Shares of services-review site Angie’s List (ANGI) shot up on October 1 on news that the beleaguered company is actively seeking a buyer. While a white knight might be able to save Angie’s List in the short term, even if they do secure a buyer the company’s long-term prospects still look quite dim.
The company is often described as being like Yelp (YELP) , but that’s the big problem. Angie’s List is like Yelp but is more limited in scope. Additionally, Angie’s List costs money to even sign up. To be sure, subscription models aren’t antithetical to a successful tech company. But in the case of Angie’s List, when a free alternative exists that is also more expansive, it becomes harder and harder to justify the existence of the company.
This is not a daring sentiment and has been noted both by the market (shares are down 53.04% on the year) and short-sell analysts looking for doomed companies. The most notable naysayer concerning Angie’s List has been the notorious Citron Research, the moniker assumed by muckracker Andrew Left.
The usually bombastic Left was especially vitriolic in his dismissal of Angie’s List, saying in his research report that the company is “the most ridiculous, stupid, misunderstood, negligent, nonsensical, outdated, irresponsible business model in the new web.” This view was later echoed in an absolutely scathing review in the New York Times that insinuated that Angie’s List was loathe to be completely honest in publicizing reviews of bad companies because they feared it might scare off potential advertisers.
After Left’s report, Angie’s List has done little to instill confidence in their stockholders. Shares of the company fell sharply in October when the company slashed membership rates 75 percent, from $40 a year to $10, in a bid to attract customers. Rather than galvanize investors the move shook confidence in the company, causing shares to fall 16 percent on the news.
At this point, with investors pulling out in droves and no discernible plan for a turnaround, the company is in need of a savior or they will eventually go bankrupt. Rumors of such an event caused shares to go up 19.47 percent to hit $7.61 a share. Whether such an event will actually ever happen – or more importantly, what a turnaround for such a fundamentally broken company will entail – remains unclear.
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