ATRN Update March 10 – ATRN – Kazaa Still Cheap
The selling in ATRN shares Wednesday was way overdone We would have expected some consolidation given the trajectory of the previous two days, but the 29% sell off was over the top. Beginning mid morning on Tuesday, there appeared to be a substantial short interest building in ATRN. This will ultimately prove to be a positive factor for those long ATRN, as those traders will eventually have to buy to cover those shares and they may find it increasingly difficult to get them. Don’t forget, we are dealing with a stock that has less than 1 million shares in the public float, so when the trend turns back to the north, the move could be quite violent and quite rapid.
I have received numerous emails from friends about the new Kazaa. Quite a buzz has developed since Monday as so many people did not realize that Kazaa still exists and NO ONE seemed to be aware that they were now part of a publicly traded company. I believe the volatility of the last few days may mask a trend that I believe to be developing – I think that a large number of ATRN shares are being bought by music afficianados who really just love the whole streaming music concept and want to get in on the ground floor. Prior to the ATRN deal to acquire Kazaa, the closest thing the retail investor could get to owning a stake in a streaming music concern was to buy Real Networks, which owns slightly less than half of Rhapsody. Of course, that holding amounts to a small portion of their overall business, so there would be little correlation between Rhapsody’s results and that of Real Networks. The other option is to get in the lottery to purchase Pandora IPO shares, which are likely to be pretty expensive, as early indications suggest a total market cap valuation post placement of over $1 Billion. Of course, these two alternatives just highlight the value and potential returns for investors who buy into Kazaa (ATRN) at its current $20 million cash adjusted market cap.
In doing some due diligence on Kazaa late last week, I did a Google News search for the word Kazaa and then Atrinsic. There was one story about Kazaa, actually one about Rdio that mentioned its founders also started the original P2P Kazaa. There was also one story about Atrinsic, the one announcing that Andrew Stollman’s contract was not going to be renewed. I did the same search tonight and there are a total of 503 stories since Monday that mention Kazaa and/or Atrinsic. Between the financial news outlets reporting on the stock action and the music industry blogs reporting on Kazaa’s juke of Apple’s App Store fee, ATRN is getting the kind of advertising and exposure that you simply cannot buy. The positive implications for shareholders are real and can be material to the company’s results going forward – do not discount the value of marketplace buzz for a company in an evolving space like streaming music and it is even more valuable in the context of the rebirth of an iconic brand like Kazaa. That’s right folks – Kazaa is back and ATRN shareholders will be the biggest beneficiaries.
GrooveVC participants who hold stock in ATRN at current prices might do well to consider adding more at current levels and they should definitely add to their position if it dips further. Keep spreading the word to buy the stock/use the service (Kazaa).
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