Remark Media’s “True Public Float” May Be Below 1.5 million Shares Now

May 7, 2013 at 8:29 am Leave a comment

Following up on a request from community members for an update to our original post about the smallish public float in Remark, we are adjusting our estimated “True Public Float” number to reflect the new information released by Remark last week. Remark’s 10ka filed last week indicated that 5%+ owners now hold a little over 52% of the 7.1 million shares outstanding.  What the new filing did not show, however, is:

Discovery Communications Shareholders – 1,510,123 shares were distributed to Discovery Shareholders since the last week of 2012.  These shares are no longer included in the 5% owner calculations because they were distributed to multiple individual shareholders of Discovery, who (as mentioned in this blog post a couple of weeks ago) acquired this stock when it was called How Stuff Works International (HSWI) and trading between $50 and $97 per share.  For the reasons discussed in detail here, we do not believe these shareholders will be wiling to sell their Remark shares in the $3.50 – $4 range and probably not even in the $6 – $7 range achieved last year.  These DISCA shareholders as a group now own a little over 21% of Remark shares outstanding in addition to the reported 11% position still owned by Discovery.

Jeff Arnold was a 5.3% shareholder last year when the count was based on 6.4m shares of common stock outstanding, but the issuance of new shares to the owners of Banks.com pushed Arnold’s stake to just below the 5% threshold so he is no longer included in the list of 5% owners, but we have no reason to believe he has sold any shares. 

Over the last few weeks, many GrooveVC participants have indicated that they have been buying (in small lots) shares of Remark Media, with an eye towards a much fuller valuation that reflects the full value of our 10.8% stake in Sharecare and the potential for Dimespring to become the “Sharecare of Personal Finance” with a market valuation that better reflects these assets.  While Groove participants can buy and sell whenever they choose and we do not attempt to ascertain a definitive number, it appears that participants have acquired between 2 and 3% of Remark’s outstanding shares. 

Thus, in addition to the 52% of shares outstanding owned by insiders and 5% owners, an additional 25-30% of Remark’s shares appear to be owned by investors who are unlikely to sell their shares anytime soon, even if the stock bumped up another 40-50% and maybe even to the upper end of last year’s trading range.  This means approximately 80% of Remark’s 7.1 million shares are in “strong hands” that effectively removes them from the shares available to be purchased on the open market. While our thesis could certainly prove to be incorrect as to the nature of some of these shareholders, we note that our analysis of this year’s 10ka filing with last year’s 14D filings indicate that none of the larger holders indicated on this year’s list of insider/5% owners sold even a single share when the stock traded much higher last year. 

In summary, we believe that the “True Public Float” of Remark shares is now in the 1.5 million share range, one of the smallest we have seen for a Nasdaq listed stock.  We believe the increasing demand for MARK shares that will materialize over the coming weeks and months will move the stock to new highs and draw even more investor attention to the evolving Remark story. 

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