I want to discuss an interesting company, and an interesting situation. While I am not sure an investment here is worthwhile, given the recent movement of the stock, it is still an interesting situation, and now there is an additional resource that investors should be aware of.
As I have discussed with readers in the past, I highly encourage investors to attend annual meetings. Some of the bigger meetings that have turned into events, ie. BRK or Fairfax AGM’s, are a great place to meet like-minded investors and a great source of ideas.
The idea I liked best from this years set of meetings was, Fund.com (ticker FNDM). This was a unique idea focused on an interesting tiny company. The stock has roughly doubled since I first started looking at it and the market cap is still only $3mil (using a stock price of $3.50). I like unique ideas like this that only retail investors can take advantage of.
Initially, this was a simple investment situation where the stock was trading below its liquidation value, and there was good reason to believe there was further upside. The other thing that attracted me to FNDM was that Thomas Braziel and his fund B.E. Capital Management were appointed as the Receiver for Fund.com shareholders. Mr Braziel is a very interesting guy who digs into obscure parts of the market. This is not the first time Mr Braziel has done this. Here is a great story about his huge win buying Ethanex Energy. That situation was similar to FNDM, whereby the stock was trading at much lower levels than the legal recoveries the company could realize.
This article about FNDM is a good summary of the investment. For those that can’t access it, a quick summary is that FNDM was highly likely to receive $1.7mil from AdvisorShares, and there was other areas of value that FNDM could potentially recover from the company’s sordid past, detailed here. One questionable transaction previous management did was selling fund.com for $10mil. This $10mil was never received by FNDM shareholders, so it was thought that FNDM may be able to recover the domain. When I was looking at this, FNDM was worth $1.38mil but they were likely to have more than $1.6mi in cash, after legal fees, once they were paid by AdvisorShares. There was also the additional upside if they recovered the fund.com domain, and there is a small chance that Mr Braziel could recover some additional assets. I was lucky enough to buy a very small position at that price.
Now the company has ~$1.66mil in cash, and they did manage to recover the domain!
What is the stock worth now? Very hard to say exactly. I don’t think the domain is worth $10mil. The only recent domain transaction I am aware of is first.com (which SYTE owned, disclosure long SYTE), and they sold that domain for $250k. The huge amount of assets ETF companies have under management, may mean such a domain is worth much more. For example, Fidelity owns the domain name funds.com, would it be worth it to them to purchase fund.com? The current trading price of FNDM suggests that the market thinks the domain could be sold for $1.5mil. If the domain was sold for $250k, and no other assets were found, then the stock would only be worth ~$2.
While the investment may not be that compelling at this price, the story is interesting, and the domain fund.com is now an interesting resource for investors. There is a link to special situation filings, there is a tracker that looks at a huge amount of ongoing special situations, and there will also be investment ideas posted to the blog. I will likely contribute an idea to that blog myself.
While this may not be an investment opportunity at current prices, unless you think the domain is worth a lot (let me know what you think), but I think it is very instructive to follow such ideas. To me it is always worth paying attention to investors that are doing something different. It gives you a chance to learn and develop additional investing skills. I also think the website could be a good resource to find some special situation investment ideas.
Disclosure; Long a small amount of FNDM
Any update on this?