At long last, Abovenet filed its 2007 10-K yesterday and we finally get to see where they stand. Or at least where they stood 9 months ago, back in May we heard how 2006 went. Perhaps soon we will hear about how Q1 and Q2 2008 went? But the big news in Abovenet’s 10-K is that they showed an actual profit for 2007 of some $13.8M, or $1.28/share. There were a couple one time items, but they seem to have mostly offset each other.
Not only that, they showed some solid growth. While revenue was up only 7.7% from $236.7M to $253.6M, the 2006 number included $24.5M from the datacenter business they sold that year. Adjusting for that, their core metro fiber and data business seems to have grown at an annual rate of over 19%. That’s quite impressive actually, and it speaks to the strength of metro fiber as an asset nowadays. They finished the year with cash on hand of about $50M and no debt, but have apparently since raised a $90M credit facility.
So Abovenet continues to climb its way back from oblivion. Operationally they may already be back, if we can trust the numbers. Accounting-wise, however, they just can’t seem to escape from limbo. From the filing:
The Company did not maintain, in all material respects, effective internal controls over financial reporting as of December 31, 2007.
Which leaves the open question: if you can’t do it in 4 years, how many does it take?
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even if they’re starting to show a tiny profit, it probably means they’re dressing up the carcus for sale.
Rob – based on the filing, can we now determine the actual market cap for ABVT and therefore deduce a reasonable price one would have to pay for them. Obviously Yahoo Finance’s market cap quote of $45 Billion is a joke!
I have EBITDA at $60M in 2007 and perhaps $85M now. Slap a 8-10 multiple on the $85M for a ballpark intrinsic value. (I don’t know how this compares to their trading value, if they have one.)
Their share count is about 12M if one includes all the in-the-money warrants and options, and their common stock closed at $58 on the pinksheets. So their marketcap is about $700M and they have net cash of about $50M if we assume cashflow has been roughly neutral lately. Dan’s range based on ebitda multiple works out to $690-850 as a takeover price, and it would seem that the marketcap reflects that pretty accurately. A 15% premium above the current EV of $650M would be about $750M. That would be my ballpark number for buying them right now.
wow….i finally got something right..thanks Rob
Haha, Dan in this case you’re the expert and the market is just trying to keep up. There’s nobody better to put a price tag on fiber than the guy who’s been buying it.
Just because Dan says 8-10 EBITDA doesn’t mean it goes for that price. As he knows all networks are not equal.
Multiples at the end of the consolidation phase go up, as anyone who has tried to buy Park Place from another player in Monopoly knows.
They cheated metromedia shareholders and will never ever be able to be a public company again until they provide their cooked books, and compensate those they cheated, in other words their future is still as dark as much of their fiber still is…….
3 yrs audited financials and a clean bill of health is all that is needed, regardless of the past. They appear to be very close.
I think not, there was an sec investigation which went on for several years if they come out and go back public they have to provide all financials including the cooked books, that or they are destined to remain on the pinks forever.
Wrong. SEC investigation and re-listing are mutually exclusive. The SEC investigation was halted.
Sounds like you had a bad experience. But those issues are in the past and have no bearing on current events.
Yes, there are certainly still those around with wounds from the last bubble. With Abovenet, there hasn’t been the closure that there was with others – hopefully as the company re-emerges from accounting hell everyone involved can find a way to move on.
Rob I understand what trying to get at but Abovenet still has a ton of skelletons in their closet I believe. I have sent a request along with several other longs to the SEC to find out why the investigation was dropped and what their finding were. It has come up that perhaps the company has admitted to the SEC just how bad they cooked the books and are going to make restitution to Metromedia shareholders of date at the time of their BK filling. The stock is @ $50 and it appears that it may continue to drop, something is up. I will post my findings once I get a response from the SEC.
It is an interesting theory, but the bankruptcy destroyed legal title of previous shareholders.
The SEC probably walked away because all of the bad actors were removed and the company itself was bankrupt. There was nothing left.
Why would the company do such a thing? Can you cite any precedence for such actions?
Altruism perhaps? 🙂
John and Stu the money men the real company the rest are yes men, this is the same company same players and no one especially longs have forgotten. The SEC did not walk away because people said, Whoops sorry my bad I will leave. The company filled BK 2 weeks after stating they would be cash flow positive. I say again this thing smells to high heaven and I hope to get a reply from the SEC in the near future, we shall see……
Also just because they filled BK does not mean longs are not entitled to compensation. If they cooked the books, which is what occured in my opinion not only will shareholders obtain compensation but there will be fines and perhaps a perp walk or 2. Thus the reason non of this has come out yet, John Kluge is not a young man but he is a extremely wealthy man and has donated 10’s of millions to the Library of Congress. I think once he is no longer in the picture you will see a ton of info hit in regards to MFNX. The stock price is @ $45 and on an up day something is up………
Well, personally I think you’re barking up an old and very dead tree, but good luck anyway David.
Methinks the SEC has bigger fish to fry these days.
No doubt there are bigger fish out there, but they have over 2 years tied up in the investigation, that is not something that the agency just walks away from unless they have reached a deal with the company. If they had found no problems it would have been announced and I guarantee you that the company would have screamed from the roof tops that they were clean and that they would be once again going public. The SEC did not say all was fine nor did the company release any news to the like. The company really screwed up big, and the one and only way out is to provide the books and come clean. They will never ever be allowed to go public without those books, and like I said if they are cooked which in my opinion they are restitution to shareholders of date will have to be made, along with fines and perhaps some jail time for the players involved that swindled the public. Stay tuned as this is far from over and as I said if and when I get a response from the SEC I will post it not only here but on ABVT’s message board……
This is an interesting debate but I feel your emotions are clouding your judgment. Re-listing on an exchange is independent of whatever the SEC does. You need three years of audited financials. An ongoing SEC investigation has no bearing on listing.
The SEC never issues an ‘all is fine’. You might be investigated by your local police for a robbery, but they don’t decide to charge you. Are you guilty? Do the police ever issue a statement – “He is innocent.”.
The company did issue a release indicating the investigation was suspended. Companies are not supposed to make any comments whatsoever about ongoing SEC investigations. The best way to judge things is to identify what legal expenditures are being made. If they are zero, then you can say the skies are clear with high confidence.
Bill LaPerch, clean-up CEO, has done a great job with this company.
Watching AboveNet trade will be interesting. We’ll see if the Real Smart Guys on Wall Street understand the strategic, financial and margin growth fiber ownership provides a company.
Bill has basically ridded the old MFN of all the garbage the Real Smart Guys on Wall Street told management they must do back in 1998-2002 “to drive value” which bankrupted the MFN company. Long gone is the software business and web hosting business.
AboveNet is now fiber-based (they own sheaths of fiber, not IRU’s) optical IP and connectivity company — watch the quality of margin growth that their fiber ownership will produce.
Owning the fiber sheath locall is the right platform for growth.