Business value II

My contribution to Nooks's Business Value thread, to which I couldn't seem to post.


As Larry points out, the cash held by BET is significantly less than the $56M headline value often quoted. However, I don’t think the actual number matters too much to investors if the cash is destined to be consumed and burned by management. (It’s like seeing a cash box stuck in a raging bin fire, in which case the eventual value of the cash box is the same regardless of its initial contents.)

To have value to investors, BET needs to demonstrate two things:

• it can grow revenue without buying it (I.e. stop give-aways shares and/or cash in return for revenue)
• it can rein in costs (so far, it has a well-established history of spending everything it earns plus more, and it hasn’t yet demonstrated it can change this behaviour. It strikes me as strange that BET hasn’t yet announced a significant cost-cutting /restructuring program.)

I hope this is a constructive, albeit pessimistic, contribution.