After a 8% spike on Friday - fuelled by MSFT paying an 85% premium for AQNT - today Valueclick rose an additional 11%. I owned this stock (and others in the space) in the past and sold it when it first doubled from $1o to $20. I saw a strong momentum in digital advertising stocks again, but focused on so-called best of breed players and doubled up on AQNT. This paid off quite well on Friday.
It doesn’t take a genius to figure out, that like TFSM and AQNT, VCLK will benefit from M&A hype. Of course, both TFSM and AQNT did sell eventually. I did not buy TFSM again, having made a nice return in the past, I also did not buy VCLK this time around… and at a $3.3B market cap, I probably won’t.
I might be proven wrong on this (won’t be the first time; DCLK/GOOG), but I don’t see VCLK selling as a slam dunk.
First, there’s the FTC inquiry clouding one third of its business. Then, there’s a little detail about VCLK. Unlike AQNT, I don’t know who really uses VCLK!
Will VCLK sell too?
I don’t know. I don’t know if it would sell, and I don’t know, frankly, who uses VCLK.
A story on TheStreet quotes an analyst on Think Equity as saying “VCLK is attractive because it has technology,” indeed, but I don’t know many publishers or advertisers who use it. Its ad serving platform, Mediaplex, might have been used by 1 out of, what a million potential business users, whereas everyone seemed to use DCLK or AQNT.
Listen, I’m sure many people use VCLK, I can read a financial statement, they make money and all, but unlike DCLK or AQNT, VCLK just never seemed to be the must-have stock in the sector within one’s portfolio, that was AQNT.
In my experience in ad sales, I recall VCLK as being one of those companies that was in the space but you never knew what it did. Here’s a rundown of its solutions. It made a plethora of M&A deals, including one for Commission Junction, and last year alone it saw its stock double largely based on acquisitions’ contributing to the top and bottom line.
Is VCLK complementary to AQNT? Sure, why not. Aren’t most things online? But after paying $6B for AQNT, I hope MSFT does not waste $4-5B (VCLK is now at $3.3B - up 100% since last year!^#$#) on a second/third tier advertising network and focus on what it needs to do which is a traffic boost in general and search queries in particular.
Facebook - who says wants to remain solo - could sell for $5-8B - so instead of paying anything near $5B for VCLK, MSFT might as well just make Mark Zuckerberg an aQuantive-esque offer and get the hottest company around.
[Before you blast me, I don’t think Facebook is worth $5-8B, but since when has value been one and the same as price? Last Fall, using figures on the size of social networking advertising, my analysis put Facebook at $2.35B in 2010, and of course, the recent slate of M&A deals, Facebook’s forays and growth trajectory have made that look so unrealistic and conservativee, since price is in fact what someone will pay for something, and not what yours truly, or any analyst says something is worth].
Then again, there are so many takers for all things digital that I would not be surprised seeing someone walk in and make VCLK an offer they can’t refuse, but before diving in at these prices, note not all stocks end up fetching a market leader premium as AQNT did, when TFSM sold to WPP, it sold for pennies more than what they stock was trading at because it had already run up quite a bit in the weeks and months leading up to it, and with the FTC cloud remaining an issue, this is one stock that is more than fully priced and more risky than the potential reward offers, in our humble opinion.
Disclaimer: of companies mentioned above, I’ve owned them all at one point but currently only own AQNT.
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