Groove Community Update December 2016

December 19, 2016 at 11:07 am Leave a comment

A quick update on the Groove VC watchlist.  Last week’s LD Micro conference was fantastic and the Groove community was well represented by investors as well as portfolio companies as both Inuvo and Remark Media made impressive presentations.

Inuvo – Inuvo’s stock notched a major uptick in price and volume over the course of the week following the release of news regarding the company’s record Cyber Monday results and this move was likely extended by the bullish presentation by CEO Rich Howe at the conference. Inuvo seems to have regained much of its operational momentum with recent revenue trends indicating significant sequential improvement and we believe this could be an inflection point for Inuvo stock. Comments during the presentation indicated a positive  shift in the revenue picture over the last few weeks generally and management bullishness was at a level we have not seen in a while. Additionally, we believe that Inuvo will increasingly be viewed as a prime acquisition candidate, as investors scour the landscape for the next ad tech company to be targeted by Chinese firms flush with cash and highly valued stock deal currency. The recent acquisition of Inuvo comparable for an eye-popping $900 million itself requires that investors take a closer look at Inuvo’s operations and relative valuation. Inuvo’s stock is quite cheap versus the value its operations and revenue stream could bring to many companies who appear to be shopping in the ad tech space.

Remark Media – Remark CFO Doug Osrow presented at the LD Micro convention this week and gave a very favorable update, highlighting the recent deals that will for the first time begin to monetize the KanKan data mining operations. He also indicated that they see such deals as just the tip of the iceberg, with many more similar deals in the works that will drive additional revenue over the next year. We were also interested to learn of Remark’s increasingly close ties with Alibaba, as we were previously unaware that many of the engineers working on the KanKan project are working at an Alibaba facility in China. This was one of several indications that we see indicating that the company’s operations are getting more and more intertwined with both Alibaba and TenCent, which we perceive as very favorable for the long term potential of the KanKan project.

Other key takeaways:
– Remark continues to improve conversion metrics for ticket and hotel room sales at and they gave examples of changes that will be made over the next couple of quarters that they think will result in continued improvements in the rate of conversions.
-Sharecare – Remark’s 5% stake in health care portal Sharecare contiues to grow in value and recent disclosures related to an acquisition have indicated a $500m revenue run rate for Sharecare. Comparable valuations in the space put its likely valuation at a levels that could make Remark’s Sharecare stake worth $50 to $100m when it comes to market, which could mean that the Sharecare could prove to be worth the company’s current valuation by itself.

Rave Restaurant Group – RAVE’s Pie Five subsidiary is accelerating the roll-out of new restaurants in new markets, with 3 new Pie Five restaurants opening in three new cities in the 7 days ended last Friday. On a recent conference call management indicated that this “acceleration” of new Pie Five openings will continue over the next six months and we note the positive revenue impact ($50k+ per year) of these openings versus the negligible capital required with new franchisee owned restaurants.

Pie Five continues to be a trailblazer among the bigger players in the fast casual pizza space, beating competitors Blaze, MOD, Pieology and Uncle Maddios to the punch with the first drive through location (one opened last week and another will be opening soon) and the launch last week of its new app that connects with third party delivery services in select markets. Both the drive through and the app that allows orders to be delivered are industry firsts though several of the other players have indicated that they expect to experiment with third party delivery as well.  We continue to see Pie Five as an innovator in the fast casual pizza space even though its parent company Rave Restaurant Group’s stock continues to be overlooked.  We believe that RAVE stock trading at  1/10th the valuation of MOD Pizza’s equity raise last month suggests a tremendous opportunity to buy shares at prices that are still heavily discounted.





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Pie Five Twin MOD Pizza Raises $42m RAVE Rights Offering – Insiders Buying Up to 15% of Company While Squeezing the Shorts

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