From the files of Scevak Corporate Advisory Services: What will become of Move.com?
Move.com is a company that has a market cap of $400m. It has $185m+ in cash and short term investments. It operates the leading real estate site, realtor.com that gets about twice the traffic of its nearest competitor.
Revenues for the company are flat but will be around $300m this year. The business will generate over $20m in cash.
Zillow, a startup, was valued at $350m in its most recent $30m round of financing. If we say the company has about $50m of cash left (generous) then it’s operations are worth roughly 1.5 times as much as Move’s ($300m vs $215m).
Global real estate companies like RightMove in the UK, Seloger in France and REA Group in Australia are soaring and are all worth more than Move.
Two years ago Elevation Partners essentially bought $100m worth of options in Move with a strike price of $4.20 but only redeemable in 2010.
The stock price is stupendously low.
The NAR (national association of Realtors) has threatened to start a consumer site in competition with Zillow. But their agreement with Move means that Move would have to approve of the deal. The NAR have publicly expressed their displeasure with Move. If they were to end their agreement Move would be crippled.
This is the genesis of how the NAR could end the agreement:
” Although the REALTOR.com® operating agreement is a perpetual agreement and it does not contain provisions that allow us to terminate, NAR may terminate it for a variety of reasons. These include:
• the acquisition of us or RealSelect by another party without NAR’s consent;
• if traffic on the REALTOR.com® site falls below 500,000 unique users per month;
• a substantial decrease in the number of property listings on our REALTOR.com® site; and
• a breach of any of our other obligations under the agreement that we do not cure within 30 days of being notified by NAR of the breach.
If our operating agreement with NAR were terminated, we would be required to transfer a copy of the software that operates the REALTOR.com® web site and assign our agreements with data content providers, such as real estate brokers or MLSs, to NAR. NAR would then be able to operate the REALTOR.com® web site itself or with another third party. ”
So basically if anyone were to take over the company, they would need the NAR’s consent. All of the other clauses (save for the non-specific last one) would likely never be met.
If Zillow can raise $87m, couldn’t they find a financial partner to help them raise $200m or so more?
I personally think the more likely outcome is that Move continues its transformation with new management and the stock price goes back into the double digits.
Unfortunately I also personally have no money, so I don’t own any stock.
