Remark Media Reboot

February 13, 2017 at 3:28 pm Leave a comment

After a recent conversation with Remark Media CFO Doug Osrow, we are again bullish on the near and long term prospects of Remark Media. While there had understandably been concerns among shareholders (and plenty of Groove contributors) about CFO Doug Osrow’s sale transactions last month, we are now convinced that these sales should not be viewed as indicative of a bearish outlook by Mr. Osrow. The sales were part of a 10b5-1 plan established by Mr. Osrow to allow for the sale of enough stock to cover the substantial tax liability he incurred as a result of stock grants he received during calendar year 2016. In addition to his cash salary, the stock grants to Mr. Osrow last year created a substantial personal tax liability that is due by April 15 of this year. Mr. Osrow set up this plan at a time when the average daily trading volume of Remark Media shares was significantly lower than it is currently. Given the volume constraints and the large number of shares that needed to be sold by April it is likely that it would have taken weeks of smallish sales each day if he had chosen to do regular open market sales at year end instead and this would have been likely to drive the stock much lower. Mr. Osrow instead took the 10b5-1 approach to take the timing of the sales out of his hands except to establish the volume parameters that would allow the shares to be sold. While this typically proves to be a prudent measure that protects shareholder value, in this case the parameters set were such that the execution of the sales led to much lower prices than what one would expect and this meant that even more shares had to be sold to achieve the plan’s targeted dollar amount. We note that such plans require that the person setting them up may not exert any subsequent influence over the plan, so the unfortunate timing of many of the sales (and the sales prices) were not within the control of Mr. Osrow, who expressed great frustration with the plan’s results.

We are now convinced that Mr. Osrow’s sales were not indicative of any bearish sentiment on his part. Quite the contrary, Mr. Osrow seemed extremely upbeat about the company’s operational performance and while he was unable to discuss specific numbers due to SEC restrictions, he was clearly very pleased with where the company is right now and he seemed very optimistic about the mid and long term outlook for the company’s operations as well. He also indicated that the company would likely take a much harder look at the best approach for dealing with the personal income tax considerations for future stock issuances given what the company viewed as a very unfortunate outcome with the execution of Mr. Osrow’s 10b5-1 plan. Given these comments, we are confident that the company is not selling shares to Aspire Capital at these prices which had been a major concern prior to this conversation.

Given the bullish near term outlook we took from the call with Mr. Osrow and our already existing belief in the longer term picture for Remark, we believe that Remark Media shares in the current $3.15 – $3.25 range will prove to be very cheap and that it represents a very good entry point for for both long term investors and short term traders.

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