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This Company's CEO knows something that Mr. Market doesn't

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17

August 20, 2010 – Comments (5) | RELATED TICKERS: EXE

  

iMergent (IIG) is an eCommerce technology company.  A high-flyer during the dot com bubble, IIG's stock has fallen from $150/share back in 2000 to its $3 and change today.  Hey, at least it survived.  That's a lot more than many of the companies from that era can say. 

 

The eCommerce space is dominated by Art Technology Group (ARTG) and IBM (IBM, duh), so IIG must focus on smaller players.  I'm not all that familiar with the company, but I do know a number of people in this industry.  I have put out some calls to see what I can find out about the company.  In the meantime, there is something very interesting about the stock that I believe makes it a solid play...at least here in CAPS.

I'll get to the good stuff in a minute, first let's take a look at iMergent's balance sheet to make sure the company's not about to blow up or anything.

iMergent's stock is currently trading at $3.68 despite the fact that it has $1.61/share in cash on its balance sheet.  There is $20 million in "Other Current Liabilities" on there that I am concerned about, but all in all debt is not a problem.

My main reason for purchasing this stock in CAPS is the following statement by the company's CEO Steven Mihaylo last month:

We are confident in the long term direction of the company and we believe that our continued focus on product and channel development will lead to future growth for the Company as well as higher shareholder value. We strongly believe in the actions we are taking. We also believe that our stock continues to be undervalued. I have asked our Chief Financial Officer and our Chief Legal Officer to draft a tender offer which I will present to iMergent's Board seeking to allow the Company to purchase between 250,000 and 1,000,000 shares of iMergent's common stock at a range of $4.25 to $4.75 per share. We believe this action is in the best interest of our shareholders and our Company, we are hopeful that this will be more effective in allowing us to acquire stock than our repurchase program has been to date. We believe iMergent's Board will support this action, and we hope to have a tender offer in place by the end of this year."

Source: iMergent Reports Second Quarter 2010 Financial Results

In short the CEO would like to buy back between 250,000 and 1,000,000 of iMergent's 11.4 million outstanding shares in a tender offer for between $4.25 and $4.75/share.  If he gets his wish, IIG's share price should rise as the tender date approaches.

I haven't seen any updates on the potential transaction lately, but the Mihaylo has been buying IIG shares hand over fist on the open market since then.  He has accumulated nearly $900,000 worth of additional shares by purchasing on 7/30, 8/2, 8/3, 8/5, 8/6, 8/9, 8/10, 8/17, and 8/18.  It certainly seems as though he thinks the tender will go through.

Source: Imergent Inc. (IIG) Insider Transactions 

So there you have it.  As I mentioned, I plan on doing some more research on this company to see if it can stand on its own two legs without this special situation.  If so, then it may be a slam dunk.  

Deej

5 Comments – Post Your Own

#1) On August 20, 2010 at 2:44 PM, TMFDeej (99.43) wrote:

Is anyone out there familiar with iMergent?  If so, I'd love to hear your thoughts on the company.

Deej 

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#2) On August 20, 2010 at 3:55 PM, MegaEurope (21.42) wrote:

iMergent's stock is currently trading at $3.68 despite the fact that it has $1.61/share in cash on its balance sheet.

Another way to put it: IIG is trading at $3.68 because it has $1.61 per share in cash. Presumably if they had less cash they would be trading lower.

Treating cash as "free money" and assuming other investors aren't factoring it into their valuation is a little simplistic.

 

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#3) On August 20, 2010 at 4:30 PM, TMFDeej (99.43) wrote:

You're right MegaEurope.  Markets are always perfectly efficient. Hey what's that on the ground...a $20 bill...nah it can't be.  If it was someone would have picked it up by now.  I guess that it must be fake.  I'll just keep walking.  ;)

The cash provides a margin of safety that this stock wouldn't have without it.  It the company was up to its eyeballs in debt and teetering on the verge of bankruptcy this wouldn't be nearly the same trade as it is for a company that has a huge cash horde. 

Deej 

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#4) On February 09, 2011 at 7:13 PM, jacobjallen (< 20) wrote:

I know a bit about Imergent.  Feel free to contact me at jedallen at q.com if you still want info.

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#5) On February 09, 2011 at 7:13 PM, jacobjallen (< 20) wrote:

I know a bit about Imergent.  Feel free to contact me at jedallen at q.com if you still want info.

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