What’s In A NAME? Demand Media To Spinoff Rightside Group On August 1

August’s spinoff calendar keeps getting busier. Demand Media (DMD) recently announced that its board of directors has approved the spinoff of its domain name business, Rightside Group. The distribution will take place on August 1st, to shareholders as of July 25th. A ‘When Issued’ market will also emerge on or about the 25th. The new company will trade on the NASDAQ under the ticker ‘NAME’ and Demand shareholders will receive 1 share of NAME for every 5 DMD shares owned.

Rightside will be a pure play domain name business and will be helmed by Taryn Naidu, Demand’s EVP of Domain Name Services. Ms. Naidu struck a positive tone and noted that:

The mission at Rightside is to advance the way businesses and consumers define and present themselves online. And as a major participant in the historic expansion of the domain name space, we are excited about the opportunities to help drive the growth and personalization of the Internet while also creating value for Rightside shareholders.

A brief and mostly unimpressive investor presentation gives a little more color on the opportunity at Rightside as of course does the most recent Form 10 filing. According to the presentation, Top Level Domains could be very profitable for the company, which would be nice considering that the segment has been losing money recently. It’s worth noting though that the company has had a lot of stock based compensation recently which is probably worth digging into a bit more. The company also generates quite a bit of D&A so it might make sense to value it using a different metric such as FCF or EBITDA. The balance sheet appears clean as well with a sizable cash balance and no debt.

Post-spinoff Demand will focus on its internet-based content and media components which have been struggling a bit recently. According to this even briefer and less impressive investor presentation, the company will focus on the following three strategic initiatives: Consumer Media (sites like ehow.com), Commerce (Society 6) and Content Marketing  (Demand Media Content Solutions). Additionally, immediately following the distribution, the parent company will implement a 1:5 reverse stock split. Interestingly, the company has still not named a new, permanent CEO since Richard Rosenblatt resigned back in October 2013. Perhaps they are waiting for the Rightside spinoff to be completed?

Disclosure: Author holds no position in any stock mentioned