Warrants Issued for Lance Armstrong

Tuesday, 10 August 2010

No, not those warrants. Not yet. Instead, these are warrants to buy stock relating to the stockmarket flotation of the business that owns the Livestrong brand.

Normally the stockmarket float of a company wouldn’t appear on this kind of website. But the filing for Demand Media Inc. to sell its shares to investors on Wall Street is a different story because Lance Armstrong is involved in the company and as ever, I’m interested in the business of cycling.


She’s related to Lance

Maybe you haven’t heard of Demand Media. It does two things, first it is one of the biggest website registrars, eNom, meaning it helps people register internet domain names. If you’ve ever seen the girl above, it’s because she’s on the holding page for a site registered with DM.

But that’s dull stuff, the second aspect is the production of online content, whether by freelance journalists or by algorithm, ie by computer. By this, the company identifies internet trends and then tweaks website content to match public interest. As they put it:

While traditional media companies create content based on anticipated consumer interest, we create content that responds to actual consumer demand. Our approach is driven by consumers’ desire to search for and discover increasingly specific information across the Internet

For example, it writes 60% of the content on eHow.com, a website that’s a worldwide repository of FAQs, answering crucial information such as “How to Make a SkinnyGirl Margarita“, “How to Send a Fax From a Computer” and “How to provide sanitised drinking water to the third world“.

Sorry, I made the last one up – eHow’s about simple questions and simple answers and Demand Media hires freelance hacks to write answers, aiming to answer questions on the trending topics on the net, thus ensuring any questions on the net are referred to its own website where handy advertising can be displayed. For example ask questions about barbecues and the adverts will relate to grills and food.

Back to cycling
If eHow helpfully sets out the side effects of blood doping, the real cycling angle here is that Lance Armstrong, his charity and also CSE, the management company close to him (run by Bart Knaggs and Bill Stapleton) have been issued with warrants to buy Demand Media stock… along with Bobbi Brown and Tyra Banks. The link up came about because Demand Media bought the:

perpetual, worldwide, exclusive license to use the LIVESTRONG.com brand, trademark and certain website names associated therewith, including LIVESTRONG.com. The Company used the license to build the LIVESTRONG.com website as the Company’s anchor health and wellness media property

In other words, Livestrong.com isn’t part of Lance Armstrong’s empire any more, it’s a subsidiary of Demand Media.


The Rich Get Richer

It’s not easy for Armstrong right now with a big investigation and the mainstream media running allegations that were once reserved for cycling insiders. So this IPO is a welcome bit of good news for him and his associates. Why? Click on the table above, lifted from the SEC filing, to enlarge as it sets out the warrants granted. Armstrong has a warrant to buy over a million shares at the fixed price of $6. What this means is that if the stock price is, say, $7 then Armstrong will make a (paper) gain of over $1 million. (stock price minus exercise price multiplied by number of shares). So should the stock price hit $10, $15 or even more then do the maths and he’ll make even more money. Note he won’t lose a cent if the IPO is a flop, these only offer the right to buy, there’s no obligation or downside.

Indeed, in addition, Armstrong has been paid US$1 million by Demand Media for “certain services and endorsement rights”. Like Tyra Banks he appears online to publicise and promote the company and its brands.

Summary

Overall, the company is an interesting one, trying to mine the internet to put timely content in front of people and profit from related advertising. Personally I find this stuff mildly infuriating and easy to ignore but it clearly works. That said, the company is still loss-making. It’s the business behind Livestrong.com and should the flotation prove a hit, Lance Armstrong will become even richer.

Pin It

{ 3 comments }

Carl January 4, 2011 at 1:29 pm

I broke out laughing reading this. Demand content, no profits so far and monetized by, err, hold on, I heard it somewhere, oh yeah, ADVERTISEMENTS. And there is hardly any competition in media content web sites. This is a surefire investment of epic proportions.

TexasEx February 16, 2011 at 11:41 pm

Today the stock is at $21, meaning Boobi (sorry, that’s supposed to be Bobbi) is sitting on a cool $112K.

Bobby February 18, 2011 at 5:58 pm

Liked the article. Here’s a link you should check out: http://www.shoeman.org/about/

They do provide fresh drinking water.

Comments on this entry are closed.

{ 1 trackback }

Previous post:

Next post: