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Take it Private! Big Apple Bagels

Take it Private! is a new series looking at one company each week that, in my opinion, has no reason for being public. To find these companies, I screen for the following:
  • High insider ownership
  • A history of solid profitability
  • A paltry Price/Earnings and/or Price/Cash Flow multiple, combined with a reasonable Price/Book ratio
  • A stagnant stock price accompanied by low volume indicating a lack of interest in the stock
My purpose in highlighting these companies? This screen can be a good way to find deep value stocks, especially companies that may be attractive to a strategic buyer, private equity firm or management-led buyout at a premium to the current share price. However, these profiles should not be interpreted as a recommendation to buy a certain stock. For the second week, let's take a look at BAB, Inc. (OTC BB: BABB).

A word of warning: given its status as a bulletin board stock with a $7 million market cap and less than $4 thousand worth of shares trading hands on any given day, BAB Inc. is probably an inappropriate investment for the vast majority of investors. Nevertheless, it is the company's size and lack of trading liquidity that makes it a great fit for the Take it Private! series.

BAB Inc. is the parent company of breakfast franchise concepts Big Apple Bagels and My Favorite Muffin, along with Brewster's Coffee, which is served at those two stores. With just one company-owned prototype store, BAB Inc. has 126 franchised locations. The company is solidly profitable and the shares currently pay a dividend yield of more than 8%, and it appears to be sustainable.

Here's where it gets interesting: insiders own 48.72% of the stock, giving Big Apple Bagels an absurdly small float for a public company. Given that, the public company expenses alone make this an ideal candidate for a management-led going-private transaction. To tell you the truth, I'm amazed that this company is public at all.

Take it Private! Hastings Entertainment

Take it Private! is a new series looking at one company each week that, in my opinion, has no reason for being public. To find these companies, I screen for the following:
  • High Insider Ownership
  • A History of Solid Profitability
  • A paltry Price/Earnings and/or Price/Cash Flow multiple, and a reasonable Price/Book ratio.
  • A stagnant stock price accompanied by low volume indicating a lack of interest in the stock
My purpose in highlighting these companies? This screen can be a good way to find deep value stocks, especially companies that may be attractive to a strategic buyer, private equity firm or management-led buyout at a premium to the current share price. However, these profiles should not be interpreted as a recommendation to buy a certain stock.

For the inaugural column, let's take a look at Hastings Entertainment (NASDAQ: HAST).

According to Hastings' latest proxy statement, the company's current directors and officers own 33.91% of the company's stock. Chairman and CEO John Marmaduke alone owns 29% of the company. So Hastings definitely meets the first test: high insider ownership.

Continue reading Take it Private! Hastings Entertainment

Prosper.com puts private lenders in touch with borrowers

Prosper.com logoProsper.com is one of the most amazing things I have ever seen and a grand statement of the pioneering spirit that keeps the wheels of prosperity in motion. At Prosper.com individual private investors are able to assist in serving the needs of potential borrowers via a bidding process to finance a wide variety of loan requests.

It works like this: First you register for the service, which the site says is fast, easy and free. Then, you create a loan listing that states how much you want to borrow and the interest rate you are willing to pay. Potential lenders can begin bidding on your loan request as soon as your listing is created. As lenders compete to finance your loan, the interest rate can become more favorable to you. After your listing closes, if you have successful bids, apparently the funds are then deposited in your account. I believe Prosper.com acts as the intermediary for these deposits. Finally, fixed monthly payments are then automatically withdrawn from your account. Prosper.com claims that there are no hidden fees and that the loan can be paid off early without penalty.

I can't actually endorse this service because I have no personal experience with it but it sounds extremely interesting, and the site appears to be for real. I'd love to get some feedback from people who have successfully used this service. If it's as valid as it appears to be, we just might have a new era of personal financing coming over the horizon.

Ask.com tries to market user privacy with AskEraser

IAC InterActive (NASDAQ:IACI)'s Ask.com has about 5% of the U.S. search engine market -- not much.

But the internet property is going to try to go against the trend. Instead of taking data from customers to target ads, Ask.com will let users "hide" their search data to promote privacy. The company is launching "AskEraser," which will destroy all personal information about a user.

According to The New York Times, unlike typical online privacy controls that can be difficult for average users to find or modify, people will be able to turn AskEraser on or off with a single click."

The privacy police will probably be very happy about the announcement. But it takes a big targeting tool away from Ask, and Ask can use all the help that it can get. It has tried and tried but has had no success in prying search share from Google (NASDAQ: GOOG) or Yahoo! (NASDAQ: YHOO).

The move by Ask is based on the premise that most people care if search engines collect data on them to better target search results and advertising. Since very few people opt out of programs that collect data online, the answer is that almost no one gives a damn.

Douglas A. McIntyre is an editor at 247wallst.com.

Metacafe: The economics of watching stuff on the web

Are you an entertaining person? Are you a visual story teller? Can you capture an audiences attention and make them respond to you? If you think you have what it takes to create interest, incite and entertain, then there are options open to you. Don't just tell me you're an artist. Grab your video camera and prove it on Metacafe.

Metacafe is not just another video sharing website. Metacafe has something for you. Cold hard cash awaits the future producer of indie films. As of this writing, the top earning video on Metacafe has pulled $26,683. Note that it has taken about two and a half years to do that. Still though, that's not a bad return on less than four minutes of video. Other vid-clips on the site have generated between $3,000 and $8,000 for their creators. While not an amount that you could live on, it's still real money which could help pay the bills.

I myself have several ideas that I'd like to try in pursuit of Internet-based revenue generation. I do call myself an artist and I have the ability to make people sit up and take notice. What I don't have is a high-speed Internet connection...

I guess my gay version of Gumby will have to wait a while longer... and his pony pal Pokie will too.

Reveo keeps the big guys on their toes

Reveo is a technology incubator which has proven that they are worth keeping an eye on. At least indirectly, Reveo competes with companies such as IBM (NYSE: IBM) and 3M (NYSE: MMM). To date Reveo holds over 300 patents in the fields of electrochemistry, optics, fuel cells, and advanced materials. This is the kind of company that invents and develops the technologies of which your future shall be built upon.

Reveo invites independent investment and has their portfolio available online. Their mission is to spin off companies based on technologies which Reveo has created and made viable. The growing list of Reveo subsidiaries includes cutting edge technology companies such as: VRex Inc., Chelix Technologies Corp., eVionyx Inc., Xellerion Inc., and PetaComm Inc. These are all companies which are busy punching wide openings into the future.

In addressing the need to provide a solid and focused business platform from which to accomplish their goals, Reveo created the Edison Technology Portfolio (ETP) Strategy. This strategy provides the frame work needed to launch Reveo's subsidiary companies with the ability to immediately exploit marketable technologies with a minimum of administrative tangle. In other words, Reveo spin off companies are able to hit the ground running.

If being up to date with leading edge technologies and the opportunities presented therein is of interest to you, then you owe it to yourself to check this company out. With a successful stable of spin off companies already in hand, it stands to reason that Reveo isn't going to disappear any time soon. I see a wealth of opportunities here... do you?

More scrutiny for private equity firms

As the Private Equity deal juggernaut continues at a record pace, the Justice Department continues to send out letters in their probe of PE competitive behavior. The Wall Street Journal reported today that Merrill Lynch & Co., Inc. (NYSE:MER) has joined this inauspicious list. Other letters in the same form, I am sure, will be received by other players. Any Justice Department investigation is bad news and a distraction, and I am sure there is concern throughout the PE industry.

The question at hand is whether PE firms, in pursuing the "club" deals (many firms getting together to pursue a large target, like a bunch of hunters combining to wrestle an elephant) are "colluding" to bring down prices for the assets they are pursuing, thereby undertaking anti-competitive and thus illegal behavior. The Journal speculates that the Hertz transaction is under particular scrutiny. This was not only a large club deal but one where the buyers made a lot of money VERY quickly. To the Justice Department, I am sure, the fact that big bucks were made in short order MUST mean illegal activity. The Federal Government seems to frown upon large scale success, and therefore must investigate.

I have not seen any of these love letters and can only speculate about the investigation, but the facts of life in Private Equity do not support a case for collusion.

Continue reading More scrutiny for private equity firms

Insider blogging: the great AOL search caper

the halls of aol must be buzzingInsider Blogging looks at the blogs about our favorite companies, exposing the last legal way to get "inside information."

I'm what you might call a First Amendment scholar, having taken law-school-level courses on the subject and researched a number of such cases for my various, data-rich employers. And even though I'm a political liberal, I have a bias against extending "privacy" laws to online behavior, especially when said online behavior is conducted on very public services. I just don't agree that there is a "compelling interest" in protecting one's search behavior, especially if it can't be definitively traced back to the individual. In a free society, private enterprises should be able to do whatever they wish with the information you type into their tools; unless they've told you otherwise. In my opinion? Your behavior on a search engine is just as protectable as anything else you do in the public realm; what groceries you purchase, for instance, or what car you drive.

So I'm entirely not shocked that AOL put a bunch of customer search data (without, it must be noted, any identifying information about who did the searching) online 10 days ago. Now, apologies have been issued ("This was a screw-up, and we're angry and upset," says a spokesperson). I seem to be in the minority, however; the internet, it is horrified.

Michael Arrington at TechCrunch seems to be most shocked, saying that "The utter stupidity of this is staggering ," [emphasis his] and he claims that "the abilitiy to analyze all searches by a single user will often lead people to easily determine who the user is, and what they are up to ... many people often search on their own name, or those of their friends and family, to see what information is available about them on the net. Combine these ego searches with porn queries and you have a serious embarrassment. Combine them with "buy ecstasy" and you have evidence of a crime. Combine it with an address, social security number, etc., and you have an identity theft waiting to happen. The possibilities are endless."

Wow. That's a bit inflammatory, Michael, don't you think?

Continue reading Insider blogging: the great AOL search caper

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Last updated: December 04, 2008: 10:32 PM

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