Red-Hot Startup LiveDeal is Atop Quite a Bubble

Jacob Harper |

Perhaps the hottest micro-cap tech property of 2014, the daily deals site LiveDeal Inc (LIVE) , released a statement on Feb. 18 that claimed the company has raised $10 million and increased revenues while trimming year-over-year losses by 62 percent.

Of more recent developments, LiveDeal purports to have increased website traffic 153 percent from Dec. 2013 to Jan. 2014. On the announcements the company’s stock popped, extending a run that has seen the company’s shares notch a six-fold gain since the beginning of the year.

LiveDeal has attracted a considerable amount of attention from tech investors on account of its massive value increase; product launches in New York, San Diego, Los Angeles and San Francisco; and a series of PR reports reprinted in major publications like Marketwatch via PR arm Stock Market Media Group. While the daily-deals market is certainly ripe for a valid competitor to the troubled Groupon Inc. ($GRPN), digging into LiveDeal makes it clear that there is almost no fundamental reason for the price run, and it has been fueled exclusively by investor over-exuberance.

Thirty-five percent of LiveDeal’s web traffic is coming from India, which is not exactly helpful for a company trafficking exclusively in deals for restaurants in a handful of cities in America.  Furthermore, SEC documents showed that the company lost $400,000 in the last quarter while possibly not bringing in any revenue and lacking a provable revenue stream to make up the difference in the future. An improvement over the $1 million in losses the quarter prior, certainly, but still troubling.

As a company, LiveDeal has been around for a long, long, time, even though the site itself is relatively new. While their history as a Craigslist-type service goes back into the first tech bubble, LiveDeal.com has only existed since September 2013. It is unclear how much, if any, of the revenue was generated from Livedeal.com and how much comes from other ventures.

LiveDeal’s stock has increased several times over on a stream of positive PR reports from Stock Media Group and other shills without generating a profit. In short, this signals that LiveDeal is atop a massive bubble fueled entirely by speculation. What’s curious about LiveDeal’s bubble, however, is that the company retains a high percentage of insider ownership — 72.08 percent. If the LiveDeal higher-ups know something the public does not about LiveDeal’s prospects, they’re certainly not getting out while the getting’s good. The company has only logged one insider sale in the last 12 months.     

But the fine print is certainly interesting. While the PR wings tout the company’s trimmed losses and increased revenues, within the Feb. 18 release LiveDeal admits that:

“While the Company believes that its existing cash on hand is sufficient to finance our operations for the next twelve months, there can be no assurance that we will generate profitability or positive operating cash flows in the near future. To the extent that we cannot achieve profitability or positive operating cash flows, our business will be materially and adversely affected. Further, our business is likely to experience significant volatility in its revenues, operating losses, personnel involved, products or services for sale, and other business parameters, as management implements and revises our strategies and responds to operating results and market conditions. “

Concerning the volatility caused by relaunches, the company used the same language, almost verbatim, in their 2011 fiscal year earnings report. As far as struggling with solvency, that is a new development. But whether LiveDeal’s new product launch will truly bring them out of the red, or if the deal on LiveDeal has expired, remains to be seen.

By midday trading LiveDeal had notched a 3.92 percent gain to hit $9.27 a share.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
LIVE Live Ventures Incorporated 2.55 0.15 6.25 158,455
GRPN Groupon Inc. 3.85 0.10 2.67 7,820,687
OLMXF OHL Mexico SAB De CV 0.86 0.04 4.98 157

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