August 21, 2008

IAC Interactive now 5 companies

IAC completed a stock spin-off of four separate businesses today leaving shareholders with five separate holdings. Will any of these spin offs be worth more as a separate company than a part of conglomerate?

The businesses now are as follows: Home Shopping Network (HSNI), Ticketmaster (TKTM), (TREE), International Leisure Group (IILG), and the parent IAC/Interactive Corp. (IACI).

All of 5 stocks got a good pop today except one Lending for obvious reasons. To me Lending tree is the most interesting business. It is in economic sector that no one wants however most the bad news and losses have been sustained already and they are reflected in their results. The company is strongly capitalized with $110 million of cash on hand. The company has a market cap just under $70 million. So the company is trading less than cash on hand makes it a candidate for "net net" business as defined by Graham. A further analysis and look into its business is in order.

I am not so excited about the other businesses. TicketMaster is a business that a lot of investors are falling heads over heals for due to its "monopoly" on ticket sales and distribution, so lets look at that for a second. TicketMaster built that monopoly at a time when Internet was absent so it had a technological and economies of scale advantages over separate venues because it was more ubiquitous. Now any venue can sell its tickets itself online and users can easily access their sites and venues do not need any scale to accomplish that.

LiveNation is concert promoter and constitute a significant portion of TicketMaster business, now its taking its business in house. Others can and will follow suit. So its monopoly is weak and could disappear quickly so I am not excited.

IACI the original business is headed by Diller and has tons of cash on hand due to the recapitalization. Mr Diller has bought any company with .com in its title over the past few years and now he is "unlocking value" by spinning them off. I am not sure I want to go through the same ride again. The remaining business of IAC Interactive is online advertising business that competes against the likes of Google and Microsoft. Those are very formidable competitors so the prospect of owning a business against those competitors do not excite me.

I have not looked too much at the Home Shopping network and the Interval Leisure Group to make any educated guess. So for the time being I want to look closer at Lending tree business and see if it worth buying.

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