The beginning of 2014 was a momentous time for daily deals site LiveDeal (LIVE). A subsidiary of Yellow Pages that had gone through a few iterations since the dotcom bubble, On the surface, LiveDeal looked to finally have cracked the code this year, reporting massive user increases and expected revenue pops. As the Groupon (GRPN) -competing site rolled out in several metropolitan markets, the company’s stock rose more than 600 percent in just three months.
But some cursory digging into the reasons behind the pop indicated that LiveDeal was almost certainly a pump-and-dump. The vast majority of the positive press that had caused the stock to rise came from “analyst reports” from Stock Media Group, a pay-for-coverage firm that will put out exuberant press releases, for a fee.
The timing of Stock Media Group’s reports, and the subsequent rise of LiveDeal’s stock seemed to correlate. As it became increasingly clear that LiveDeal had become wildly overvalued in late Febraury, the stock began to slip. At $9.27 a share we called it overvalued, noting that LiveDeal was recycling the same excuses for why their revenue was poor from a report issued three years prior. That is, nothing had really changed – except their wildly inflated stock price.
On April 7, Equities.com noted that LiveDeal’s momentous rise was not due to any actual success on the company’s part but rather the result of Stock Media Group’s incessant pumping, and we called for LiveDeal’sbubble to completely pop. Since that article, LiveDeal has lost more than fifty percent of their value.
As we noted, the only thing that could save LiveDeal would be some concrete analysis on the stock that was not paid for. As that has failed to materialize, and the majority of positive coverage on LiveDeal has continued to be Stock Media Group reports, and according to a recent article on Seeking Alpha, shady penny stock brochures and sketchy radio ads, that has not happened.
It’s clear someone is pumping LiveDeal. The question is, how much further will its stock slip? Shares are still up 257 percent on the year, so it still has room to drop.
So far, investors haven’t bet en masse on it dropping. The short float is only at 19.11 percent, which is high-ish but certainly not a pile-on. As it continues retreating, it will be interesting to see how much longer investors who went long on LiveDeal hold on, and how much the short increases. It’s traded below $2 as recently as six months ago. If its current free-fall exacerbates, it could go even lower.
LiveDeal sunk 7.14 on the day to hit $3.12 a share. It traded as high as $12 just three months prior.
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