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HistoricalPEGuy (63.02)

WWWW - Special K's Article on Seeking Alpha

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July 27, 2012 – Comments (0) | RELATED TICKERS: WWWW

A very rare thing happened today - a single blog by "Special K" made WWWW's stock price drop by 12%.  You can find the article at:

http://seekingalpha.com/article/752051-wwww-the-case-of-the-non-cash-cash-flow

First and foremost - "Special K" readily admits to shorting the stock, which actually makes his analysis all the more credible, but also calls into question his motivation for writing the article and the huge impact it had on the stock today.  Personally, I still own WWWW, but have massively reduced my holdings over the last six months - check out my previous blogs.

Secondly - The analysis by "Special K" is a bit misguided.  Many companies take on risk in order to grow.  SDRL is probably the poster child here.  Companies make a bet, based on what they think the future holds and then leverage themselves to take advantage of the opportunity that lies before them.  While Special K points out key risks, he misses several key upside factors.  The biased analysis performed is deluding investors - who if not careful, will be caught in a short squeeze if Web.com simply continues to operate as they are today.

Yes, its true - Web.com is losing money.  Web.com has a significant debt load.  If the economy tanks, Web.com could be left holding the bag. 

What's also true - Web.com has increased revenue from $46 MM a quarter to $119 MM a quarter.  That type of growth cannot be ignored.  Yes, it is through acquistion, but they are in prime position to pull it off.  What "Special K" doesn't mention is that Web.com is in great position to emerge from their leveraged acquisitions in great shape.  "Special K" argues that the stock isn't recession proof (very true) and that its in an industry with a low barrier for entry.  These are the only real knocks on Web.com.  The low barrier to enter just isn't true - but relative to other industries it might look that way.

Final Point:  Investment in WWWW is risky, just like all other investment vehicles.  However, "Special K" is only talking downside and simply doesn't understand that growth can be painful in the short term, but wildly beneficial in the long term.  Take a hard look at his analysis and you'll quickly realize that GAAP results just aren't that bad.  The more likely scenario is that WWWW pays down its debt over time and emerges as a leader in the space.

------ HPEGuy

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