Answers Corp. (NASDAQ: ANSW) stock got smashed on Friday, dropping more than 23%. The company that via Answers.com provides users with answer-based search services and also operates Wikianswers.com, which is a Q&A platform where users ask various questions and a community of people answers them, is having all kinds of problems trying to finance an acquisition of Lexico, owner of the Web properties Dictionary.com, Thesaurus.com, and Reference.com.

Answers planned to buy the company for $100 million, even though Answers had just $9.2 million in cash at the time of the announcement. Skeptics, like my IOI partner, Zack Miller, just looked at the numbers and wondered how this deal was going to be financed, and it appears that they were correct to be skeptical. Since the announcement back in July, Answers stock is down over 65%.

In a note on Friday, paidContent.org referring to the deal financing said, "a plan to sell 14.94 million shares, raising $100 million. But that was based on the company's Tuesday closing price of $6.69. Since then the stock has been crushed, falling nearly 42 percent to $3.96. At this level, 14.94 million shares would only be worth $58 million, not nearly what it needs to raise to fund the buy. At these prices, the company would have to up the offering to 25.6 million, further diluting the value held by the company's current shareholders."

It looks like if this deal gets done, and I have my doubts that it will, investors are going to see lots more red, as the stock looks like it will be heading much lower.

Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. Disclosure: Writer has no position long or short in any stock mentioned as of 1/20/08.

Dilution is not the Answers.com originally appeared on BloggingStocks on Sun, 20 Jan 2008 17:40:00 EST. Please see our terms for use of feeds.

As Middle East leaders prepare to convene together, again, I was looking for some ways to play this event in my portfolio via Israeli Ingenuity, something we discuss a lot at IsraelNewsletter.com. This time around, the location is Annapolis, Maryland, site of the U.S. Naval Academy. Tuesday's conference aims to relaunch Israeli-Palestinian peace talks for the first time in seven years. Looks like almost everyone is going to attend. Even Lebanon looks ready to join the U.S., Israel, the Palestinians, and Syria in making history.

I'd be a buyer here of Elbit Systems (NASDAQ: ESLT), an Israeli defense contractor working on some large deals and really cool technology. BloggingStocks' Aaron Katsman wrote this past week about the anti-hijacking technology Elbit is marketing and this will certainly come in handy in Annapolis while each attending party will be working diligently to secure its best interest at the expense of all the others'. We've been here before and most of us do not so readily imbibe the peace kool-aid as in years past.

The second company I'd be buying here is Answers.com (NASDAQ: ANSW). Answers.com is an Israeli internet firm that runs an answer-based information portal providing users with answers covering millions of topics. I hope the participants in Annapolis are using Answers.com to find a path to peace because from where I'm sitting, it doesn't look particularly promising.

Answers.com, which gets a lot of its traffic from search monolith, Google (NASDAQ: GOOG), is in the process of acquiring the parent company of Dictionary.com, in a bid to secure more organic search traffic to its site. Dictionary.com may come in handy for Annapolis participants to find the definition of "disappointment" when this is all over.

Zack Miller is the lead equity analyst for America Israel Investment Associates, LLC., the managing editor of IsraelNewsletter.com and a former equity analyst for a leading multinational hedge fund. Author's fund holds a position in ESLT but not in ANSW.

Two stocks to buy before Tuesday's Annapolis peace conference originally appeared on BloggingStocks on Sun, 25 Nov 2007 09:10:00 EST. Please see our terms for use of feeds.

According to The Global Language Monitor, there are 988,968 words in the English language. Yesterday, Answers Corp. (NASDSAQ: ANSW) paid $100 million for Lexico Publishing Group LLC, owners of the internet's most used dictionary, Dictionary.Com. Thesaurus.com and Reference.com were also included in the deal. The company will sell off $140 million of its stock to cover the cost of the purchase.

Answers Corp. is attempting to become the go-to advertising-supported free reference site on a far-flung body of topics from Supreme Court decisions to Bible lexicon, company histories to travel guides. To differentiate itself, its strategy is to aggregate branded, authoritative, content from companies such as AccuWeather, Thomason Gale, Britannica, and Barron's.

They are also pursuing the user-generated content market that Wikipedia established with its recent purchase of Wikianswers.com. In total, Answers.com averaged 4.86 million queries in the first quarter of 2007, from which it realized revenue of $2.9 million and a GAAP loss of $303 thousand -- not a great foundation for a $100 million purchase.

Dictionary.com and its ancillary brands seem like a perfect fit for the company's strategy, though. The overriding question is the validity of this strategy. While the notion of driving people to a web site for one piece of info is so 2006, Answers Corp. seems like the perfect company to take advantage of widgets to extend its market presence, and the value of baseline domain names such as these should remain high.

Continue reading Answers Corp. pays $100 a word for Dictionary.com

Answers Corp. pays $100 a word for Dictionary.com originally appeared on BloggingStocks on Wed, 18 Jul 2007 15:26:00 EST. Please see our terms for use of feeds.