Another market darling falls from grace

Isentia, the Australian-based media monitoring company, is the latest market star to fall from grace, down 36% on the day of its results.  Isentia  enjoyed a market cap touching almost $1bn at its peak, but is now wallowing at almost one third of that hefty valuation. 

Overall, Isentia's core media monitoring business is growing at uninspiring single digit rates. However, the real thorn in the side for this company is their $30m+ acquisition of King Content.  In August 2015, perhaps exuberated with a galloping share price, Isentia  dropped $28.8m (plus two earn-outs) in this content marketing firm.  King performed well in its first year (contributing  $3.6m in EBITDA and delivering vendors their first earn-out) but has curiously reported a 1H loss of $2m and is expected to drop another $1m in 2H17, severely denting Isentia’s overall bottom line.  

This is not one that Cyan Investment Management has ever held, and whilst there might be a temptation for investors to bottom-pick, we see little in the way of proven track record to attract our attention. Additionally, with the current share price almost 20% below the $2 IPO in 2014 (in which private equity firm Quadrant sold down 61% of its holding), investors might well have further hesitation in taking stock in PE sell-downs.