corporate governance. Most of the queries that we sent to the company during conference calls were on that subject. We are doing what we can do on that and if the company doesn’t improve then it’s not our responsibility.

[Logan]

@Antu, the people who went to meet the CEO did it to get clarity on many issues. The meeting was not a waste at all in any sense, because of them we all got clarity on Axis, LOC, Daum and many other topics. You should be thanking them and you really should appreciate their efforts. They went to meet with the CEO during pandemic times, tell me, how many people are ready to do it?

You can’t relate stock price movements with the meeting. The meeting was done to get clarity on issues and not to jack up the prices.

[Logan]

My guess is that the audit was done mostly to get the LOC. Back in 2016-17, BCG’s subsidiaries were audited by EY at White Oak’s request/order. Since BCG has many subs, the lenders will always ask for a complete/thorough audit which usually takes time.

I don’t think they’d reveal the report to public because it contains all the sensitive information about the company. They shared many presentations with us during the lockdown which was good.

I agree with @odysee on lack of details given by the CEO on consolidation of subs. My guess is that they are not sure whether the parent company gets the LOC or the consolidated sub gets it. If they consolidate all the subs and if the parent gets the LOC then they have to make other arrangements (mostly tax related).

The business is good but the CEO doesn’t know how to communicate with the markets. If they improve corporate governance and stop giving wrong timelines then people will trust the company more. Appointment of Mr.Acharya is a good move.

[Logan]

For the price to get out of operators’ (manipulators) control, we need to see material changes.

During 2012-13, the price crashed below 3 levels because of LGS write off and then it rose to above 60 levels because of material changes in the business (tremendous growth in revenues and profits).

Then again there were fluctuations in prices because of Daum case and finally it crashed because of bankruptcy announcement of one of BCG’s subsidiaries (Ybrant Media Acquisition Inc).

Then when all these were happening simultaneously there was selling by VC and PE firms which brought in more supply of shares. Combination of all these became a disaster for the stock price.

When all these happened there weren’t material changes in the company to stabilize or lift up the price.

In last 1-2 years, there were/are material changes, even though SBI and Canara loans were closed we didn’t see changes in price because pledged shares weren’t released. During corona rally, we saw reduction in pledged shares and that gave strength to the rally.

Oak selling halted that rally but didn’t crash the price to extreme levels because the market knew Oak was exiting.

But the recent crash is because of Axis case which is causing lot of uncertainty (wrt price not business) and operators are taking big advantage of the current situation. They are creating panic among investors (we can the volumes).

Fortunately we don’t have many issues now so these operators can’t manipulate like they did in the past.

[Logan]

@Rathi_b, thank you for the clarification. It cleared all the confusions I had on Axis issue.

I don’t think we can understand G group’s intention. 2 entities of theirs have kept stake below 5%. Are there any regulatory filings needed to do if the stake is over 5%?

To get stable investors’ attention, the best thing BCG could do is have higher growth rates so LOC plays an important role. Even without LOC, the profits grew 23% so after they receive it’ll be very interesting to see the growth rates. In the conference call, the CEO was very confident on the future of the company so it’s a good sign.

Market recognises BCG’s potential and strengths but it is not yet ready to give the right valuation because of Axis. I don’t think people would’ve cared much about Axis debt if Axis didn’t go to NCLT (SBI and Canara are the examples). Just the name scares investors so much. Markets hate uncertainty and the delay in NCLT isn’t helping anyone.

I don’t think any other company’s stock price would’ve fallen after seeing positive news. 23% growth in pandemic times is not a small accomplishment. We have TTD trading close to 250PE and BCG struggling at 0.5PE. I think convincing the market to move on from the past is very important. Criteo’s stock is also struggling to move but it had issues with business but with BCG the issues are legacy issues and their impact on the business is not much but the market is not understanding it. I don’t think market is factoring in programmatic advertising when it’s valuing BCG.

[Logan]

Thank you for the clarification @nitin_asce.

The sad part is BCG can’t utilise the PO funds it received.

[Logan]

@Rathi_b

In the conference call, the CEO said Axis went to NCLT to put pressure on BCG and the case getting delayed in NCLT doesn’t have any impact on the negotiations they are having with Axis.

What are your thoughts on this?

[Logan]

Yes @diamond_2017, you are right, sorry I didn’t notice that.

[Logan]

@JRS, you are right, operators are playing with investors’ sentiments. BCG had a great momentum but Oak selling and Axis issue stopped that and turned the sentiment to negative again.

According to Warren Buffet “In the business world, the rearview mirror is always clearer than the windshield”. This quote can be applied to BCG’s situation. Market is more worried about the past that it is completely ignoring the present and the future.

Now, all the businesses are going digital and these companies are advertising more. People are watching more content online, fans aren’t allowed inside the stadiums so they have to watch all the sporting events online, same with movie theatres and many other things.

Then after we get the vaccine, the old advertisers will be back. Advertisers like airlines, retail outlets, travel industry, cruise ships, casinos, movies theatres and many others will give great discounts to get crowd back to pre-pandemic levels and mostly they’ll advertise online as they know where people are spending more time.

I’m not hyping anything and I don’t have any intention on that but looking at the current situation, business wise, both present and the future are good for BCG but valuation wise our market is fixated more on the past. It takes a lot of effort for the management to convince the market to move on from the past.

Trust plays a major role and they have to be as transparent as possible to gain back the lost trust. When the prices are falling it’s important that the company replies back to investors mails (they need not give complete details, just replying back is sufficient on many topics). It shows that the company is with the investors during tough times.

Appointing a new person to look after the investors relations is a very welcome move. Appointment of Mr.Acharya and the CEO buying shares from the open market are also good steps. Removal of pledge on promoters shares is also important (don’t know when it will happen as SBI ots was paid last year in March or May but we saw removal of pledge on shares this year).

[Logan]

Thank you @Rathi_b, @sateanna, @tanv151 and sk vedula. We all owe you a lot for doing this.

[Logan]

@drjaysee

For FY20 (without considering PO shares), the EPS is Rs.9.24 and Book Value per share is Rs.59.3.

If you consider PO shares then EPS is Rs.8.67 and Book Value per share is Rs.55.6.

[Logan]

@hw_tw, LGS was already listed and BCG reverse merged with LGS so its not a traditional acquisition. All the responsibilities were transferred to BCG’s management when the merger completed. The loans were taken by the company and not by the promoters so even if there’s a change in management, the company has to pay off those loans. So, BCG, not LGS, has to pay off the loans and they have been doing it since 2012-13. You have to give something as collateral so promoters have pledged their shares.

This is the case when a company (ABC) acquires (merges with) another company (XYZ). ABC will taken on XYZ’s debt also.

I don’t know why Axis put LGS promoters’ properties for sale but that was stopped by BCG’s lawyers. So whatever discussions that are happening are between BCG’s management and Axis and LGS promoters aren’t involved.

[Logan]

@hw_tw, the loans that BCG has/had are not traditional loans. BCG had ots (one time settlement) with all the banks and the company has paid down almost all the debt except a small amount with Axis (almost 220-250 crores have been paid and 8-10 crores are remaining). Since these are ots, I don’t think these can be transferred to other banks.

The loans were taken by LGS and it’s promoters gave surety and when BCG bought LGS the responsibly shifted to BCG and it’s promoters so shares are pledged.

There are/were disagreements with Axis on the final amount to be paid. BCG first paid SBI and Canara and I think the final date to pay off Axis ots expired so Axis went to DRT and NCLT to put pressure on the company. I think the other names in the list are LGS promoters. Don’t know why Axis has mentioned LGS promoters in the list.

In one of the conference calls, Mr.Reddy said they stopped Axis from putting properties on sale.

Even in NCLT, I don’t think Axis has mentioned anywhere to put properties on sale. They’ve mentioned the PO money.

[Logan]

@tanv151, no need to apologize for your post, I understand that you are frustrated with the CEO and BCG’s management. Like you even I’m frustrated with them. As you said, its very important for us to stay united. There are so many conspiracy theories about this company that it makes everyone lose patience. Operators are manipulating share prices as per their wish and its really sad to know we can’t do anything about it.

The CEO should make big changes in the way the management sees shareholders. The market sentiment is extremely negative and BCG’s management should focus on changing that. They show the intention but they aren’t executing them on time.

[Logan]

On Axis, PO and LOC

1) I don’t know why he didn’t take out 10 crores from the 120 crores, only person who could answer is the CEO and not me. Raising funds may not be only for Axis, the company has other plans too (a part of it may have gone to pay Daum if they’d considered paying in installments, there’s Mr.Pispathi’s project etc).

2) If he could get LOC why PO? Even on this you should ask the CEO but anyway I’ll give my opinion on this. Axis was very persistent on closing off the loan and they went to DRT and NCLT against BCG so he may have raised the funds needed to close it off sooner.

3) Again, you are asking the wrong person here. I don’t know why it was delayed. If you really wanted to know about this then you should’ve told us to mention about this in the questions list that we sent to the company to be answered in the conference call.

4) Yes Mr.Subrata was a director in BCG and he and others got PO shares. I don’t want to comment on conspiracy theories so I won’t comment on things like why they were chosen. I don’t think there’s any problem with giving preferential shares to friends. Many companies do that all the time, even Tatas got preferential shares in Tata Motors and Idea promoters also got in Vodafone Idea. If there were misdoings then why did SEBI, BSE and NSE all approve the process?

You are showing all your frustrations on me instead of showing them on the CEO. Would you be able to answer these same questions if I asked you?

Please let me know

Why BCG wants back Lycos?
Why is the CEO delaying the payment to Daum?
If he could get LOC why PO?
Why PO process was delayed?

We all may have different opinions on the company and the stock but at the end of the day all we want is good return on our investments. We want the company to be as transparent as possible, we want them to communicate well with the shareholders, we want them to address all the shareholders concerns. We want them to confront the operators who are manipulating share prices.

[Logan]

@tanv151, it seems like you are asking these questions to the wrong person. Only the CEO could answer all these questions. Like you, even I’m a retail investor and just like how you have your own opinions, I also have my opinions on different subjects. There’s no rule saying that we all should agree with each other on all the topics right?

@odysee asked my opinion on uncertainty and I shared my opinion on that subject, it’s simple as that. I’ve mentioned that I don’t give importance to Axis and Daum and I’ve never mentioned that the CEO is doing a good job on delaying these. These 2 issues are having a great impact on the stock price and causing a lot of anxiety and uncertainties but the impact on the business is not big. I didn’t force anyone to agree to my views and opinions. I’ve never said BCG doesn’t have corporate governance issues and in fact I’ve always highlighted that. The main reason there’s lack of trust is because of corporate governance issues.

Coming to your questions,

On Daum,

1) I don’t understand how you can ask me about the court verdict, only the CEO and BCG’s lawyers can answer these questions. In my opinion its mostly to do with the arrangements BCG made with Daum or any other reason which only the management knows.

2) I don’t know what value the CEO sees in Lycos (to get it back) so only he could answer that.

3) I don’t know why he’s delaying it but my guess is that he wants to settle it at once instead of paying in installments (given the history with Daum).

4) Regarding the 120 crores in cash, no company will dedicate all the cash to one thing (be it on business or settling issues) they’ll always keep cash on hand for emergency. 120 crores is a small amount (at least in dollar terms) to have a great impact on the business. When converted to dollars the amount is $16M. If you get a return of $2M putting all the $16M on business or any other thing then that’s not a good move. You always have to keep some amount for emergency purposes.

5) Again, committing all the 120 crores to settle Daum will wipe out entire cash on hand and there won’t be any cash left to run the business smoothly as there’ll be no liquidity at all.

[Logan]

@kmr003, what’s wrong in comparing BCG with TTD? I don’t know whether if it’s an apple to apple comparison or not but both those companies are in the Adtech industry. It’s not my problem if some people compare BCG with random companies.

@cvkrr, every company will have its own business model and it depends on many factors. Google, Yahoo and Bing are all search engines but why do they have different business model? Why only Google is dominant?

I really don’t know the day to day operations of these companies so whatever opinions I give you won’t be any good. I think its better to ask the CEO about these.

[Logan]

@ramganesh1982, on receivables, compare BCG with its peers like TTD and Rubicon Project (which is now Magnite Inc) to get a better understanding.

TTD’s (2019) receivables are $1.12B and its revenues are $661M (1.7 times), Magnite Inc’s (2019) receivables are $217M and its revenues are $156M. BCG’s (2019-20) receivables are $129M and revenues are $381M. Compared to these 2 companies BCG has way less receivables.

You have to look at payables also to understand the cash flow issues. TTD’s payables are $868M, Manginte Inc’s payables are $259M and BCG’s payables are $13.5M. Here too BCG’s payables are way less compared to the others (those 2 companies receivables and payables are more than the revenues).

I’m not saying BCG is better than these 2 and my point is that many smaller players in the Adtech industry have receivable problems. TTD and Maginte have better cash position as they may not have to pay publishers like BCG does. If the payables stayed with BCG then it’d be in the form of cash and BCG could’ve used some amount for other things (fix outstanding issues sooner).

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