Archive for July, 2010

GrooveVC Vertro Update 7-30-2010

Investing in Vertro should get a little more interesting over the next month or so. From August 27 forward, VTRO stock has to trade above 1.00 to comply with the Nasdaq minimum bid price rule.  The company has until Sept. 13 to comply with the rule, which requires the stock to maintain a minimum bid price of $1.00 per share for the ten trading days prior to Sept. 13.  Given that Monday September 6, 2010 is a non trading Labor Day holiday, that means that the ten trading days prior to Sept. 13 would begin on August 27.

As such, one of two things is about two happen and we believe that either will be quite positive for existing shareholders.  The first and most obvious is that the company will report a very stellar, solidly profitable quarter and give investors an idea of how well the company is doing in the third quarter.  We believe the company is doing very well and believe that they are expecting their results and update to move the stock higher.  Will the results be strong enough to cause the stock to double – essentially what must happen if they are to achieve the necessary minimum bid price?  That would be a pretty tall order, even if the report is enormously bullish but it is a possibility.

The second thing that could happen will occur if the earnings report and update fail to push the stock over the $1 price in time –  the reverse split that shareholders approved at the most recent annual meeting.  We believe this will be a very positive occurrence for several reasons –

1) the obvious reason that the company will thereafter be in compliance with the Nasdaq minimum bid requirement, thereby removing a dark cloud that has hung over Vertro shares since the company was formed by the divestiture of the Miva assets and renamed.

2) the stock will be trading solidly above $1 and possibly within striking distance of $5 if the company goes the 5 for one route.  When the stock trades above $1, it will put Vertro on many, many more investor’s radar screens as a potential investment.  There is a very large cross section of the investing public who simply will not consider investing in a “penny stock” (anything trading below $1) and many institutions who are restricted from investing in stocks that trade below $1.  Thus, any reverse split will get us greater exposure to investors generally and that is a good thing, particularly at a time when we feel that Vertro has a really strong story to tell.  Our greatest hope is that the Board will decide to implement a 5 for 1 reverse split, which could put Vertro’s trading price within striking distance of the $5 level.  This would provide a huge boost to our potential investor universe as it opens the door to nearly all mutual funds and institutional investors, not to mention that individual investors would then be able to buy Vertro in margin accounts.  We expect to see increasing daily trade volume and thus liquidity as the stock gets closer to and eclipses the $5 trading level.

3) When Vertro is trading above $1, it will receive much greater exposure in financial news outlets and other media.  Stocks trading below $1 are mostly just ignored and there seems to be a strong prejudice against securities trading below $3.  Given what we expect to be strong quarterly results and a good update on Q3 results so far, we would expect a 5 for 1 reverse split to cause the stock to (at least) trade over the $3.level.  This would give Vertro the potential for good exposure to a potential user base in a vertical with some of the highest per click ad rates (read – higher payout to Vertro per click).

In summary, we believe that the next few weeks will be very interesting and very good for existing Vertro shareholders.  This ia a great time (stock trading in 50 cent range) to add more shares and keep telling friends and business associates to take the Alot toolbar and home page for a test drive.  Buy the stock and use the service – keep searching, buying and spreading the word.

July 30, 2010 at 6:58 am Leave a comment

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