|In the days preceding the filing of Facebook’s initial registration statement, most of the social networking stocks, including LinkedIn, Zynga, Renren and Quepasa, experienced nice gains (see preceding post). As the date of Facebook’s actual IPO approaches in May, I expect these stocks to have another run, whether or not their fundamentals justify that run. |
One of the more interesting (if speculative) plays is Quepasa Corporation (stock symbol: QPSA), which owns two social networking properties (Quepasa.com and myYearbook) that are probably best described as second or third tier websites. The company also operates a casual gaming platform.
Quepasa.com, a survivor of the Internet Bubble (which raised over $200 million in total funding), is a money-losing bilingual social networking website that services the Hispanic community in North America and South America. The site claims to have over 35 million members. At one point in 2000 the website was ranked as the most popular destination for U.S. Hispanics.
The real sizzle of Quepasa is the myYearbook website. Whereas myYearbook is generating an actual operating profit, Quepasa has been losing money. See recap below.
On November 11, 2011, Quepasa completed the acquisition of myYearbook in a transaction that was valued at $90.1 million, including $18 million in cash and 17 million shares of QPSA.
myYearbook was launched in 2005 by two high school students who outsourced the actual development of the website to contractors in India. The website, which has over 20 million users, “provides the opportunity to interact and meet new people (and) retains the natural fun feel of dating and provides good reasons to interact through leveraging demographics and interest data.” The website, which generates revenue from the sale of advertising and virtual currency, is targeted to a young demographic. According to QPSA’s SEC filings, myYearbook is “the number one site for “Teens” in terms of minutes, visits and page views in the comScore Teens category and is consistently ranked in the top 40 of all U.S. web domains in a number of leading statistics including minutes per user per month, page views and visits per visitor according to comScore. . . In September 2011, myYearbook’s mobile applications accounted for over 46% of its total daily active users, up from only 2% in January 2010.”
As of December 5, 2011, QPSA had 35,947,133 shares outstanding, not including warrants and options to purchase approximately 14 million additional shares. QPSA closed at $4.18 on Friday, giving the company a market cap (once again, not including the warrants and options) of approximately $150.3 million. According to Yahoo, over the last 52 weeks the shares have traded as high as $10.70 and as low as $2.74.
To finance the acquisition of myYearbook, QPSA raised approximately $12.5 million through the sale of common stock and convertible securities.
Recent financial results
Quepasa Corporation – Nine months ending September 30, 2011
Operating income (loss): ($6,906,739)
Net earnings (loss): ($7,349,251)
Quepasa Corporation – Nine months ending September 30, 2010
Operating income (loss): ($4,416,158)
Net earnings (loss): ($4,948,962)
Quepasa Corporation – Year ending December 31, 2010
Operating income (loss): ($6,055,395)
Net earnings (loss): ($6,762,150)
myYearbook – Nine months ending September 30, 2011
Operating income (loss): $372,254
Net earnings (loss): ($119,803)
myYearbook – Nine months ending September 30, 2010
Operating income (loss): $504,217
Net earnings (loss): $137,342
myYearbook – Year ending December 31, 2010
Operating income (loss): $1,765,465
Net earnings (loss): $3,071,298
Tangible book value as of September 30, 2011 (adjusted for the merger): Approximately $8.2 million
Major Holders: According to Yahoo, 44% of the shares are held by insiders and 5% holders and 7% of the shares are held by institutions.
Reporting date for year end results: QPSA is scheduled to report their 2011 results on March 1, 2012.
Warning: I want to emphasize that QPSA is a very speculative play. Quespasa is not Facebook, but it may be undervalued relative to Facebook simply because it is a second tier property. Also, it is important to note that QPSA has a checkered history and the ownership of the common shares is not highly concentrated. The stock is subject to wide price swings and there is probably not a lot of loyalty amongst the shareholder base. You can probably expect some heavy selling if the stock makes a significant upward move. Do some due diligence.
Quepasa’s SEC filings can be found here: http://www.sec.gov/cgi-bin/browse-edgar?company=quepasa&match=&CIK=&filenum=&State=&Country=&SIC=&owner=exclude&Find=Find+Companies&action=getcompany