Well, that’s the way to not only waste $48 million on a dud buy, but see your shares cop a pounding from nervy investors into the bargain who carved $US88 million off iSentia’s market value yesterday after it delivered more bad news in an update.
In the late nineties, investors blindly piled in to any stock somehow related to this new-fangled interweb thingy that was supposedly set to change our lives, in most cases blissfully unaware of what it all meant. PE ratios for internet start-ups flew off the scale, basically because E was still just a pipe dream.
Following our earlier comments on the Isentia (ASX:ISD) result, we have now met with management, of Isentia as well as major competitor, Meltwater, and formed a view on our holding. Our view may change as new information comes to hand over time, but for the time being we have settled a position, and can outline our decision and rationale.
As many investors have noted, iSentia Limited (ASX: ISD) delivered a poor earnings announcement yesterday. The Montgomery Fund and Montgomery [Private] Fund both hold positions in ISD, and so this is clearly disappointing for us. The combined holdings amounted to less than 2% of the assets in those Funds before the announcement, so the damage was contained, but nonetheless, disappointing.
iSentia’s AGM revealed paywall negotiations have now been finalised and the business has performed to expectations so far in FY15. Guidance was maintained but the broker sees earnings risk to the upside. The broker expects online access, both paywalled and free, to be available from major Aust publishers from January, which should accelerate the take-up of online services.
A number of deals are re-shaping the global media intelligence landscape and UBS explores the potential for Isentia. The broker still believes the company will benefit from Asian growth and has the first mover advantage. The company is unlikely to be an M&A target, in the broker’s view.