Corner of Berkshire & Fairfax Message Board

General Category => Investment Ideas => Topic started by: SmallCap on June 24, 2014, 01:33:21 PM

Title: SYTE - Enterprise Diversified
Post by: SmallCap on June 24, 2014, 01:33:21 PM
I couldn't find a thread dedicated to this company even though it's been talked about before.

Interesting company that is going through some shareholder activism that is being led by one of our regular board posters

If you haven't see it check out these articles.

http://www.scavengerreport.com/2014/06/18/sitestar-corporation-strange-happenings-at-this-tiny-real-estate-play/

and straight from the pirate himself

http://ragnarisapirate.blogspot.com/2014/06/starting-activism-at-sitestar-syte.html
Title: Re: SYTE - Sitestar
Post by: DTEJD1997 on June 24, 2014, 02:06:33 PM
I've known Jeff for a while and have every confidence in him.  He is an expert when it comes to residential real estate.  He is PERFECT for the BOD of Sitestar.

He is also a great value investor for small cap stocks.

Unfortunately, there is already a thread on this...
Title: Re: SYTE - Sitestar
Post by: Sportgamma on June 25, 2014, 02:49:12 AM
I had spotted that Jeff was said to be 50 years old according to the SYTE filings and found it amusing. Not so much after reading the letter and blog post from Jeff.

The scenario that he describes in the letter and blog are outrageous. No board meetings, CFO refuses to meet a board member, they put his signature on the filing without his consent or him even seeing the filing.

I own some shares based on the thesis that cost accounting of the properties understates the true book value of the properties. However, with this out in the open my main worry is that a cockroach in the kitchen is hardly the only one.

Another concern I have is this: As I see this, there is no misunderstanding between the two sides and things won´t get patched up. Either management leaves or they don´t. The CEO owns about a third of the shares. Their primary option will be to attempt to buy the activists out. They might try to go dark with the company. As somebody belonging to neither of these groups, my primary concern as to the outcome, is that the activists leave and I´ll be stuck with current management and trapped in a stock with no liquidity.
Title: Re: SYTE - Sitestar
Post by: rkbabang on June 25, 2014, 05:57:17 AM
I had spotted that Jeff was said to be 50 years old according to the SYTE filings and found it amusing. Not so much after reading the letter and blog post from Jeff.

The scenario that he describes in the letter and blog are outrageous. No board meetings, CFO refuses to meet a board member, they put his signature on the filing without his consent or him even seeing the filing.

I own some shares based on the thesis that cost accounting of the properties understates the true book value of the properties. However, with this out in the open my main worry is that a cockroach in the kitchen is hardly the only one.

Another concern I have is this: As I see this, there is no misunderstanding between the two sides and things won´t get patched up. Either management leaves or they don´t. The CEO owns about a third of the shares. Their primary option will be to attempt to buy the activists out. They might try to go dark with the company. As somebody belonging to neither of these groups, my primary concern as to the outcome, is that the activists leave and I´ll be stuck with current management and trapped in a stock with no liquidity.

I'm in the same boat as you, although SYTE is a tiny position for me and I have no plans to buy more at the moment, so I'm just in wait and see mode right now.

One concern of mine is the unknown current condition of the properties. How many of them are not occupied? Are they being checked on and maintained or are they just sitting there abandoned?   Any property owner knows what it takes to maintain a property and I'm concerned that this might not be taken care of sufficiently here.   The properties page (http://sitestar.com/properties/) on the website, doesn't seem to change very often. How much capital will it take to get the properties ready to be rented/or for sale if they are allowed to deteriorate?  There are a lot of unknowns here for us outside shareholders.

More info about Sitestar that I'll add to this thread:

The old thread in the General category -  Topic: The Pirate has hijacked a seat on Sitestar´s board (http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/the-pirate-has-hijacked-a-seat-on-sitestars-board/)

Arquitos Capital's Letter to Sitestar’s management (http://www.arquitos.com/wp-content/uploads/2014/02/SYTE-letter-082813.pdf) - August 28, 2013  (A lot of good suggestions. A reverse split is a no-brainer and should be done immediately).

The recent 13D filing (https://www.sec.gov/Archives/edgar/data/1096934/000154255614000008/0001542556-14-000008-index.htm) including the Letter to management (https://www.sec.gov/Archives/edgar/data/1096934/000154255614000008/demandletter.pdf) - June 3, 2014

And also required reading are all of Jeff's blog posts on Sitestar in order:

     Sitestar: The Cigar Butt That Isn't (http://ragnarisapirate.blogspot.com/2011/08/sitestar-cigar-butt-that-isnt.html)August 1, 2011
     Scut-Scut-Scuttlebutt...  (http://ragnarisapirate.blogspot.com/2012/03/scut-scut-scuttle-butt.html)March 4, 2012
     Why I Am 13D-ing Sitestar (http://ragnarisapirate.blogspot.com/2012/05/why-i-am-13d-ing-sitestar.html)May 30, 2012
     Sitestar Properties For Sale/Rent (http://ragnarisapirate.blogspot.com/2012/06/sitestar-properties-for-sale.html)June 23, 2012
     Portrait Of A CEO: Frank Erhartic (http://ragnarisapirate.blogspot.com/2012/09/portrait-of-ceo-frank-erhartic.html)September 1, 2012
     A Board Seat At Sitestar... (http://ragnarisapirate.blogspot.com/2013/10/a-board-seat-at-sitestar.html)October 31, 2013
     Starting Activism at Sitestar (SYTE) (http://ragnarisapirate.blogspot.com/2014/06/starting-activism-at-sitestar-syte.html)    June 23, 2014
Title: Re: SYTE - Sitestar
Post by: writser on June 25, 2014, 06:23:10 AM
What surprises me is that the 'portrait of a CEO'-post was really positive about Frank Erhartic. Ragnar gets a board seat, looks forwarding to working together with two incredibly nice and shrewd managers. Hardly two years later he has to go activist because the CFO is fleeing out of the office when he arrives. The whole drama reminds me of Walter Schloss: 'I’m not very good at judging people. So I found that it was much better to look at the figures rather than people. I didn't go to many meetings.'. Probably he experienced stuff like this too ... I really appreciate what Ragnar is trying to achieve and I hope it works out for all of you involved. I'll follow it from the sidelines with a bag of popcorn though.
Title: Re: SYTE - Sitestar
Post by: Sportgamma on June 25, 2014, 06:54:22 AM
Here are some tidbits from the investor chat in december:
http://www.sitestar.com/press_release_December_2013.cfm

"We have also cut some major expenses in our Internet division that should be reflected starting late this year and into the first quarter of 2014."

"This year, we have been concentrating on fixing up the homes we have purchased and renting them out.  We currently have about a dozen houses rented so far this year with about $10,000 a month in rental income.  We have many more houses that we are working on for rent and we hope to at least double the monthly rental income in 2014."

"We should be able to get most of our properties available to sell or rent within the next 6 months while adding additional properties."

"Frank: 2014 Goals & Objectives:
Frank: 1. Increase our rental income by at least 2x
Frank: 2. Complete all of our existing home renovations that need to be done
Frank: 3. Buy and Sell significantly more homes this year
Frank: 4. Further develop our in-house systems to make things run more smoothly
Frank: 5. Further develop our in-house systems to better capture leads for sale, rent, buying and investing.
Frank: 6. Redo our existing home page to better reflect what we are currently doing and to help capture those leads.
Frank: 7. Partner with more investors to purchase or invest in more real estate deals
Frank: 8. Increase our revenue and net profit significantly
Frank: 9. Continue to find ways to cut costs and streamline operations
Frank: 10. Increase Shareholder value"

"there are over 40 properties that we own and all are free and clear. As we build our rental property inventory, we can leverage this for bigger deals and more deals when we need the money. In the past, I have had to borrow money for Sitestar personally since Sitestar didn’t have many hard assets."

"We are looking at really good ROI’s on rental properties. Our target is approximately 20% ROI on rentals.  On higher end properties, the ROI doesn’t make sense for rentals so those are typically flips."

"Frank: Jeff has been down several times and visits our properties. He has helped move some of them along. We have board meetings on a regular basis."

"Frank: I do want to mention something that is a big thing on our balance sheet. That is the USAT debt we show on our financials.  We do not believe that we owe this and in fact, we believe that they owe us money. We are trying to solve this through legal means but our auditors will not let us take it off our books as they say that we owe it.  We will be entering into arbitration soon and hope to have this resolved soon. There are no guarantees on how this will turn out but we have all of our supporting documents to our attorney and believe we are solid with our claims."

"Frank: Let me ask you guys what your thought are on a reverse split.  We are getting a quote on what that would cost if that makes sense."

"jeff: 1) On the balance sheet’s "Notes Payable, current portion" of $900K -- when does the company thinks that will get taken care of and officially removed? 2) Timing on when the shares of the former employee will be officially cancelled? 3) What is the total dollar size of the real estate opportunity within Frank's geography and circle of competence? Would SYTE consider raising additional equity to take advantage of the real estate opportunities, to the extent that there are still opportunities but unlikely to last long into the future?"

"Frank: #1 already answered.
Frank: #2: Those share are in treasury and do not reflect outstanding shares. We will probably cancel those officially soon. I am not sure it makes sense to hold on to them any longer unless we want to cancel more shares from others at the same time.
Frank: #3: is related to the size of the local market. I don’t have exact figures on that. It is enough to keep us busy for quite some time, however.
Frank: another question related to if we would consider raising additional equity to take advantage of RE opportunities....
Frank: I really don’t want to issue more shares if we don’t have to so that is probably unlikely unless we use that as collateral and can purchase them back at some point.  I like reducing the number of shares better and using other avenues to raise money which real estate can easily do."

"Frank: Would the company be willing to share the shareholder registrar with the public, or at least its investors?
Frank: I would have to evaluate it on a case by case basis."


Title: Re: SYTE - Sitestar
Post by: rkbabang on June 25, 2014, 07:21:00 AM
Here are some tidbits from the investor chat in december:
http://www.sitestar.com/press_release_December_2013.cfm
...

I read the transcript of the chat in December, but now I'm not sure how much of it to believe.  Things seem to have changed.  For instance
"We have board meetings on a regular basis" has certainly not been the case in 2014, nor did: "We are also planning on an Annual Shareholder meeting in late April or May" (which Frank also said in the chat) ever happen.

And:

"This year, we have been concentrating on fixing up the homes we have purchased and renting them out.  We currently have about a dozen houses rented so far this year with about $10,000 a month in rental income.  We have many more houses that we are working on for rent and we hope to at least double the monthly rental income in 2014. We should be able to get most of our properties available to sell or rent within the next 6 months while adding additional properties."

Well 6 months has past and I see no evidence (or at least I have no information) that any of that has taken place or any progress what-so-ever toward it has been made. Certainly the properties page on the website doesn't reflect it.  The change in management behavior from December to June has been quite disconcerting and makes me glad I have a policy to never allocate too much to any one micro/nano-cap company.

I now see the shareholder activism (up to and including replacing the management, if it comes to that) as maybe the only hope to realizing SYTE's value.
Title: Re: SYTE - Sitestar
Post by: matjone on June 29, 2014, 04:36:27 PM
Have they put out a schedule of their properties anywhere?  Or does each shareholder have to drive to Virginia to figure this out?

Title: Re: SYTE - Sitestar
Post by: ragnarisapirate on June 29, 2014, 09:52:41 PM
No schedule, but you can get an idea at sitestar.com/rentals (http://sitestar.com/rentals) and sitestar.com/properties (http://sitestar.com/properties)

There are some that are rented, which are not on the site. You can find out additional info from the various taxing authorities, which all have decent websites.
Title: Re: SYTE - Sitestar
Post by: matjone on June 30, 2014, 03:33:57 PM
I saw that after posting.  I looked through it and only counted 7500 in monthly rent.  In the call 6 months ago they said they were at 10k and ramping up.  I also checked a couple of the for sale properties against tax assessments and zillow.  Some of them were assessed a little lower than the asking price, but it is normal at least where I am from for the assessed values to be lower than market values.    I am trying to piece it together from the county websites but there is always the problem of them owning things through other entities that won't show up when you search "sitestar".  It would be nice if they would include a schedule of what they owned in their reports.
Title: Re: SYTE - Sitestar
Post by: matts on June 30, 2014, 06:08:52 PM
I saw that after posting.  I looked through it and only counted 7500 in monthly rent.  In the call 6 months ago they said they were at 10k and ramping up.  I also checked a couple of the for sale properties against tax assessments and zillow.  Some of them were assessed a little lower than the asking price, but it is normal at least where I am from for the assessed values to be lower than market values.    I am trying to piece it together from the county websites but there is always the problem of them owning things through other entities that won't show up when you search "sitestar".  It would be nice if they would include a schedule of what they owned in their reports.

Yes, that would be nice. Buuuut, since they are ducking their own director by running away when he is not looking I'm not going to hold my breath on them being nice. This is such a weird case, the fact that they let Jeff on the board at all is very surprising now. Then in December Frank agrees to a shareholder chat that he was under no obligation to do, and after that it deteriorates so rapidly. The behavior of Solitron management is terrible but at least makes some rational sense, they have been consistent in telling shareholders to F off.
 
Title: Re: SYTE - Sitestar
Post by: ragnarisapirate on July 01, 2014, 09:20:36 AM
I saw that after posting.  I looked through it and only counted 7500 in monthly rent.  In the call 6 months ago they said they were at 10k and ramping up.  I also checked a couple of the for sale properties against tax assessments and zillow.  Some of them were assessed a little lower than the asking price, but it is normal at least where I am from for the assessed values to be lower than market values.    I am trying to piece it together from the county websites but there is always the problem of them owning things through other entities that won't show up when you search "sitestar".  It would be nice if they would include a schedule of what they owned in their reports.

Those are properties that are for rent, not rented. The rented rentals are not listed on the website.
Title: Re: SYTE - Sitestar
Post by: globalfinancepartners on January 21, 2015, 08:49:34 AM
Here is an update on Ragnarisapirate's (Jeff Moore) ongoing drama with the management of Sitestar.

http://www.sec.gov/Archives/edgar/data/1096934/000138713115000159/moore-dfrn14a_012015.htm

This paragraph was new news to me:
"On January 12, 2015, over the objection of Mr. Moore, the Board of SiteStar adopted a series of amendments to SiteStar’s bylaws, one of which removed the ability of shareholders to call a meeting of the shareholders. The amendments were not passed with retroactive effect. The Moore Shareholder Group believes that the meeting it has called, and to which this proxy relates, remains properly called pursuant to Nevada law and the SiteStar bylaws in effect when the meeting was called. If the meeting cannot be held in the initial time frame specified when the meeting was called and a new meeting must be called, which is no longer permitted under the bylaws, or the directors were to challenge the validity of the meeting in light of the bylaw amendments, Nevada law permits holders of 15% of the outstanding voting securities to petition a court to order a meeting for the election of directors if no meeting has been held within the prior 18 months. If either of those events occurs, the Moore Shareholder Group will petition the court to order a meeting."

I also hadn't known that the CEO was going through a divorce and potentially expressed interest in selling a large block of stock at some point.  Interesting to follow, for sure.  My in-laws are in Lynchburg VA so I've kept up with this story over the last couple years...
Title: Re: SYTE - Sitestar
Post by: constructive on January 21, 2015, 09:00:51 AM
Ragnar, how much will 9 directors cost? It seems a little excessive to fly 9 people from all over the country for a company this small.

Other than that the proxy makes perfect sense.

Here are some people you may want to engage with to vote on it: http://investorshub.advfn.com/Sitestar-Corporation-SYTE-560/
Title: Re: SYTE - Sitestar
Post by: globalfinancepartners on January 21, 2015, 12:41:18 PM
And now this from SYTE:
http://www.marketwatch.com/story/sitestar-comments-on-moores-attempt-to-remove-a-majority-of-the-members-of-the-sitestar-board-of-directors-2015-01-21?siteid=bigcharts&dist=bigcharts
Title: Re: SYTE - Sitestar
Post by: oddballstocks on January 21, 2015, 12:51:20 PM
This is really interesting to watch unfold.  Unfortunately sitting management has a variety of tools available to screw shareholders.

On my desk is a certificate from an unnamed company with $4m NCAV trading for $800k.  I have considered an attempt to take them over multiple times, but there are way too many ways I can end up on the short end.  I'll probably send in my certificate and cash out, it's not worth the hassle.
Title: Re: SYTE - Sitestar
Post by: rkbabang on January 21, 2015, 01:26:50 PM
I just got an email from investorrelations@sitestar.com.  I can't find it online anywhere to link to it, so I'll just paste it here:

Quote
FOR IMMEDIATE RELEASE

Contact:
Frank R. Erhartic, Jr.
434-239-4272
investorrelations@sitestar.com

Sitestar Comments on Moore's Attempt to Remove a Majority of the Members of the Sitestar Board of Directors
Advises Stockholders to Take No Action at This Time


Lynchburg, Virginia ? January 21, 2015 ? Sitestar Corporation (OTCQB: SYTE) (''Sitestar'' or the ''Company'') today issued the following statement regarding the filing by the Moore Shareholder Group  (''Moore'') of definitive proxy materials with the Securities and Exchange Commission (''SEC'') in order to solicit proxies to call a Special Meeting of Sitestar?s stockholders on February 12, 2015 in New Canaan, Connecticut.  The purpose of the meeting is to elect nine nominees to the Sitestar Board to replace the majority of the current Board; Frank R. Erhartic, Jr., President and CEO of Sitestar; and Daniel Judd, CFO of Sitestar. Mr. Moore is the third member of the current Sitestar Board and would continue to be a member of the Sitestar Board under the Moore preliminary proxy materials.  Sitestar urges all of its stockholders to refrain from taking any action, including returning any proxy card sent by Moore, until they have reviewed the recommendation of Sitestar?s Board of Directors that will be included in a proxy statement to be filed by the Company. Under federal securities laws Moore cannot solicit proxies from Sitestar stockholders until Moore provides stockholders with definitive proxy solicitation materials. The Sitestar Board intends to call for a special meeting of stockholders on March 12, 2015 to allow sufficient time for the December 31, 2014 fiscal year end financial statements to be completed and will pursue the course of action that the Board believes is in the best interests of the Company and all of its stockholders.

In response to the Moore proxy solicitation, Frank R. Erhartic, Jr., President and CEO of Sitestar, stated, ''We are committed to the long-term interest of the Company and our shareholders and will oppose any group that seeks to derail our efforts that have turned this Company around. If you believe that you have been approached by this group for purchase of your shares or for a Proxy vote, please contact our office immediately.''

Akerman LLP and FitzGerald Yap Kreditor LLP are serving as legal counsel to the Company.
Title: Re: SYTE - Sitestar
Post by: LowIQinvestor on January 22, 2015, 07:48:07 AM
Quote
Posted by: oddballstocks
« on: January 21, 2015, 12:51:20 PM » Insert Quote
This is really interesting to watch unfold.  Unfortunately sitting management has a variety of tools available to screw shareholders.

On my desk is a certificate from an unnamed company with $4m NCAV trading for $800k.  I have considered an attempt to take them over multiple times, but there are way too many ways I can end up on the short end.  I'll probably send in my certificate and cash out, it's not worth the hassle.

Oddball hits on an interesting point here. I too have considered pursuing a more activist approach with some tiny companies but can never get around how time consuming and potentially expensive it could be. Looks like this will cost them around $50k to launch the proxy? I guess they want to be reimbursed for this by Sitestar?

"The entire expense of soliciting proxies is being borne by the Moore Shareholder Group. Costs of this solicitation of proxies are currently estimated to be approximately $50,000. The Moore Shareholder Group estimates that through the date hereof its expenses in connection with this solicitation are approximately $25,000."

I really do wish them the best and hope that they succeed. I imagine they never intended to have to get this involved...
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on January 27, 2015, 10:58:06 AM
The 13Ds filed by management are utterly bizarre.
http://www.sec.gov/Archives/edgar/data/1096934/000072174815000045/0000721748-15-000045-index.htm
http://www.sec.gov/Archives/edgar/data/1096934/000072174815000047/0000721748-15-000047-index.htm
http://www.sec.gov/Archives/edgar/data/1096934/000117031215000007/0001170312-15-000007-index.htm
http://www.sec.gov/Archives/edgar/data/1096934/000117031215000006/0001170312-15-000006-index.htm

Column 5 is backwards:
http://www.sec.gov/Archives/edgar/data/1096934/000117031215000003/xslF345X03/primary_doc.xml

6 months with no response, and this is the best they can come up with? What kind of lawyers do these guys have? DUI attorneys?
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on January 30, 2015, 12:22:13 PM
Company has changed bylaws to fend off "corporate raiders"
http://www.sec.gov/Archives/edgar/data/1096934/000072174815000059/site8k01282015.htm

Getting uglier by the day.
Title: Re: SYTE - Sitestar
Post by: globalfinancepartners on February 10, 2015, 01:36:42 PM
Settlement with Ragnar -

http://www.sec.gov/Archives/edgar/data/1096934/000138713115000447/jm-corresp_021015.htm
Title: Re: SYTE - Sitestar
Post by: Schwab711 on February 10, 2015, 03:46:43 PM
Admittedly I haven't looked into SYTE but how do you find an IV or range for IV with such poor management? It seems like you have to fight an uphill battle, price-multiple is likely capped to some extent, even if there's growth in profits the money has been shown to be mis-allocated giving you just a percentage of that growth, and the less efficient style can lead to bankruptcy if the industry experiences tough times. It doesn't make any sense to me to buy deep-value but terribly run stocks unless you have the money to be an activist or owner. What am I missing? Back-tests of strategy proving me wrong?
Title: Re: SYTE - Sitestar
Post by: ScottHall on February 10, 2015, 06:44:00 PM
Settlement with Ragnar -

http://www.sec.gov/Archives/edgar/data/1096934/000138713115000447/jm-corresp_021015.htm

Wonder what this is all about.
Title: Re: SYTE - Sitestar
Post by: oddballstocks on February 10, 2015, 07:34:17 PM
Admittedly I haven't looked into SYTE but how do you find an IV or range for IV with such poor management? It seems like you have to fight an uphill battle, price-multiple is likely capped to some extent, even if there's growth in profits the money has been shown to be mis-allocated giving you just a percentage of that growth, and the less efficient style can lead to bankruptcy if the industry experiences tough times. It doesn't make any sense to me to buy deep-value but terribly run stocks unless you have the money to be an activist or owner. What am I missing? Back-tests of strategy proving me wrong?

Two thoughts.  As someone running some backtests myself I'd say that anyone who references them going forward is full of crap.  I now understand why no quant manager just going by the data ever matches the backtested results.

Second thought.  Sometimes the assets are worth so much more than it's worth putting up with terrible management.  At times an exec will die and the company will be let free.  Other times the CEO will finally decide to sell and retire in Boca.  And lastly sometimes it's worth doing the activist thing like Jeff did to unlock the value himself.
Title: Re: SYTE - Sitestar
Post by: globalfinancepartners on February 11, 2015, 09:14:47 AM
A bit more of the story -

http://www.sec.gov/Archives/edgar/data/1096934/000072174815000072/0000721748-15-000072-index.htm
Title: Re: SYTE - Sitestar
Post by: Grenville on February 11, 2015, 01:16:24 PM
A bit more of the story -

http://www.sec.gov/Archives/edgar/data/1096934/000072174815000072/0000721748-15-000072-index.htm

Interesting. Thanks for posting!
Title: Re: SYTE - Sitestar
Post by: globalfinancepartners on February 12, 2015, 10:39:31 AM
Looks like someone is getting goofy with their buying today - this thing traded six and a half cents at one point today.
Title: Re: SYTE - Sitestar
Post by: globalfinancepartners on April 02, 2015, 07:55:09 AM
Annual Report out at Sitestar -

http://www.sec.gov/Archives/edgar/data/1096934/000072174815000203/site10k033115.htm
Title: Re: SYTE - Sitestar
Post by: globalfinancepartners on May 16, 2015, 09:39:15 AM
10Q is out -

http://www.sec.gov/Archives/edgar/data/1096934/000072174815000361/site10q051515.htm
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on May 16, 2015, 09:19:53 PM
10Q is out. Quarter only contained a month or so of involvement of new directors, and shows no change. Reporting is not materially improved, and results certainly are not. I'm hopeful to see change in Q2, first full quarter with new directors. If it's just going to be more of the same with three more guys in the room, not much to stay around for.
Title: Re: SYTE - Sitestar
Post by: alertmeipp on May 17, 2015, 06:18:28 AM
Interesting read. So this company is up 3 times since his involvement even with all those actions.

What is the remaining upside.
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on November 25, 2015, 01:08:49 PM
10Q is out. Quarter only contained a month or so of involvement of new directors, and shows no change. Reporting is not materially improved, and results certainly are not. I'm hopeful to see change in Q2, first full quarter with new directors. If it's just going to be more of the same with three more guys in the room, not much to stay around for.
2 more quarters, and no change, except accelerated decline in internet business. I wonder if Board has even met.
Title: Re: SYTE - Sitestar
Post by: matts on November 26, 2015, 08:08:01 AM
Agreed. I expected investor communication to improve with the new directors. I have been disappointed by the lack of progress (or at least its invisibility).
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on December 02, 2015, 04:50:18 PM
http://www.inelegantinvestor.com/2015/12/02/sitestarsyte-management-asleep-at-the-wheel/
Title: Re: SYTE - Sitestar
Post by: ScottHall on December 02, 2015, 05:08:54 PM
If Frank Erhartic hates his shareholders so much maybe he should just take the thing private.
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on December 02, 2015, 05:55:09 PM
Depending on the price, that would be one acceptable outcome

If Frank Erhartic hates his shareholders so much maybe he should just take the thing private.
Title: Re: SYTE - Sitestar
Post by: DTEJD1997 on December 03, 2015, 06:11:12 AM
Hey all:

I used to own this stock a while ago...

Fortunately, I sold out at a profit.

The problem is that management seems to be totally disconnected from running it in any meaningful way.  Additionally, they seem somewhat hostile to shareholders.

How much of a discount do you need to overcome incompetent/hostile management?  In my opinion, there was not enough of a discount...
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on December 03, 2015, 06:59:24 AM
The stock is so illiquid that if I were to try to sell my stake, I'd end up giving someone else enough of a discount...

How much of a discount do you need to overcome incompetent/hostile management?  In my opinion, there was not enough of a discount...

Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on December 03, 2015, 10:41:07 AM
Sitestar(SYTE) Management Acts As Though It Is Not A Public Company http://www.inelegantinvestor.com/2015/12/03/sitestarsyte-management-acts-as-though-it-is-not-a-public-company/
Title: Re: SYTE - Sitestar
Post by: ratiman on December 03, 2015, 12:31:03 PM
The level of unreality in this thread has reached a point that I am compelled to post. This is not a company. It has no valuable, cash generating assets. It has no strategy. It has negligible capital. It is run by a guy who is mostly qualified to run Windows servers circa 1998. It will generate no significant returns, not this year, not in ten years. The bid ask spread is larger than the value of the company. If you can get out at 1c you are very lucky.
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on December 03, 2015, 12:59:34 PM
It is true that it is not a company, and the CEO is not competent.
That said, the ISP continues to throw off some cash, and the value of the RE exceeds the market cap of the company. There is no debt.
The ISP also contains some valuable domain names, one worth six figures on its own.

$.01 would value the company at $750,000. That just doesn't make sense compared to the asset values.
Title: Re: SYTE - Sitestar
Post by: Junto on December 03, 2015, 05:12:33 PM
The level of unreality in this thread has reached a point that I am compelled to post. This is not a company. It has no valuable, cash generating assets. It has no strategy. It has negligible capital. It is run by a guy who is mostly qualified to run Windows servers circa 1998. It will generate no significant returns, not this year, not in ten years. The bid ask spread is larger than the value of the company. If you can get out at 1c you are very lucky.


It certainly is a company, whether it should be public is another question. Perhaps the larger question not asked is who wants to put out a tender to buy those that want out? Jeff Moore (ragnarisapirate) has demonstrable experience in real estate. He could be the new CEO and go to market to raise more capital for "investment purposes."

Hell PDH had a much worse business model and underlying business when Parsad made his move for it and look at the premium on that stock right now!  Instant money for those wanting to make a play....  :o
Title: Re: SYTE - Sitestar
Post by: no_thanks on December 03, 2015, 05:18:20 PM
Good idea, and I would be interested in giving it a go, but the issue would be buying Frank's shares and not InelegantInvestor's :)  I might send him an email though just to see. 
Title: Re: SYTE - Sitestar
Post by: rkbabang on December 03, 2015, 05:48:05 PM
I own over 1% of shares, I'd certainly vote to replace the CEO at this point.
Title: Re: SYTE - Sitestar
Post by: DTEJD1997 on December 03, 2015, 05:50:53 PM
If Jeff wanted to be CEO, I would back him in an instant!

He gets my endorsement.
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on December 03, 2015, 06:08:43 PM
I've spoken with probably over 10% of shares over the past few days. Everyone would vote to replace the CEO. That's probably why the company has refused over and over again to hold a meeting. The settlement requires that one be held by June of 2016 though.

I own over 1% of shares, I'd certainly vote to replace the CEO at this point.
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on December 03, 2015, 06:11:19 PM
Good idea, and I would be interested in giving it a go, but the issue would be buying Frank's shares and not InelegantInvestor's :)  I might send him an email though just to see. 

I'm not really looking to sell my shares; I'd much rather let them realize their value. That said, I would have to consider a reasonable offer.
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on December 03, 2015, 07:11:19 PM
I elaborated a bit on the issue of the loan the company took out from the CEO's mother. Basically the loan was unnecessary, the interest rate absurd(and it increased without disclosure), and the relationship was not disclosed. This is a serious issue and the Board must investigate it.

http://www.inelegantinvestor.com/2015/12/03/sitestarsyte-failed-to-disclose-unnecessary-high-interest-rate-loan-from-ceos-mother/
Title: Re: SYTE - Sitestar
Post by: ScottHall on December 03, 2015, 08:15:40 PM
I don't own shares but this guy seems like a real jackass. The internet business probably isn't worth too much at this point given its decline rate, but the real estate has probably appreciated since the company bought it.

Jeff as CEO would get me to buy shares immediately. We've talked briefly in the past, and he seems like a great guy.
Title: Re: SYTE - Sitestar
Post by: oddballstocks on December 03, 2015, 09:46:54 PM
Right now Jeff is probably reading this thread, drinking a good Kentucky bourbon and nodding his head in approval....

If he were to become CEO I'd buy in as well.
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on December 03, 2015, 10:08:02 PM
All you folks who would buy shares if Jeff were CEO- buy shares now and help make it happen.
Title: Re: SYTE - Sitestar
Post by: ratiman on December 04, 2015, 04:27:10 AM
Is SWAY  earning 10% yield on the properties BEFORE expenses? No. Total investment in properties is $2.2B. Total rent revenues last quarter was $46M, annualize that it's $184M. So SWAY is not even generating 10% yield before expenses and depreciation. FFO yield on the real estate is about 2.5%. So how are they going to generate a 10% return after expenses? It doesn't make sense.

Residential real estate is not meant to be owned in a public company. It's a cottage industry with no economies of scale run by small entrepreneurs who invest their own untaxed and uncompensated labor in the business. Meanwhile, SYTE has to pay a CEO, CFO, auditor, board, HQ expenses, etc etc. SYTE is just an uneconomic enterprise and it isn't worth more than $0 to anyone who isn't Frank Erhartic.
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on December 04, 2015, 04:43:26 AM
Is SWAY  earning 10% yield on the properties BEFORE expenses? No. Total investment in properties is $2.2B. Total rent revenues last quarter was $46M, annualize that it's $184M. So SWAY is not even generating 10% yield before expenses and depreciation. FFO yield on the real estate is about 2.5%. So how are they going to generate a 10% return after expenses? It doesn't make sense.

Residential real estate is not meant to be owned in a public company. It's a cottage industry with no economies of scale run by small entrepreneurs who invest their own untaxed and uncompensated labor in the business. Meanwhile, SYTE has to pay a CEO, CFO, auditor, board, HQ expenses, etc etc. SYTE is just an uneconomic enterprise and it isn't worth more than $0 to anyone who isn't Frank Erhartic.
I agree that real estate is not where they should be allocating capital. It should be sold off, and they shouldn't buy more. I'm flabbergasted at how you can claim that its value is $0. Surely the 40+ properties must have some value!

When the market cap is far smaller than the value of the company's assets, as is the case here, you don't need a 10% yield to make money, you just need to get back to par. Is this a cigar butt? Sure, but it has quite a few puffs left.
Title: Re: SYTE - Sitestar
Post by: ratiman on December 04, 2015, 04:58:44 AM
Is SWAY  earning 10% yield on the properties BEFORE expenses? No. Total investment in properties is $2.2B. Total rent revenues last quarter was $46M, annualize that it's $184M. So SWAY is not even generating 10% yield before expenses and depreciation. FFO yield on the real estate is about 2.5%. So how are they going to generate a 10% return after expenses? It doesn't make sense.

Residential real estate is not meant to be owned in a public company. It's a cottage industry with no economies of scale run by small entrepreneurs who invest their own untaxed and uncompensated labor in the business. Meanwhile, SYTE has to pay a CEO, CFO, auditor, board, HQ expenses, etc etc. SYTE is just an uneconomic enterprise and it isn't worth more than $0 to anyone who isn't Frank Erhartic.
I agree that real estate is not where they should be allocating capital. It should be sold off, and they shouldn't buy more. I'm flabbergasted at how you can claim that its value is $0. Surely the 40+ properties must have some value!

When the market cap is far smaller than the value of the company's assets, as is the case here, you don't need a 10% yield to make money, you just need to get back to par. Is this a cigar butt? Sure, but it has quite a few puffs left.

You can always buy cash on the balance sheet for much less (50% haircut) than cash in your bank account. I'm not sure the reason for that, but that's how the market works.

But the question is whether investors will ever get money out of Sitestar. Hmmm . . . no. Frank effectively owns the business and always will. All cash flows through his hands and will end up in his pocket. He doesn't need investors to grow the business. So basically all the cash in the business will end up in his hands. If you don't believe me, paint a scenario in which the 46 year old FE pays a dividend or buys back shares instead of paying himself a bigger salary. I don't see it happening. 
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on December 04, 2015, 05:08:41 AM

You can always buy cash on the balance sheet for much less (50% haircut) than cash in your bank account. I'm not sure the reason for that, but that's how the market works.

But the question is whether investors will ever get money out of Sitestar. Hmmm . . . no. Frank effectively owns the business and always will. All cash flows through his hands and will end up in his pocket. He doesn't need investors to grow the business. So basically all the cash in the business will end up in his hands. If you don't believe me, paint a scenario in which the 46 year old FE pays a dividend or buys back shares instead of paying himself a bigger salary. I don't see it happening. 
As I understand it, the whole Graham method is buying that cash at a 50% haircut and profiting when the value is realized. Frank has 1/3 of the shares. Possibly. It actually looks like his ex-wife owns or co-owns a bunch of them(the filings are contradictory). That is not enough for him to maintain control. As part of the settlement agreement with the Moore group, he must hold an annual meeting by the end of June. I don't imagine he will be uncontested, and I don't see how he gets a single vote beyond the shares that he owns.
 
The settlement agreement also limits what he can do without permission of the Moore group. 
Title: Re: SYTE - Sitestar
Post by: ratiman on December 04, 2015, 05:19:28 AM
1/3 is more than enough to control the company. I'd say 20% is enough. Most of the shareholders are probably unwilling to pay their brokerage $15 to sell $10 of shares, although many of the shareholders are probably unaware of what they own. Frank could probably do a 100-1 reverse split and buy the fractional shares. 
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on December 04, 2015, 05:48:50 AM
1/3 is more than enough to control the company. I'd say 20% is enough. Most of the shareholders are probably unwilling to pay their brokerage $15 to sell $10 of shares, although many of the shareholders are probably unaware of what they own. Frank could probably do a 100-1 reverse split and buy the fractional shares. 
Based on the public filings of the Moore group and other shareholders I've spoken to, there is easily more than 1/3 of shares held in large blocks by people who are not supportive of management. If Frank didn't think so, why did he settle?
Title: Re: SYTE - Sitestar
Post by: rmitz on December 04, 2015, 10:17:53 AM

You can always buy cash on the balance sheet for much less (50% haircut) than cash in your bank account. I'm not sure the reason for that, but that's how the market works.

But the question is whether investors will ever get money out of Sitestar. Hmmm . . . no. Frank effectively owns the business and always will. All cash flows through his hands and will end up in his pocket. He doesn't need investors to grow the business. So basically all the cash in the business will end up in his hands. If you don't believe me, paint a scenario in which the 46 year old FE pays a dividend or buys back shares instead of paying himself a bigger salary. I don't see it happening. 
As I understand it, the whole Graham method is buying that cash at a 50% haircut and profiting when the value is realized. Frank has 1/3 of the shares. Possibly. It actually looks like his ex-wife owns or co-owns a bunch of them(the filings are contradictory). That is not enough for him to maintain control. As part of the settlement agreement with the Moore group, he must hold an annual meeting by the end of June. I don't imagine he will be uncontested, and I don't see how he gets a single vote beyond the shares that he owns.
 
The settlement agreement also limits what he can do without permission of the Moore group.

Remember that the Graham method is to buy a huge basket of these things, because many of them won’t work out.
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on December 04, 2015, 10:59:15 AM
Remember that the Graham method is to buy a huge basket of these things, because many of them won’t work out.
Rest assured, this is not the only stock I own.
That said, I think shining light on what is going on may increase the probability that shareholders realize value.
Title: Re: SYTE - Sitestar
Post by: intothebreach on December 04, 2015, 11:01:43 AM
Hindsight is always much easier, so I'll try to thread carefully here. No position here, ever.

It seems to me that at this point the thesis is essentially a bet on management being replaced (or strongly influenced) in the not-too-distant future, otherwise the value will likely never be realized for shareholders. So I would suggest determining the likelihood of such a scenario occurring, or the willingness into taking and paying for legal action to uphold the rights of minority shareholders (and the costs of doing so versus the potential reward).

Otherwise, while this is indeed legally a company with assets currently worth something, it is not a business you can invest in with any margin of safety. Surely I'm missing information, but the downside unfortunately looks like a zero as a scenario involving costly legal actions cannot be excluded. Might as well bet it all on red.

Put otherwise: would you buy this again today? if not, it may be worth asking why you're staying long, which is essentially the same thing. Best of luck either way.
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on December 04, 2015, 11:11:00 AM
Hindsight is always much easier, so I'll try to thread carefully here. No position here, ever.

It seems to me that at this point the thesis is essentially a bet on management being replaced (or strongly influenced) in the not-too-distant future, otherwise the value will likely never be realized for shareholders. So I would suggest determining the likelihood of such a scenario occurring, or the willingness into taking and paying for legal action to uphold the rights of minority shareholders (and the costs of doing so versus the potential reward).

Otherwise, while this is indeed legally a company with assets currently worth something, it is not a business you can invest in with any margin of safety. Surely I'm missing information, but the downside unfortunately looks like a zero as a scenario involving costly legal actions cannot be excluded. Might as well bet it all on red.

Put otherwise: would you buy this again today? if not, it may be worth asking why you're staying long, which is essentially the same thing. Best of luck either way.
In an illiquid investment, I'm not sure that would I buy it again is symmetrical. Buying a stake of this size would push the price up meaningfully, while selling would push it down.

I do believe that a management change in the next 6 months is likely, or at least that current management will be forced to change strategy. But, like you said, hindsight is much easier. I like my odds right now, but I'd certainly be sweating if this was a huge % of my assets.
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on December 15, 2015, 10:45:23 AM
CEO is out, $900,000 lawsuit is settled. Steven Kiel of Arquitos is Interim CEO:
http://www.sec.gov/Archives/edgar/data/1096934/000072174815000888/site8k121515ex99_1.htm (http://www.sec.gov/Archives/edgar/data/1096934/000072174815000888/site8k121515ex99_1.htm)
Title: Re: SYTE - Sitestar
Post by: fareastwarriors on December 15, 2015, 11:02:07 AM
Whoa! The shareholders can fight back!
Title: Re: SYTE - Sitestar
Post by: rkbabang on December 15, 2015, 11:19:51 AM
That is great news!   A new CEO (interesting they appointed Steven Kiel rather than Moore) and getting rid of that $900K that was hanging over the company's head for far too long.
Title: Re: SYTE - Sitestar
Post by: DTEJD1997 on December 15, 2015, 11:24:12 AM
That is great news!   A new CEO (interesting they appointed Steven Kiel rather than Moore) and getting rid of that $900K that was hanging over the company's head for far too long.

Jeff Moore may not have wanted that position...he has substantial real estate holdings outside of SYTE's market....

Very good news indeed.  It will be interesting to see what happens.  That $900k is a huge deal for the company.
Title: Re: SYTE - Sitestar
Post by: oddballstocks on December 15, 2015, 11:40:29 AM
Wow, Steve running the company now, great news!  Time to look at buying some shares..
Title: Re: SYTE - Sitestar
Post by: Sportgamma on December 15, 2015, 11:41:45 AM
Well done!
Title: Re: SYTE - Sitestar
Post by: bci23 on December 15, 2015, 12:46:53 PM
anyone have any thoughts on this statement:

"The board has further agreed to engage legal counsel to lead an investigation to determine the appropriateness, scope, and nature of certain related-party transactions involving Mr. Erhartic"
Title: Re: SYTE - Sitestar
Post by: no_thanks on December 15, 2015, 01:28:54 PM
Probably the loan from his mom that inelegant investor pointed out, right?
Title: Re: SYTE - Sitestar
Post by: ratiman on December 15, 2015, 03:57:07 PM
Wow, I was 100% wrong on this one. Really surprised that a guy would voluntarily give up control, though he was paying himself just $50,000. Good luck to the longs.
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on December 15, 2015, 04:24:29 PM
Wow, I was 100% wrong on this one. Really surprised that a guy would voluntarily give up control, though he was paying himself just $50,000. Good luck to the longs.
I don't think it was so voluntary. He was terminated for cause. Thank you for the good luck wishes. We're still going to need it.
Title: Re: SYTE - Sitestar
Post by: ScottHall on December 15, 2015, 05:15:26 PM
Congrats guys. Always nice to see the good guys win one.
Title: Re: SYTE - Sitestar
Post by: Morgan on December 15, 2015, 06:48:43 PM
Woah. Congrats!
Title: Re: SYTE - Sitestar
Post by: rkbabang on December 16, 2015, 11:07:44 AM
What I'd like to see next is for the company to convince Frank to sell his shares back to the company and retire them.  Maybe sell first.com to finance it.  Then a 1 for 100 reverse split.
Title: Re: SYTE - Sitestar
Post by: Hielko on December 16, 2015, 12:33:26 PM
What I'd like to see next is for the company to convince Frank to sell his shares back to the company and retire them.  Maybe sell first.com to finance it.  Then a 1 for 100 reverse split.
Or 1:1000 IMO
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on December 29, 2015, 07:48:35 AM
New pr from company with scant detail, asking for patience: http://www.sec.gov/Archives/edgar/data/1096934/000072174815000898/site8k122915ex99_1.htm
Title: Re: SYTE - Sitestar
Post by: Travis Wiedower on February 06, 2016, 01:25:24 PM
I've been working on Sitestar recently and just posted a blog covering my thoughts: http://traviswiedower.com/2016/02/06/what-is-sitestar-worth/ (http://traviswiedower.com/2016/02/06/what-is-sitestar-worth/)

I assume most in this thread are bullish, does anyone think I'm understating their valuation?
Title: Re: SYTE - Sitestar
Post by: writser on February 07, 2016, 04:28:33 AM
I haven't been following this name closely but that was a great post. Thanks for putting in the effort and sharing your insights.

One footnote (take my thoughts with a grain of salt, no expert on Sitestar): this is an extremely small company now run by part-time people. I would expect that monetizing the real estate will take at least a couple of years and a lot of hard (paid) work and I would probably discount the real estate assets for that.

Nevertheless it looks decently attractive. However, I'm not going to buy because all the value is in the real estate, I live on the other side of the planet and I'll always be at a huge disadvantage when it comes to handicapping the value of ~50 arbitrary houses in Virginia.
Title: Re: SYTE - Sitestar
Post by: rkbabang on February 08, 2016, 07:01:07 AM
I've been working on Sitestar recently and just posted a blog covering my thoughts: http://traviswiedower.com/2016/02/06/what-is-sitestar-worth/ (http://traviswiedower.com/2016/02/06/what-is-sitestar-worth/)

I assume most in this thread are bullish, does anyone think I'm understating their valuation?

Thank you for posting this.  I have trying to find a definitive list of the properties owned, but it doesn't appear to be public anywhere. Even http://sitestar.com/properties  doesn't exist anymore.  Also, I've been assuming first.com is worth 7 figures, but who really knows until it is sold.
Title: Re: SYTE - Sitestar
Post by: Travis Wiedower on February 08, 2016, 03:39:24 PM
You can use the Wayback Machine to view the old sitestar.com/properties and /rentals pages by the way. I wouldn't be the least bit surprised if first.com is worth $1M+. It's a hell of a domain. I'm thinking of it more as a free option than a significant part of the investment thesis though.
Title: Re: SYTE - Sitestar
Post by: rkbabang on February 09, 2016, 06:08:23 AM
You can use the Wayback Machine to view the old sitestar.com/properties and /rentals pages by the way. I wouldn't be the least bit surprised if first.com is worth $1M+. It's a hell of a domain. I'm thinking of it more as a free option than a significant part of the investment thesis though.

Thanks, I forgot about the wayback machine.   Yes it is a nice free option though, because for a company this size $1M+ in cash is very significant.
Title: Re: SYTE - Sitestar
Post by: bizaro86 on February 09, 2016, 06:58:49 AM
It's entirely possible I don't "get" domains, but what would you expect first.com to get used for?
Title: Re: SYTE - Sitestar
Post by: rkbabang on February 09, 2016, 07:40:18 AM
It's entirely possible I don't "get" domains, but what would you expect first.com to get used for?

I don't know, but "we.com" was just sold for $8M

https://www.namepros.com/blog/we-com-sales-price-was-8million-buyer-revealed.873017/
Title: Re: SYTE - Sitestar
Post by: rkbabang on February 09, 2016, 07:43:26 AM
Here's another example from last year.  360.com went for $17M.

http://www.ibtimes.com/chinas-qihoo-360-pays-reported-17-million-360com-bid-boost-global-profile-1808274

EDIT:  Also these are only the public ones.  A quote from the above article:  "This news was almost certainly leaked by Qihoo, since companies pay large sums for domains all the time and the news never makes big headlines since it is kept private

I think a name like first.com is worth at least 1/17th what 360.com is worth, or 1/8th of we.com.  Maybe more. They key would be to put it on the market and wait for the right buyer.
Title: Re: SYTE - Sitestar
Post by: Travis Wiedower on February 09, 2016, 08:19:22 AM
Sports (first place), banking related (First National Bank), some type of game/gambling/betting (again, first place), dating (tagline: "the first and last place you need to meet the love of your life"), and God knows how many social media type things we can't predict (first user to do x results in y).  That's with just a couple minutes of thinking so I'm sure there's way better options. Single syllable, common word domains will always have a demand.
Title: Re: SYTE - Sitestar
Post by: rkbabang on February 25, 2016, 09:34:02 AM
More news:

Sitestar Announces the Appointment of Jeffrey Moore as Chairman, the Resignation of Roger Malouf as a Director, the Appointment of Christopher Payne as a Director, and the Issuance of a Demand Letter to Its Former CEO (http://markets.ibtimes.com/ibtimes/news/read?Symbol=130%3A867612&GUID=31599569)

"On February 16, 2016 the Company received the final results of the investigation regarding its former CEO, Frank Erhartic. This investigation was led by outside legal and accounting advisors to the Company. The results of the investigation form the basis of a demand letter that the Company has sent to Mr. Erhartic. The letter demands restitution for payments that the Company believes Mr. Erhartic inappropriately requested and received from the Company. The investigation also revealed that the company has previously claimed 3,318,000 more common shares than it has documentation for, a number which Mr. Erhartic has certified in filings to the Securities and Exchange Commission. The letter to Mr. Erhartic requests information to explain this discrepancy. There can be no promises that the Company will successfully collect on these demands. "
Title: Re: SYTE - Sitestar
Post by: Travis Wiedower on February 27, 2016, 11:18:06 AM
A company has less shares outstanding than it claimed... never seen that before.
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on February 27, 2016, 05:30:43 PM
A company has less shares outstanding than it claimed... never seen that before.

I would guess that they are among the shares Frank claimed to own.
Title: Re: SYTE - Sitestar
Post by: Parsad on February 27, 2016, 09:27:01 PM
A company has less shares outstanding than it claimed... never seen that before.

I would guess that they are among the shares Frank claimed to own.

Actually, I think they mean that 3,318,000 shares issued or claimed to be owned by the company has no back-up documentation to prove they should exist.

Question is:

- who owns these shares?

- were these shares sold by whoever they were issued to?

- were they fraudulently issued if there is no documentation or director's resolutions indicating they should have been issued?

Cheers!
Title: Re: SYTE - Sitestar
Post by: rkbabang on March 07, 2016, 01:37:05 PM
Not surprising news:  "On March 3, 2016, the Company terminated Daniel A. Judd, its Chief Financial Officer. Mr. Judd was the Company’s principal financial officer and principal accounting officer."

http://www.sec.gov/Archives/edgar/data/1096934/000072174816001025/site8k030716.htm
Title: Re: SYTEE - Sitestar
Post by: rkbabang on April 26, 2016, 12:54:02 PM
Anyone else notice that the symbol has changed from SYTE to SYTEE, it appears to have changed on April 19th, although the investor relations page says nothing about it?

http://www.otcmarkets.com/stock/SYTEE/quote

http://www.otcmarkets.com/market-activity/symbol-changes?search=SYTE&searchType=symbol

Title: Re: SYTEE - Sitestar
Post by: nodnub on April 26, 2016, 03:44:42 PM
Anyone else notice that the symbol has changed from SYTE to SYTEE, it appears to have changed on April 19th, although the investor relations page says nothing about it?

http://www.otcmarkets.com/stock/SYTEE/quote

http://www.otcmarkets.com/market-activity/symbol-changes?search=SYTE&searchType=symbol

I googled "otcbb e suffix" and found this -->   https://www.sec.gov/answers/eadded.htm


When a company that trades on the Nasdaq Stock Market or the Over-the-Counter Bulletin Board (OTCBB) falls behind in its reporting obligations with the SEC, the letter "E" is appended at the end of the company's stock ticker symbol. New York Stock Exchange-listed companies that are late in filing required reports to the SEC have the initials "LF" added to the end of their stock ticker symbol.

Markets have different approaches to companies that don't file required reports in a timely manner, or that file incomplete reports. For instance, on the OTCBB, after the "E" is added, the company is given a "grace period" to submit a complete report, typically 30 calendar days for U.S. companies and 60 calendar days for most U.S. banks and non-U.S. companies. If the company files complete required reports during the grace period, the "E" will be removed; if it does not, the company's stock symbol will be removed from trading on the OTCBB. For more information, please read the following:


another perspective here:
http://www.mjwstout.com/what-does-an-e-suffix-mean-for-an-otcbb-trading-symbol/
Title: Re: SYTE - Sitestar
Post by: rkbabang on April 27, 2016, 05:00:54 AM
Anyone else notice that the symbol has changed from SYTE to SYTEE, it appears to have changed on April 19th, although the investor relations page says nothing about it?

http://www.otcmarkets.com/stock/SYTEE/quote

http://www.otcmarkets.com/market-activity/symbol-changes?search=SYTE&searchType=symbol

I googled "otcbb e suffix" and found this -->   https://www.sec.gov/answers/eadded.htm


When a company that trades on the Nasdaq Stock Market or the Over-the-Counter Bulletin Board (OTCBB) falls behind in its reporting obligations with the SEC, the letter "E" is appended at the end of the company's stock ticker symbol. New York Stock Exchange-listed companies that are late in filing required reports to the SEC have the initials "LF" added to the end of their stock ticker symbol.

Markets have different approaches to companies that don't file required reports in a timely manner, or that file incomplete reports. For instance, on the OTCBB, after the "E" is added, the company is given a "grace period" to submit a complete report, typically 30 calendar days for U.S. companies and 60 calendar days for most U.S. banks and non-U.S. companies. If the company files complete required reports during the grace period, the "E" will be removed; if it does not, the company's stock symbol will be removed from trading on the OTCBB. For more information, please read the following:


another perspective here:
http://www.mjwstout.com/what-does-an-e-suffix-mean-for-an-otcbb-trading-symbol/


Thanks for the info.
Title: Re: SYTE - Sitestar
Post by: OracleofCarolina on June 14, 2016, 10:46:32 AM
http://www.otcmarkets.com/stock/SYTE/news

interesting news out today on Sitestar.
Title: Re: SYTE - Sitestar
Post by: ratiman on June 15, 2016, 04:19:27 AM
HVAC value fund? This should be very entertaining. Good luck/condolences to the longs.
Title: Re: SYTE - Sitestar
Post by: Travis Wiedower on June 15, 2016, 05:42:38 PM
HVAC value fund? This should be very entertaining. Good luck/condolences to the longs.

Lol my reaction wasn't much different, I actually thought I read it wrong at first. Alternatively, I'd say these guys are smart and have their own money invested so there's probably value there.
Title: Re: SYTE - Sitestar
Post by: oddballstocks on June 15, 2016, 06:27:02 PM
HVAC value fund? This should be very entertaining. Good luck/condolences to the longs.

Lol my reaction wasn't much different, I actually thought I read it wrong at first. Alternatively, I'd say these guys are smart and have their own money invested so there's probably value there.

Knowing both Steve and Jeff I'd say it's the later.
Title: Re: SYTE - Sitestar
Post by: Jurgis on June 15, 2016, 08:12:54 PM
We'll see how this works out.

But I've seen this pattern in other places and I can't say I like it. Activist "good guys" gain control of (usually small) company to fix it/redirect it/improve it. Then there's silence. Then they go into some weirdo tangent deals without explanation or with "hey this is the best thing since sliced bread" sales pitch that doesn't seem very convincing. Then ... Then ... I'd like to say "profit"... but so far I'm not so sure.

I'll do Buffett "criticize in general" this time and won't name any names. Get back in 3-5 years. ;)
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on June 22, 2016, 07:51:49 AM
We'll see how this works out.

But I've seen this pattern in other places and I can't say I like it. Activist "good guys" gain control of (usually small) company to fix it/redirect it/improve it. Then there's silence. Then they go into some weirdo tangent deals without explanation or with "hey this is the best thing since sliced bread" sales pitch that doesn't seem very convincing. Then ... Then ... I'd like to say "profit"... but so far I'm not so sure.

I'll do Buffett "criticize in general" this time and won't name any names. Get back in 3-5 years. ;)
Jurgis hits the nail on the head, except I will name names. Now that they are management, Jeff and Steven have begun behaving in exactly the ways they previously railed against. This is a public company, with public shareholders. The lack of disclosure is incredibly troublesome. I would love to hear from other shareholders who agree with me. Please message me here, or leave a feedback at inelegantinvestor.com, where I hope to have posted a more detailed set of concerns in the next few days.
Title: Re: SYTE - Sitestar
Post by: globalfinancepartners on June 22, 2016, 08:15:50 AM
I get your point - but it does appear that they are working as hard as possible to get the SEC filings correct and out and then have an annual meeting to drastically increase disclosure.  I am willing to give them the benefit of the doubt as they took on a total mess of a company.  It honestly couldn't be any worse than previous management
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on June 22, 2016, 09:03:42 AM
I get your point - but it does appear that they are working as hard as possible to get the SEC filings correct and out and then have an annual meeting to drastically increase disclosure.  I am willing to give them the benefit of the doubt as they took on a total mess of a company.  It honestly couldn't be any worse than previous management

If they are focused on getting the 10-K out, fine. But, instead, they have chosen to change strategy entirely and have devoted $2MM(from where?) to a new "HVAC fund". Is it proper for a major strategic change like this to be implemented by a management with no mandate from shareholders?

Proper order of operations:
1) Figure out where company stands
2) Tell the owners
3) Decide what to do
4) Do it

Kiel & Moore order of operations
1) Figure out where company stands, kinda
2) Decide what to do
3) Do it
..
..
7) Tell the owners
Title: Re: SYTE - Sitestar
Post by: oddballstocks on June 22, 2016, 09:14:05 AM
We'll see how this works out.

But I've seen this pattern in other places and I can't say I like it. Activist "good guys" gain control of (usually small) company to fix it/redirect it/improve it. Then there's silence. Then they go into some weirdo tangent deals without explanation or with "hey this is the best thing since sliced bread" sales pitch that doesn't seem very convincing. Then ... Then ... I'd like to say "profit"... but so far I'm not so sure.

I'll do Buffett "criticize in general" this time and won't name any names. Get back in 3-5 years. ;)
Jurgis hits the nail on the head, except I will name names. Now that they are management, Jeff and Steven have begun behaving in exactly the ways they previously railed against. This is a public company, with public shareholders. The lack of disclosure is incredibly troublesome. I would love to hear from other shareholders who agree with me. Please message me here, or leave a feedback at inelegantinvestor.com, where I hope to have posted a more detailed set of concerns in the next few days.

Have you called or emailed Jeff or Steve?

Having a full audit plus compiling a 10-K is a lot of work, especially for a small company.  I've spoken to auditors about these things in the past, the delay isn't surprising.  I'm sure the costs will be outrageous.

Regarding the HVAC fund, it's weird.  But then again as a shareholder you've entrusted management to make decisions on your behalf.  Steve and Jeff are value guys who are accessible, but this isn't a democratic company either.  I've never heard of other companies saying "we're thinking about how to allocated capital, can the shareholders vote on it?"  Usually an exec acts when an opportunity exists.

My guess is based on the situation that shareholders will never be happy or satisfied no matter what the new management does.  Maybe this does well, maybe the HVAC stuff goes bonkers.  Or maybe it idles along like most think it will.  Or maybe it all blows up, who knows.

If I had to make guesses it'd be that those houses the company owned aren't all that great once management came into power.

I guess the alternate reality here is these guys could start to act like a pump and dump company releasing every thought management has.  "Sitestar has decided to investigate investing in houses." "Sitestar has decided to focus on other investments." "Sitestar is close to making a major investment with an unnamed company."  But at $400/pop I'm not sure shareholders want that, or maybe they do?

This name intrigues me, but I'll only invest once the dust settles.
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on June 22, 2016, 09:32:27 AM
We'll see how this works out.

But I've seen this pattern in other places and I can't say I like it. Activist "good guys" gain control of (usually small) company to fix it/redirect it/improve it. Then there's silence. Then they go into some weirdo tangent deals without explanation or with "hey this is the best thing since sliced bread" sales pitch that doesn't seem very convincing. Then ... Then ... I'd like to say "profit"... but so far I'm not so sure.

I'll do Buffett "criticize in general" this time and won't name any names. Get back in 3-5 years. ;)
Jurgis hits the nail on the head, except I will name names. Now that they are management, Jeff and Steven have begun behaving in exactly the ways they previously railed against. This is a public company, with public shareholders. The lack of disclosure is incredibly troublesome. I would love to hear from other shareholders who agree with me. Please message me here, or leave a feedback at inelegantinvestor.com, where I hope to have posted a more detailed set of concerns in the next few days.

Have you called or emailed Jeff or Steve?

Having a full audit plus compiling a 10-K is a lot of work, especially for a small company.  I've spoken to auditors about these things in the past, the delay isn't surprising.  I'm sure the costs will be outrageous.

Regarding the HVAC fund, it's weird.  But then again as a shareholder you've entrusted management to make decisions on your behalf.  Steve and Jeff are value guys who are accessible, but this isn't a democratic company either.  I've never heard of other companies saying "we're thinking about how to allocated capital, can the shareholders vote on it?"  Usually an exec acts when an opportunity exists.

My guess is based on the situation that shareholders will never be happy or satisfied no matter what the new management does.  Maybe this does well, maybe the HVAC stuff goes bonkers.  Or maybe it idles along like most think it will.  Or maybe it all blows up, who knows.

If I had to make guesses it'd be that those houses the company owned aren't all that great once management came into power.

I guess the alternate reality here is these guys could start to act like a pump and dump company releasing every thought management has.  "Sitestar has decided to investigate investing in houses." "Sitestar has decided to focus on other investments." "Sitestar is close to making a major investment with an unnamed company."  But at $400/pop I'm not sure shareholders want that, or maybe they do?

This name intrigues me, but I'll only invest once the dust settles.

I have emailed both Jeff & Steve on multiple occasions. I can assure that if their responses(when they bothered to respond) were any less than totally dismissive, I would not be speaking about this on a public forum. You say they are accessible- it is just flat untrue. Steve made clear in his first communication as CEO that they had no interest in speaking to shareholders outside the meeting(which he promised would happen in the first half of the year).

As a shareholder, I never was given the opportunity to "entrust management to make decisions on my behalf". Steve, Jeff & Jeremy were elected by "written consent", the majority of their votes coming from the previous CEO who they terminated for cause.

I wouldn't expect shareholders to vote on every deal, but they should be sure they have the confidence of shareholders before they take a huge % of the company's capital and invest it in an unproven business. At the very least they should have sought input from shareholders on whether a liquidation or continued operation was preferable.

Again, not asking for one million press releases, but isn't a decision to liquidate the real estate portfolio worthy of being shared with owners?  When you announce that you are investing $2MM in an HVAC fund, shouldn't you say something about the source of funds, when the company previously had nothing remotely like $2MM in cash?

I really wanted to trust this management. But they frankly don't give a crap about their shareholders.
Title: Re: SYTE - Sitestar
Post by: oddballstocks on June 22, 2016, 09:51:12 AM
We'll see how this works out.

But I've seen this pattern in other places and I can't say I like it. Activist "good guys" gain control of (usually small) company to fix it/redirect it/improve it. Then there's silence. Then they go into some weirdo tangent deals without explanation or with "hey this is the best thing since sliced bread" sales pitch that doesn't seem very convincing. Then ... Then ... I'd like to say "profit"... but so far I'm not so sure.

I'll do Buffett "criticize in general" this time and won't name any names. Get back in 3-5 years. ;)
Jurgis hits the nail on the head, except I will name names. Now that they are management, Jeff and Steven have begun behaving in exactly the ways they previously railed against. This is a public company, with public shareholders. The lack of disclosure is incredibly troublesome. I would love to hear from other shareholders who agree with me. Please message me here, or leave a feedback at inelegantinvestor.com, where I hope to have posted a more detailed set of concerns in the next few days.

Have you called or emailed Jeff or Steve?

Having a full audit plus compiling a 10-K is a lot of work, especially for a small company.  I've spoken to auditors about these things in the past, the delay isn't surprising.  I'm sure the costs will be outrageous.

Regarding the HVAC fund, it's weird.  But then again as a shareholder you've entrusted management to make decisions on your behalf.  Steve and Jeff are value guys who are accessible, but this isn't a democratic company either.  I've never heard of other companies saying "we're thinking about how to allocated capital, can the shareholders vote on it?"  Usually an exec acts when an opportunity exists.

My guess is based on the situation that shareholders will never be happy or satisfied no matter what the new management does.  Maybe this does well, maybe the HVAC stuff goes bonkers.  Or maybe it idles along like most think it will.  Or maybe it all blows up, who knows.

If I had to make guesses it'd be that those houses the company owned aren't all that great once management came into power.

I guess the alternate reality here is these guys could start to act like a pump and dump company releasing every thought management has.  "Sitestar has decided to investigate investing in houses." "Sitestar has decided to focus on other investments." "Sitestar is close to making a major investment with an unnamed company."  But at $400/pop I'm not sure shareholders want that, or maybe they do?

This name intrigues me, but I'll only invest once the dust settles.

I have emailed both Jeff & Steve on multiple occasions. I can assure that if their responses(when they bothered to respond) were any less than totally dismissive, I would not be speaking about this on a public forum. You say they are accessible- it is just flat untrue. Steve made clear in his first communication as CEO that they had no interest in speaking to shareholders outside the meeting(which he promised would happen in the first half of the year).

As a shareholder, I never was given the opportunity to "entrust management to make decisions on my behalf". Steve, Jeff & Jeremy were elected by "written consent", the majority of their votes coming from the previous CEO who they terminated for cause.

I wouldn't expect shareholders to vote on every deal, but they should be sure they have the confidence of shareholders before they take a huge % of the company's capital and invest it in an unproven business. At the very least they should have sought input from shareholders on whether a liquidation or continued operation was preferable.

Again, not asking for one million press releases, but isn't a decision to liquidate the real estate portfolio worthy of being shared with owners?  When you announce that you are investing $2MM in an HVAC fund, shouldn't you say something about the source of funds, when the company previously had nothing remotely like $2MM in cash?

I really wanted to trust this management. But they frankly don't give a crap about their shareholders.

I guess you have two choices:
a) sell your shares
b) mount a proxy battle and try to get on the Board so you have some influence
Title: Re: SYTE - Sitestar
Post by: premfan on June 22, 2016, 09:54:39 AM
We'll see how this works out.

But I've seen this pattern in other places and I can't say I like it. Activist "good guys" gain control of (usually small) company to fix it/redirect it/improve it. Then there's silence. Then they go into some weirdo tangent deals without explanation or with "hey this is the best thing since sliced bread" sales pitch that doesn't seem very convincing. Then ... Then ... I'd like to say "profit"... but so far I'm not so sure.

I'll do Buffett "criticize in general" this time and won't name any names. Get back in 3-5 years. ;)
Jurgis hits the nail on the head, except I will name names. Now that they are management, Jeff and Steven have begun behaving in exactly the ways they previously railed against. This is a public company, with public shareholders. The lack of disclosure is incredibly troublesome. I would love to hear from other shareholders who agree with me. Please message me here, or leave a feedback at inelegantinvestor.com, where I hope to have posted a more detailed set of concerns in the next few days.

Have you called or emailed Jeff or Steve?

Having a full audit plus compiling a 10-K is a lot of work, especially for a small company.  I've spoken to auditors about these things in the past, the delay isn't surprising.  I'm sure the costs will be outrageous.

Regarding the HVAC fund, it's weird.  But then again as a shareholder you've entrusted management to make decisions on your behalf.  Steve and Jeff are value guys who are accessible, but this isn't a democratic company either.  I've never heard of other companies saying "we're thinking about how to allocated capital, can the shareholders vote on it?"  Usually an exec acts when an opportunity exists.

My guess is based on the situation that shareholders will never be happy or satisfied no matter what the new management does.  Maybe this does well, maybe the HVAC stuff goes bonkers.  Or maybe it idles along like most think it will.  Or maybe it all blows up, who knows.

If I had to make guesses it'd be that those houses the company owned aren't all that great once management came into power.

I guess the alternate reality here is these guys could start to act like a pump and dump company releasing every thought management has.  "Sitestar has decided to investigate investing in houses." "Sitestar has decided to focus on other investments." "Sitestar is close to making a major investment with an unnamed company."  But at $400/pop I'm not sure shareholders want that, or maybe they do?

This name intrigues me, but I'll only invest once the dust settles.

I have emailed both Jeff & Steve on multiple occasions. I can assure that if their responses(when they bothered to respond) were any less than totally dismissive, I would not be speaking about this on a public forum. You say they are accessible- it is just flat untrue. Steve made clear in his first communication as CEO that they had no interest in speaking to shareholders outside the meeting(which he promised would happen in the first half of the year).

As a shareholder, I never was given the opportunity to "entrust management to make decisions on my behalf". Steve, Jeff & Jeremy were elected by "written consent", the majority of their votes coming from the previous CEO who they terminated for cause.

I wouldn't expect shareholders to vote on every deal, but they should be sure they have the confidence of shareholders before they take a huge % of the company's capital and invest it in an unproven business. At the very least they should have sought input from shareholders on whether a liquidation or continued operation was preferable.

Again, not asking for one million press releases, but isn't a decision to liquidate the real estate portfolio worthy of being shared with owners?  When you announce that you are investing $2MM in an HVAC fund, shouldn't you say something about the source of funds, when the company previously had nothing remotely like $2MM in cash?

I really wanted to trust this management. But they frankly don't give a crap about their shareholders.

Inelegant,

As a seed investor to a startup company you should let the entrepreneur create value. Any ranting will not create value. Either the entrepreneur's will create value or not.  90ish percent of idea companies fail or get your money back. Then the 5 percent of idea companies show nonlinear growth. This follows the power law formula that vc's use.  Investors in such early stage idea companies are essentially public market seed (angel) investors. Either the idea company shows traction or fails or gets your money back. Truth is self revealing and in 2-4 years we will know if these guys are real entrepreneur's or living in poserville.

Now maybe when you made the investment you thought this was a "value" investment. Then i would understand rant.  The seed investing game requires much more patience then usually required.  In the private world its 5-8 year process. Knowing what category your investments fall into helps putting the situation in context.



Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on June 22, 2016, 09:58:31 AM


I guess you have two choices:
a) sell your shares
b) mount a proxy battle and try to get on the Board so you have some influence
Yes, those are the two most likely options.
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on June 22, 2016, 10:02:27 AM
Inelegant,

As a seed investor to a startup company you should let the entrepreneur create value. Any ranting will not create value. Either the entrepreneur's will create value or not.  90ish percent of idea companies fail or get your money back. Then the 5 percent of idea companies show nonlinear growth. This follows the power law formula that vc's use.  Investors in such early stage idea companies are essentially public market seed (angel) investors. Either the idea company shows traction or fails or gets your money back. Truth is self revealing and in 2-4 years we will know if these guys are real entrepreneur's or living in poserville.

Now maybe when you made the investment you thought this was a "value" investment. Then i would understand rant.  The seed investing game requires much more patience then usually required.  In the private world its 5-8 year process. Knowing what category your investments fall into helps putting the situation in context.

I'm not a seed investor in a startup company here and this management are not entrepreneurs. I have spent time in that space and I understand they dynamics. This was, for all involved, a value investment. That is, most of the major holders that I know, current management included, purchased because we saw assets whose value exceeded the business's market cap by a significant margin of safety.  My very complaint is that they have now decided to morph it into a seed investment without shareholder input.
Title: Re: SYTE - Sitestar
Post by: valuedontlie on June 22, 2016, 10:09:25 AM
I rather like the "HVAC Fund" idea having looked at purchasing a few local/regional HVAC companies myself... Had a similar idea to "roll-up" a specific area by purchasing a few smaller companies and cobbling together back-office/management (which they already have)... Prices are very attractive at the transaction size they are talking about... This could be pretty meaningful to SYTE... It is not unreasonable to acquire private HVAC companies at 2-4x EBITDA/CF...
Title: Re: SYTE - Sitestar
Post by: matts on June 22, 2016, 10:15:47 AM
Inelegant,

As a seed investor to a startup company you should let the entrepreneur create value. Any ranting will not create value. Either the entrepreneur's will create value or not.  90ish percent of idea companies fail or get your money back. Then the 5 percent of idea companies show nonlinear growth. This follows the power law formula that vc's use.  Investors in such early stage idea companies are essentially public market seed (angel) investors. Either the idea company shows traction or fails or gets your money back. Truth is self revealing and in 2-4 years we will know if these guys are real entrepreneur's or living in poserville.

Now maybe when you made the investment you thought this was a "value" investment. Then i would understand rant.  The seed investing game requires much more patience then usually required.  In the private world its 5-8 year process. Knowing what category your investments fall into helps putting the situation in context.

I'm not a seed investor in a startup company here and this management are not entrepreneurs. I have spent time in that space and I understand they dynamics. This was, for all involved, a value investment. That is, most of the major holders that I know, current management included, purchased because we saw assets whose value exceeded the business's market cap by a significant margin of safety.  My very complaint is that they have now decided to morph it into a seed investment without shareholder input.

I think you need to come to grips with the fact that the decision has been made (right or wrong). This is now a growth vehicle, not an asset-based value play. Whatever they decide to do now with the real estate or any other assets, they are not giving it back to the shareholders. More disclosure would be nice but you won't change their mind. So again, realize the thesis underlying your position has changed and decide whether you want to be involved with the new company and new investment style. The old company is gone.

Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on June 22, 2016, 10:19:24 AM
I rather like the "HVAC Fund" idea having looked at purchasing a few local/regional HVAC companies myself... Had a similar idea to "roll-up" a specific area by purchasing a few smaller companies and cobbling together back-office/management (which they already have)... Prices are very attractive at the transaction size they are talking about... This could be pretty meaningful to SYTE... It is not unreasonable to acquire private HVAC companies at 2-4x EBITDA/CF...
I don't dislike the idea. I really have no information on it. My point is not that it's a bad idea, just that management is overstepping and is not treating shareholders as partners.
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on June 22, 2016, 10:23:17 AM
I think you need to come to grips with the fact that the decision has been made (right or wrong). This is now a growth vehicle, not an asset-based value play. Whatever they decide to do now with the real estate or any other assets, they are not giving it back to the shareholders. More disclosure would be nice but you won't change their mind. So again, realize the thesis underlying your position has changed and decide whether you want to be involved with the new company and new investment style. The old company is gone.
It is still an asset-based value play. The assets, I believe are still worth more than the market cap. It is hard to say, of course, since the company has not released financials. If that's the case, why should their small stake enable them to force me to sell below value?

Shareholders are the owners of a company. Shares of stock are not pieces of paper, they are are shares in a business. Management is our steward, not our tyrant.
Title: Re: SYTE - Sitestar
Post by: premfan on June 22, 2016, 10:28:09 AM


I guess you have two choices:
a) sell your shares
b) mount a proxy battle and try to get on the Board so you have some influence
Yes, those are the two most likely options.

Inelegant,

If you choose option B some recent craziness has been happening in the activist game. Swenson launched a proxy against biglari with only 0.1 percent of shares. Currently paragon technologies is launching a proxy against rubicon with 0.1 percent of shares. It would only cost 4,450 dollars + legal + marketing fees to launch something if you want influence. Do the math see if it works.
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on June 22, 2016, 10:36:29 AM
Very familiar with Swenson as well as Biglari's ongoing retaliation against him. Also familiar with Gad and his Rubicon proxy(though I'd point out that SED ended pretty damn poorly for him).  Also, I own more than .1%, and I'm confident that I'm not alone among shareholders in my feelings. It's funny how people start contacting you when you take a position...

Inelegant,

If you choose option B some recent craziness has been happening in the activist game. Swenson launched a proxy against biglari with only 0.1 percent of shares. Currently paragon technologies is launching a proxy against rubicon with 0.1 percent of shares. It would only cost 4,450 dollars + legal + marketing fees to launch something if you want influence. Do the math see if it works.
Title: Re: SYTE - Sitestar
Post by: Ballinvarosig Investors on July 18, 2016, 02:35:53 PM
Sitestar 10k is out - https://www.sec.gov/Archives/edgar/data/1096934/000072174816001455/site07141610k.htm

Some crazy stuff has gone on at this company!

Quote
As of December 31, 2015, the Company leased its corporate headquarters located at 7109 Timberlake Road, Lynchburg, Virginia from Frank Erhartic, Jr., a stockholder of the Company and the Company’s former CEO. The terms of the lease directed the company to pay Mr. Erhartic $48,000 per year. The Company now believes that Mr. Erhartic was not the legal owner of the property.

Quote
Litigation
 
On April 12, 2016, Sitestar filed a civil action complaint against Frank Erhartic, Jr. (the “Former CEO”), the Company’s former CEO and director and currently an owner of record or beneficially of more than five percent of the Company’s Common Stock, alleging, among other things, that the Former CEO engaged in, and caused the Company to engage in to its detriment, a series of unauthorized and wrongful related party transactions, including causing the Company to borrow certain amounts from the Former CEO’s mother unnecessarily and at a commercially unreasonable rate of interest, converting certain funds of the Company for personal rent payments to the Former CEO, commingling in land trusts certain real properties owned by the Company and real properties owned by the Former CEO, causing the Company to pay certain amounts to the Former CEO for lease payments under an unauthorized lease as to a storage facility owned by the Former CEO, causing the Company to pay rent on its corporate headquarters owned by the Former CEO’s ex-wife in amounts commercially unreasonable and excessive and to make real estate tax payments thereon for the personal benefit of the Former CEO, converting to the Former CEO and/or [absconding with] five motor vehicles owned by the Company, causing the Company to pay real property and personal property taxes on numerous properties owned personally by the Former CEO, causing the Company to pay personal credit card debt of the Former CEO, causing the Company to significantly overpay the Former CEO’s health and dental insurance for the benefit of the Former CEO, and causing the Company to pay the Former CEO’s personal automobile insurance. The Company is seeking, among other relief available, monetary damages in excess of $350,000. This litigation matter is currently pending in the Circuit Court for the City of Lynchburg (Lynchburg, Virginia).
They sacked the CFO and tried to remove him as director, but he has refused to go!
Quote
At the Board of Directors meeting on December 14, 2015 the Company’s former CFO, Dan Judd, was placed on probation in light of the circumstances that had led to the termination of the former CEO. New management engaged an outside financial consultant to review the Company’s accounting practices and to assist Mr. Judd in carrying out his duties. As previously reported in our Current Report of Form 8-K filed with the SEC on March 7, 2016, Mr. Judd subsequently was terminated on March 3, 2016. The Board has requested that he resign as a Director, but Mr. Judd has not responded favorably to that request and has not participated in Board meetings since his dismissal as CFO.
Most of the properties have been sold off now, as a whole sold for above the carrying value.
Quote
Subsequent to December 31, 2015, and as of July 18, 2016, we have sold 21 residential properties including four properties that are pending closing. Of the 17 properties that have closed, the net proceeds total $1,399,121. This compares to their carrying value as of the year ended December 31, 2015 of $1,338,495.
Steve Kiel has wrote a shareholder letter.

http://sitestar.com/letters/2015ltr.pdf
Title: Re: SYTE - Sitestar
Post by: Ballinvarosig Investors on July 18, 2016, 02:57:41 PM
It really does sounds like the current management team are going to make this their own investment vehicle. I have to wonder why would they bother? Surely the ex-CEO who still has 32% of the stock, if he wants to cause trouble, he has a large enough block of stock to do so.
Title: Re: SYTE - Sitestar
Post by: brendanb22 on July 18, 2016, 06:38:56 PM
Looks like the margin of safety is no longer there -- company is trading above NAV with restated values and the real estate portfolio is no longer able to generate a return per Steven Kiel's letter. I trust that they will generate shareholder value going forward, but I am not sure the valuation is as compelling as it once seemed
Title: Re: SYTE - Sitestar
Post by: AccentricInv on July 18, 2016, 07:35:12 PM
Does anyone know if they ended up with a decent return on the real estate?  I remember reading about it on Ragnar's site a few years ago. But it seems the value they thought was there was either fake or eroded by all the other issues?

The story seems to be a lesson in the perils of deep value nanocap investing.
Title: Re: SYTE - Sitestar
Post by: oddballstocks on July 18, 2016, 08:43:45 PM
Does anyone know if they ended up with a decent return on the real estate?  I remember reading about it on Ragnar's site a few years ago. But it seems the value they thought was there was either fake or eroded by all the other issues?

The story seems to be a lesson in the perils of deep value nanocap investing.

The perils but also possibilities.  Mismanagement at GE? Good luck getting on the Board.  Mismanagement at Sitestar, Jeff and Steve took the thing over!

Title: Re: SYTE - Sitestar
Post by: NeverLoseMoney on July 19, 2016, 04:08:45 AM
It really does sounds like the current management team are going to make this their own investment vehicle. I have to wonder why would they bother? Surely the ex-CEO who still has 32% of the stock, if he wants to cause trouble, he has a large enough block of stock to do so.
It's an awkward situation with Mr. Erhartic owning such a large stake. Best option now is probably to try to reach a settlement on the lawsuit that Sitestar filed against Mr. Erhartic. The company drops the lawsuit and in return Erhartic sells his shares back to the company at a reasonable price. Try to find a solution where all the disputes with the former management are settled and everyone can go their separate ways.

After all the things that took place here, I don't think I'd be happy working hard and running this company while making Erhartic rich if the company succeeds.
Title: Re: SYTE - Sitestar
Post by: AccentricInv on July 19, 2016, 06:55:15 AM
Does anyone know if they ended up with a decent return on the real estate?  I remember reading about it on Ragnar's site a few years ago. But it seems the value they thought was there was either fake or eroded by all the other issues?

The story seems to be a lesson in the perils of deep value nanocap investing.

The perils but also possibilities.  Mismanagement at GE? Good luck getting on the Board.  Mismanagement at Sitestar, Jeff and Steve took the thing over!

Yeah, but if they weren't able to extract the real estate value that they originally thought, isn't that an issue? 

Took 4 years and countless headaches just to take control of a company that ended up not being undervalued?  They could have started an investment holding company from scratch in 1/4th the time!

Again an interesting story to follow though, and impressed Jeff, Steve, & co were able to pull it off.
Title: Re: SYTE - Sitestar
Post by: oddballstocks on July 19, 2016, 06:59:41 AM
Does anyone know if they ended up with a decent return on the real estate?  I remember reading about it on Ragnar's site a few years ago. But it seems the value they thought was there was either fake or eroded by all the other issues?

The story seems to be a lesson in the perils of deep value nanocap investing.

The perils but also possibilities.  Mismanagement at GE? Good luck getting on the Board.  Mismanagement at Sitestar, Jeff and Steve took the thing over!

Yeah, but if they weren't able to extract the real estate value that they originally thought, isn't that an issue? 

Took 4 years and countless headaches just to take control of a company that ended up not being undervalued?  They could have started an investment holding company from scratch in 1/4th the time!

Again an interesting story to follow though, and impressed Jeff, Steve, & co were able to pull it off.

This is a great point with a caveat.  If they started a holding company to invest they'd need to find capital.  Instead they were able to acquire capital, it took years, but they acquired capital that already existed at a very low cost to themselves.  That's the beauty of the capital markets.
Title: Re: SYTE - Sitestar
Post by: rkbabang on July 19, 2016, 07:04:37 AM
Does anyone know if they ended up with a decent return on the real estate?  I remember reading about it on Ragnar's site a few years ago. But it seems the value they thought was there was either fake or eroded by all the other issues?

The story seems to be a lesson in the perils of deep value nanocap investing.

The perils but also possibilities.  Mismanagement at GE? Good luck getting on the Board.  Mismanagement at Sitestar, Jeff and Steve took the thing over!

Yeah, but if they weren't able to extract the real estate value that they originally thought, isn't that an issue? 

Took 4 years and countless headaches just to take control of a company that ended up not being undervalued?  They could have started an investment holding company from scratch in 1/4th the time!

Again an interesting story to follow though, and impressed Jeff, Steve, & co were able to pull it off.

It is impressive to take over a company even though the CEO owned >30%, even if it didn't go exactly as planned.

(http://www.theredheadriter.com/wp-content/uploads/2015/01/your-plan-vs-reality-photo-755x532.png)
Title: Re: SYTE - Sitestar
Post by: bskptkl on July 19, 2016, 07:11:29 AM
Looks like the margin of safety is no longer there -- company is trading above NAV with restated values and the real estate portfolio is no longer able to generate a return per Steven Kiel's letter. I trust that they will generate shareholder value going forward, but I am not sure the valuation is as compelling as it once seemed
Agree - sold small position on opening, but will still have rooting interest. Good guys win!
Title: Re: SYTE - Sitestar
Post by: brendanb22 on July 19, 2016, 07:59:00 AM
Kiel already runs his own fund. Why invest on behalf of a company that has a CEO you just ousted that still owns approx 35%?

I'd find it hard to believe if he wasn't regretting this undertaking given the new findings around the RE portfolio. That time could have been higher ROI elsewhere
Title: Re: SYTE - Sitestar
Post by: willward1 on July 19, 2016, 08:52:23 AM
Would you rather own an average house flipping/landlording business or an average HVAC business?

Data Point 1:
If you google "HVAC quotes" you find links to dodgy looking leadgen sites that ask users to answer a bunch of questions and cough up their email address. By contrast, how do consumers get info about real estate listings online? They use zillow, redfin, etc which give away massive amounts of detail for free without even requiring a signup. This tells us something about the balance of consumer to business pricing power in the two markets.

Data Point 2:
Search HVAC on http://ragnarisapirate.blogspot.com and read about Jeff's experience as a property investor dealing with HVAC issues.  The CEO of HVAC Co is also a former real estate guy who decided that HVAC is the better business to be in.

Especially after seeing the numbers on the rental properties, to me this looks like a rational move of redeploying capital to a business with more upside. 

Finally, what is the best possible upside you can get from flipping an undervalued piece of real estate?  Maybe 100% - 150% on a phenomenal deal after a bunch of [probably HVAC] work? How does that compare with the upside of creating a trusted brand or a bigger company w/ economies of scale in the HVAC space?

Long as of this AM...
Title: Re: SYTE - Sitestar
Post by: Poor Charlie on July 19, 2016, 01:10:19 PM
Would you rather own an average house flipping/landlording business or an average HVAC business?

Data Point 1:
If you google "HVAC quotes" you find links to dodgy looking leadgen sites that ask users to answer a bunch of questions and cough up their email address. By contrast, how do consumers get info about real estate listings online? They use zillow, redfin, etc which give away massive amounts of detail for free without even requiring a signup. This tells us something about the balance of consumer to business pricing power in the two markets.

Data Point 2:
Search HVAC on http://ragnarisapirate.blogspot.com and read about Jeff's experience as a property investor dealing with HVAC issues.  The CEO of HVAC Co is also a former real estate guy who decided that HVAC is the better business to be in.

Especially after seeing the numbers on the rental properties, to me this looks like a rational move of redeploying capital to a business with more upside. 

Finally, what is the best possible upside you can get from flipping an undervalued piece of real estate?  Maybe 100% - 150% on a phenomenal deal after a bunch of [probably HVAC] work? How does that compare with the upside of creating a trusted brand or a bigger company w/ economies of scale in the HVAC space?

Long as of this AM...

The HVAC industry is a decent place to deploy capital: almost all parts of the value chain (OE / distribution / servicing) earn, on average, nice returns on capital; cold-starts have a better-than-average chance of working out; and acquisitions, if thoughtfully executed, don’t seem to have the blow-up risk you find in most industries.  Furthermore, a number of companies have started from positions similar to SYTE in the HVAC industry and gone on to do well.  For instance, take a look at AAON and ACR Group.  AAON (OE) started as a reverse-merger and ACR Group (distribution) started (if memory serves) as a publicly traded shell.  Both grew substantially and earned very good returns on capital over multi-decade periods. 

There aren’t that many companies in the HVAC industry that are public, but those that are/were (like AAON and ACR) have disproportionately done well.  The only poorly performing publicly traded HVAC business that I’ve looked at was ServiceMaster’s plumbing / HVAC servicing business that they sold off in 2006.
Title: Re: SYTE - Sitestar
Post by: Wabash02 on July 19, 2016, 01:57:34 PM
I view it as nothing but positive that Keith will be joining the board!
Title: Re: SYTE - Sitestar
Post by: rkbabang on August 09, 2016, 08:11:44 AM
The 10Q is out for the quarter ending in March. Looks like a few properties sold and some cost reductions in the internet portion of the business.  Also after March they sold 17 properties ($1.3M) and as already announced invested in the HVAC fund which has made 4 acquisitions.  No further word on how the suit against the former CEO is going.

https://www.sec.gov/Archives/edgar/data/1096934/000072174816001511/0000721748-16-001511-index.htm
Title: Re: SYTE - Sitestar
Post by: bizaro86 on August 11, 2016, 09:29:19 AM
They just did a private placement doubling the number of shares outstanding at $0.048. That should take care of any concern of the old CEO holding them hostage, as they are now firmly in control. I'm not in love with the price of the private placement, but I suppose it was priced before the stock rose.

http://www.otcmarkets.com/stock/SYTE/news/Sitestar-Completes-a-Private-Placement-of-Common-Stock?id=137926&b=y
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on August 11, 2016, 10:03:44 AM
They just did a private placement doubling the number of shares outstanding at $0.048. That should take care of any concern of the old CEO holding them hostage, as they are now firmly in control. I'm not in love with the price of the private placement, but I suppose it was priced before the stock rose.

http://www.otcmarkets.com/stock/SYTE/news/Sitestar-Completes-a-Private-Placement-of-Common-Stock?id=137926&b=y

So, they doubled shares, sold way below market, and didn't offer existing shareholders a chance to participate. Classy.
Title: Re: SYTE - Sitestar
Post by: Jurgis on August 11, 2016, 10:06:30 AM
They just did a private placement doubling the number of shares outstanding at $0.048. That should take care of any concern of the old CEO holding them hostage, as they are now firmly in control. I'm not in love with the price of the private placement, but I suppose it was priced before the stock rose.

http://www.otcmarkets.com/stock/SYTE/news/Sitestar-Completes-a-Private-Placement-of-Common-Stock?id=137926&b=y

So, they doubled shares, sold way below market, and didn't offer existing shareholders a chance to participate. Classy.

This also seems par for the course for these "good guys" taken-over nanocaps.  :-\
Title: Re: SYTE - Sitestar
Post by: Ballinvarosig Investors on August 11, 2016, 10:10:05 AM
They just did a private placement doubling the number of shares outstanding at $0.048. That should take care of any concern of the old CEO holding them hostage, as they are now firmly in control. I'm not in love with the price of the private placement, but I suppose it was priced before the stock rose.

http://www.otcmarkets.com/stock/SYTE/news/Sitestar-Completes-a-Private-Placement-of-Common-Stock?id=137926&b=y

So, they doubled shares, sold way below market, and didn't offer existing shareholders a chance to participate. Classy.
I bet Steve Kiel got to participate.
Title: Re: SYTE - Sitestar
Post by: Travis Wiedower on August 11, 2016, 10:42:24 AM
Yikes that looks really bad :o
Title: Re: SYTE - Sitestar
Post by: Wabash02 on August 11, 2016, 11:10:24 AM
Wow, this is really disappointing. 
Title: Re: SYTE - Sitestar
Post by: rkbabang on August 11, 2016, 11:34:10 AM
I understand why they didn't want to give existing shareholders a chance to participate: they didn't want Frank to participate.  But it is still hugely disappointing.  As they screwed all outside shareholders, not just him. The price they got is disappointing as well, especially because they did it in secret, giving a sweet deal to someone.  This is the opposite of a shareholder friendly move.

I know I've criticized Sardar Biglari quite a bit, but one thing I really liked about him, way back when, was when he wanted to raise money he'd do a rights offering so that ALL existing shareholders had the opportunity to participate and maintain their ownership percentage in the company.
Title: Re: SYTE - Sitestar
Post by: andgroup on August 11, 2016, 11:44:15 AM
So you average down and you wait a little longer, but honestly, these guys are on fire.  2-3 steps ahead of everyone. It is very fun to watch. I'm very happy to pickup some more shares today and watch this thing unfold over the longer term.  I won't be selling my shares anytime soon.  I think this team will far more than makeup for this little bump in the road. - John Woods

Title: Re: SYTE - Sitestar
Post by: bskptkl on August 11, 2016, 11:45:47 AM
I understand why they didn't want to give existing shareholders a chance to participate: they didn't want Frank to participate.  But it is still hugely disappointing.  As they screwed all outside shareholders, not just him. The price they got is disappointing as well, especially because they did it in secret, giving a sweet deal to someone.  This is the opposite of a shareholder friendly move.

I know I've criticized Sardar Biglari quite a bit, but one thing I really liked about him, way back when, was when he wanted to raise money he'd do a rights offering so that ALL existing shareholders had the opportunity to participate and maintain their ownership percentage in the company.
Agree 100% about unfair and all, but rights offering can be extremely expensive for such a tiny company. Private placements on other hand are very cheap. They should have priced it higher, but maybe it ran up in price after they set it.
Title: Re: SYTE - Sitestar
Post by: rkbabang on August 11, 2016, 11:51:39 AM
I'm not selling, just a little miffed.  I'm hoping it comes down a bit more, so I can pick up a little more. 
Title: Re: SYTE - Sitestar
Post by: andgroup on August 11, 2016, 11:56:20 AM
Also excuse me for being a bit philosophical here, but I do not put Biglari anywhere near Kiel in terms of character, I think they are in totally different orbits, and I never invested with Biglari, but I am invested in this deal and I plan to keep my stake and increase it every time I get a chance.
Title: Re: SYTE - Sitestar
Post by: Jurgis on August 11, 2016, 12:00:29 PM
Right, so when the "good guys" buy half of the company under the table for lower than market price it's OK, because they are the "good guys" (TM). They did it for the benefit of all shareholders. Showed character too.  8)
Title: Re: SYTE - Sitestar
Post by: andgroup on August 11, 2016, 12:05:00 PM
I think he was looking out for the longer term interest of the company, but if you are trying to trade for a quick pop, it probably wasn't fun.  But I'm in this for the longer term and so all I've got to say is, if anyone is real unhappy, please sell your shares, my limit orders are waiting to pounce....
Title: Re: SYTE - Sitestar
Post by: rkbabang on August 11, 2016, 12:07:35 PM
I'd like to know who they offered it to.  Before this deal I owned 1.2% of the company and I didn't know about it.
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on August 11, 2016, 12:13:27 PM
I'd like to know who they offered it to.  Before this deal I owned 1.2% of the company and I didn't know about it.

Same here. I was well over 1%
Title: Re: SYTE - Sitestar
Post by: Jurgis on August 11, 2016, 12:14:46 PM
I'd like to know who they offered it to.  Before this deal I owned 1.2% of the company and I didn't know about it.

Quote
Purchasers of the stock in the private placement primarily consisted of affiliates to the Company.

Apparently your 1.2% does not an affiliate make. Now, you own ~0.6%, have a nice day.

OK, I got it. They needed to sell shares, they wanted something for their efforts that took bunch of time and work, they did the deal to sell shares to themselves. It doesn't make it any nicer, but that's par for the course.

Disclosure: I am a spectator at this time. Just learning not to get into nanocap bandwagons with "good guys" by assuming things will work great when they take the helm. (Imagine the fury if former CEO had sold 50% shares of the company to himself under market price just before the "good guys" showed up.)
Title: Re: SYTE - Sitestar
Post by: slkiel on August 11, 2016, 01:45:45 PM
All,

As many of you who have emailed me know, it is not my habit to comment on the day-to-day situation at Sitestar. However, I would like to provide a bit more of a perspective on the private placement. This will be my only comment on the subject until we hold our shareholder meeting.

In the letter I wrote to shareholders in December 2015, I promised to hold a shareholder meeting in the first six months of the year. It was embarrassing to me that we could not do that and shareholders were rightfully upset. One reason we were unable to do so was because of the state of the financials. The other was because of the quorum issue. We would have held the meeting, not been able to hit the quorum, and wasted the money and time to do so. Because of this capital raise, we can now move forward with scheduling the shareholder meeting. Our directors are meeting this weekend to set the date. We will develop the proxy and send it out soon thereafter. The meeting will be held in Charlotte, NC, and I hope everyone can attend.

Addressing a few other comments, we had to do this offering as an unregistered offering. For those involved in small companies, you are familiar that a rights offering and S-1 filing is pricey. That is true. The second part of that, and one that I was not aware of until being in this position, is the difficulty to get an S-1 approved. Given the turnover at the company with management, the board, and the auditor, as well as the overhang with previous management, getting an S-1 approved would have been a challenge, to put it mildly. That would have been the preferred route from the company’s perspective, but the option was not available to us and likely won’t be for some time.

With regards to the pricing, 4.8 cents is the book value at the end of Q1. I understand the share price has run up recently. Unfortunately it was not realistic to issue shares at 8 cents. We would not have been able to raise the funds necessary for a price other than book value. No placement fees were paid, legal expenses were low, and those who subscribed did not view that they were receiving a discount for accepting shares that are unregistered and restricted. However, accepting restricted shares bears a real cost not only because of liquidity, but also because of the fees for required legal opinions and trading costs associated with accepting certificates. It was highly unlikely that an outsider would have been willing to participate in a meaningful way at a different price than what the offering was priced at.

I am sad to read that some feel that we are ingratiating ourselves or “screwing” passive shareholders. I would ask for a little more perspective on the company’s current situation and the challenges we face with regards to the issues listed here. This capital raise is consistent with the things I wrote about in the shareholder letter. Obviously I wish we were in a different situation and did not have to raise money, but we need to build enough scale to effectively carry out our operations. Basically, we have to get bigger or go private. We cannot effectively exist as a public company with a book value of less than $4 million.

This offering allows us to spread these fixed costs across a wider asset base. This is an important thing because of the tiny size of our company. Former management did not have the proper infrastructure to operate as a public company. As we are building that foundation, these fixed costs have become meaningful. We are now able to spread that among a larger number of shares.

Additionally, we have been looking at several interesting opportunities. Having this cash, and the cash generated by the sale of properties discussed in the Q1 filing, allows us to more seriously examine those opportunities.

Doing this placement at this price was the only option to us to accomplish the goals listed above. I understand if shareholders may be upset, but I am confident that the entire company and all shareholders will benefit from it over the long term. As others who are in my position with a small company can attest, a lot of things happen behind the scenes that we cannot share with outside shareholders, as much as we would like to. We have to consider the situation and information within the company that outsiders are not privy to. We are doing the best we can, and I am proud of how much progress we have made since December. I hope we can keep that momentum going. Jeff, Jeremy, Chris, Keith, and I thank you all for the support.
Best regards,

Steve
Title: Re: SYTE - Sitestar
Post by: T-bone1 on August 11, 2016, 02:37:09 PM
Great response!  Thanks Steve and well done.
Title: Re: SYTE - Sitestar
Post by: andgroup on August 11, 2016, 03:11:24 PM
Great job!
Title: Re: SYTE - Sitestar
Post by: woyzeck on August 12, 2016, 03:12:12 AM
From what I can tell as an outsider you have done everything right since your involvement and outsiders have benefitted handsomely. However, raising capital now at a questionable price, which clearly benefits yourself and other insiders at the expense of outsiders, is a questionable practice and in my opinion probably inappropriate even considering the circumstances. Don’t get me wrong, I think you are a very talented investor, and I believe you will do well for Sitestar investors over time, but the price just doens’t seem fair. How do outsiders know the current book value is appropriate? Are insiders aware of any gains on the sale of real estate since the Q1 10-Q? Why not wait with the issuance until the Q2 10-Q is out?
Title: Re: SYTE - Sitestar
Post by: Sunrider on August 12, 2016, 03:27:32 AM
Hmm. I was inclined to give you and the pirate the benefit of the doubt but the quorum point seems strange to me / insufficient justification.

Why would you have to worry about a quorum (as opposed to being able to get a majority). Most annual meetings have very few people turn up and they end up being quorate without issue. Re voting - well that would be done by proxy and mostly electronically anyway.

So what is it that you were worried about/actually mean here?
Thanks.
C.

All,

As many of you who have emailed me know, it is not my habit to comment on the day-to-day situation at Sitestar. However, I would like to provide a bit more of a perspective on the private placement. This will be my only comment on the subject until we hold our shareholder meeting.

In the letter I wrote to shareholders in December 2015, I promised to hold a shareholder meeting in the first six months of the year. It was embarrassing to me that we could not do that and shareholders were rightfully upset. One reason we were unable to do so was because of the state of the financials. The other was because of the quorum issue. We would have held the meeting, not been able to hit the quorum, and wasted the money and time to do so. Because of this capital raise, we can now move forward with scheduling the shareholder meeting. Our directors are meeting this weekend to set the date. We will develop the proxy and send it out soon thereafter. The meeting will be held in Charlotte, NC, and I hope everyone can attend.

Addressing a few other comments, we had to do this offering as an unregistered offering. For those involved in small companies, you are familiar that a rights offering and S-1 filing is pricey. That is true. The second part of that, and one that I was not aware of until being in this position, is the difficulty to get an S-1 approved. Given the turnover at the company with management, the board, and the auditor, as well as the overhang with previous management, getting an S-1 approved would have been a challenge, to put it mildly. That would have been the preferred route from the company’s perspective, but the option was not available to us and likely won’t be for some time.

With regards to the pricing, 4.8 cents is the book value at the end of Q1. I understand the share price has run up recently. Unfortunately it was not realistic to issue shares at 8 cents. We would not have been able to raise the funds necessary for a price other than book value. No placement fees were paid, legal expenses were low, and those who subscribed did not view that they were receiving a discount for accepting shares that are unregistered and restricted. However, accepting restricted shares bears a real cost not only because of liquidity, but also because of the fees for required legal opinions and trading costs associated with accepting certificates. It was highly unlikely that an outsider would have been willing to participate in a meaningful way at a different price than what the offering was priced at.

I am sad to read that some feel that we are ingratiating ourselves or “screwing” passive shareholders. I would ask for a little more perspective on the company’s current situation and the challenges we face with regards to the issues listed here. This capital raise is consistent with the things I wrote about in the shareholder letter. Obviously I wish we were in a different situation and did not have to raise money, but we need to build enough scale to effectively carry out our operations. Basically, we have to get bigger or go private. We cannot effectively exist as a public company with a book value of less than $4 million.

This offering allows us to spread these fixed costs across a wider asset base. This is an important thing because of the tiny size of our company. Former management did not have the proper infrastructure to operate as a public company. As we are building that foundation, these fixed costs have become meaningful. We are now able to spread that among a larger number of shares.

Additionally, we have been looking at several interesting opportunities. Having this cash, and the cash generated by the sale of properties discussed in the Q1 filing, allows us to more seriously examine those opportunities.

Doing this placement at this price was the only option to us to accomplish the goals listed above. I understand if shareholders may be upset, but I am confident that the entire company and all shareholders will benefit from it over the long term. As others who are in my position with a small company can attest, a lot of things happen behind the scenes that we cannot share with outside shareholders, as much as we would like to. We have to consider the situation and information within the company that outsiders are not privy to. We are doing the best we can, and I am proud of how much progress we have made since December. I hope we can keep that momentum going. Jeff, Jeremy, Chris, Keith, and I thank you all for the support.
Best regards,

Steve
Title: Re: SYTE - Sitestar
Post by: Ballinvarosig Investors on August 12, 2016, 03:40:04 AM
Share price activity yesterday was amusing, seems like it didn't click for investors until lunch time that they would be facing huge dilution.

Seriously though, if management couldn't do right by all the shareholders, they should have just liquidated this thing.
Title: Re: SYTE - Sitestar
Post by: bskptkl on August 12, 2016, 06:01:36 AM
All,

As many of you who have emailed me know, it is not my habit to comment on the day-to-day situation at Sitestar. However, I would like to provide a bit more of a perspective on the private placement. This will be my only comment on the subject until we hold our shareholder meeting.

In the letter I wrote to shareholders in December 2015, I promised to hold a shareholder meeting in the first six months of the year. It was embarrassing to me that we could not do that and shareholders were rightfully upset. One reason we were unable to do so was because of the state of the financials. The other was because of the quorum issue. We would have held the meeting, not been able to hit the quorum, and wasted the money and time to do so. Because of this capital raise, we can now move forward with scheduling the shareholder meeting. Our directors are meeting this weekend to set the date. We will develop the proxy and send it out soon thereafter. The meeting will be held in Charlotte, NC, and I hope everyone can attend.

Addressing a few other comments, we had to do this offering as an unregistered offering. For those involved in small companies, you are familiar that a rights offering and S-1 filing is pricey. That is true. The second part of that, and one that I was not aware of until being in this position, is the difficulty to get an S-1 approved. Given the turnover at the company with management, the board, and the auditor, as well as the overhang with previous management, getting an S-1 approved would have been a challenge, to put it mildly. That would have been the preferred route from the company’s perspective, but the option was not available to us and likely won’t be for some time.

With regards to the pricing, 4.8 cents is the book value at the end of Q1. I understand the share price has run up recently. Unfortunately it was not realistic to issue shares at 8 cents. We would not have been able to raise the funds necessary for a price other than book value. No placement fees were paid, legal expenses were low, and those who subscribed did not view that they were receiving a discount for accepting shares that are unregistered and restricted. However, accepting restricted shares bears a real cost not only because of liquidity, but also because of the fees for required legal opinions and trading costs associated with accepting certificates. It was highly unlikely that an outsider would have been willing to participate in a meaningful way at a different price than what the offering was priced at.

I am sad to read that some feel that we are ingratiating ourselves or “screwing” passive shareholders. I would ask for a little more perspective on the company’s current situation and the challenges we face with regards to the issues listed here. This capital raise is consistent with the things I wrote about in the shareholder letter. Obviously I wish we were in a different situation and did not have to raise money, but we need to build enough scale to effectively carry out our operations. Basically, we have to get bigger or go private. We cannot effectively exist as a public company with a book value of less than $4 million.

This offering allows us to spread these fixed costs across a wider asset base. This is an important thing because of the tiny size of our company. Former management did not have the proper infrastructure to operate as a public company. As we are building that foundation, these fixed costs have become meaningful. We are now able to spread that among a larger number of shares.

Additionally, we have been looking at several interesting opportunities. Having this cash, and the cash generated by the sale of properties discussed in the Q1 filing, allows us to more seriously examine those opportunities.

Doing this placement at this price was the only option to us to accomplish the goals listed above. I understand if shareholders may be upset, but I am confident that the entire company and all shareholders will benefit from it over the long term. As others who are in my position with a small company can attest, a lot of things happen behind the scenes that we cannot share with outside shareholders, as much as we would like to. We have to consider the situation and information within the company that outsiders are not privy to. We are doing the best we can, and I am proud of how much progress we have made since December. I hope we can keep that momentum going. Jeff, Jeremy, Chris, Keith, and I thank you all for the support.
Best regards,

Steve
But the issuance was restricted to a small group of shareholders. I have a simple solution - offer same terms to other large shareholders and issue more stock. Maybe have a cutoff date and holdings size.
Title: Re: SYTE - Sitestar
Post by: cje on August 12, 2016, 07:31:20 AM
bskptkl- I imagine they will have a further rights offering at some point.  That wouldn't work in this case as Frank would be involved still- and it's expensive.

Just my $.02, I'm not involved in this position but have been watching it.  My firm has negotiated to buy into private placements for small public companies before 3 times.  Each time below the current market price- and we've never done it as it takes a pretty good discount to get past the PITA of having attorneys involved with the various legal restrictions, etc.  Then you're sitting on an illiquid position that you can't do anything with.

These guys needed to raise money.  My shop buys private companies.  Buying $250k HVAC companies is probably a decent strategy at the size they're at now, but the headaches per dollar are crazy high with such tiny companies.  I imagine they're looking for larger companies to integrate in, and you need cash to do that.

Frankly, I can't figure out why this thing climbed to $.08/share- made very little sense to me.  Again, just my $.02.
Title: Re: SYTE - Sitestar
Post by: Jurgis on August 12, 2016, 07:46:55 AM
Frankly, I can't figure out why this thing climbed to $.08/share- made very little sense to me.  Again, just my $.02.

Your $.02 is what makes price difference between $.08 and $.06  :P  ;D


For companies of such size and liquidity CoBF sentiment is enough to move prices a lot.

And/or some people liked new management and wanted to get in "at the ground floor" possibly regardless of price. (Although anyone who wanted to build sizeable position either had to have a lot of patience or pay up).
Title: Re: SYTE - Sitestar
Post by: Schwab711 on August 12, 2016, 08:51:37 AM
I usually hate this stuff but it seemed fairly predictable that management needed to raise money and reduce the influence of prior management quickly. There was a material chance that the company's progress would have been stalled otherwise. For several reasons, I think what happened was fair (maybe not optimal, but what is in business).

1. As mentioned by Steve, anything other than a private placement wasn't really an option. It's not like a lot of folks would have wanted to participate in the private placement considering the holding period restrictions, among others. PIPE transactions are the only way to go with little companies.

2. Book value was $0.047 or $0.048. This book value was primarily comprised of relatively easy to value assets (cash & homes in a liquid market). As mentioned earlier, every trade above this price was pricing in an intangible value that would take many years to be realized, if ever (the jump to $0.08 was based on a BOD nomination!!). Absolutely nothing changed after the PP from that perspective. I think you could even make an argument that PP investors deserved to purchase at less than book, given the leverage they had.

3. What HVAC company were they going to purchase for $1.8m that would generate enough cash to make it worth being public? They'd be spending all FCF on auditing and listing fees. The plan never made sense unless they expanded quickly. Companies with $1m in FCF are going dark for the same reasons. As a shareholder of SYTE you should expect a "go-big-or-go-home" attitude and the associated risks.

4. The company currently has ~$7.5m in assets, primarily cash. They are in the process of changing their business model and recently changed management. The stock has next to no liquidity. Folks that are speculating should understand that this should only be a multi-year holding. Anything less is plain foolish.

Just my observations. I do have a position.
Title: Re: SYTE - Sitestar
Post by: SmallCap on August 12, 2016, 12:32:23 PM
stepping back from this dilution and how it was done.

I haven't seen a really good case made for why this company should continue as a going concern.

as far as I recall the premise the Ragnar had when he made the initial investments was that the main business was a dying business but the assets exceeded the share price. He also mistakenly attributed some value to the existing management.

after taking control of this business knowing the large chunk of shares are held by previous management and the market cap is too small for efficiency bot of which makes continuing to operate the business.  making moves like they just made necessary to continue operating the company.

But why continue operating the company?

i am oversimplifying it buy why not liquidate and the 3 amigos can create their own partnership to buy Hvac. What does continuing the company do for them and the shareholders?
Title: Re: SYTE - Sitestar
Post by: Schwab711 on August 12, 2016, 01:15:09 PM
Given their stated strategic vision, I would guess having US dollars that are worth more than face value is pretty nice
Title: Re: SYTE - Sitestar
Post by: oddballstocks on August 12, 2016, 07:27:27 PM
stepping back from this dilution and how it was done.

I haven't seen a really good case made for why this company should continue as a going concern.

as far as I recall the premise the Ragnar had when he made the initial investments was that the main business was a dying business but the assets exceeded the share price. He also mistakenly attributed some value to the existing management.

after taking control of this business knowing the large chunk of shares are held by previous management and the market cap is too small for efficiency bot of which makes continuing to operate the business.  making moves like they just made necessary to continue operating the company.

But why continue operating the company?

i am oversimplifying it buy why not liquidate and the 3 amigos can create their own partnership to buy Hvac. What does continuing the company do for them and the shareholders?

Years back a Director at a small company that went public explained it to me like this. Paraphrasing "In a private company when you earn $1 you have $1. In a public company when you earn $1 you have the market's multiple of it. If your company sucks and you have a PE of 5 that is still 5x more than you had as a private company"
Title: Re: SYTE - Sitestar
Post by: Spekulatius on August 13, 2016, 06:44:14 AM
stepping back from this dilution and how it was done.

I haven't seen a really good case made for why this company should continue as a going concern.

as far as I recall the premise the Ragnar had when he made the initial investments was that the main business was a dying business but the assets exceeded the share price. He also mistakenly attributed some value to the existing management.

after taking control of this business knowing the large chunk of shares are held by previous management and the market cap is too small for efficiency bot of which makes continuing to operate the business.  making moves like they just made necessary to continue operating the company.

But why continue operating the company?

i am oversimplifying it buy why not liquidate and the 3 amigos can create their own partnership to buy Hvac. What does continuing the company do for them and the shareholders?

Years back a Director at a small company that went public explained it to me like this. Paraphrasing "In a private company when you earn $1 you have $1. In a public company when you earn $1 you have the market's multiple of it. If your company sucks and you have a PE of 5 that is still 5x more than you had as a private company"
You can sell your private company at a multiple of earnings, but that multiple of your private company very likely is lower than the multiple of a public company.

A rights offering that includes existing shareholders would have been fairer. I don't know how much it costs to do an S-1 filing, but the fees for the SEC are quite small ($100/M of capital raised or so). I suspect that he main cost is for the lawyers writing the prospectus?

The 0.048c price is not that unfair, since it seems close to the unperpetuated price of the stock and probably close to the NAV.
Title: Re: SYTE - Sitestar
Post by: Travis Wiedower on August 15, 2016, 09:17:40 AM
I also think the risk of Frank buying his allotted shares (or anything close) in an offering was very low. He was making $50k a year and is currently being sued by Sitestar... doubt his available cash is that high.
Title: Re: SYTE - Sitestar
Post by: TBW on August 16, 2016, 06:48:13 AM
I think that the optics look bad but ultimately they did what they had to do at what I think upon reflection is a fair price.  The situation to me is more a reflection of how difficult/expensive it is to be a small public company rather than management being self-serving. 

Question does anyone know the AUM of Arquitos?  Curious to know how much of their fund SYTE is now.
Title: Re: SYTE - Sitestar
Post by: Foreign Tuffett on August 16, 2016, 08:34:27 AM
stepping back from this dilution and how it was done.

I haven't seen a really good case made for why this company should continue as a going concern.


Neither have I
Title: Re: SYTE - Sitestar
Post by: gg on August 16, 2016, 09:20:54 AM
stepping back from this dilution and how it was done.

I haven't seen a really good case made for why this company should continue as a going concern.


Neither have I

It does not seem likely that liquidating the assets at this point would yield a distribution that is meaningfully higher than the current share price. So, might as well make an attempt to create value (by attempting to growing earnings and compounding capital)
Title: Re: SYTE - Sitestar
Post by: TBW on September 08, 2016, 04:02:05 PM
Anyone else going to the shareholder meeting?  If so let me know I would be happy to organize a meet-up the night before.
Title: Re: SYTE - Sitestar
Post by: rkbabang on September 09, 2016, 07:30:25 AM
Interesting.  Frank posted to a message board here:

http://investorshub.advfn.com/boards/read_msg.aspx?message_id=125043195

This guy is delusional, he still thinks that he is Chairman of the Board.  This is what he wrote:

"You can't trust what these guys say in my opinion. They go onto the Board under false pretenses and took over under false pretenses.

I am still a Board member and the Chairmen of the Board, I agreed to resign but not immediately like they claim. To officially resign, it must be in writing which it never was. Dan Judd s also a Board member and has been pressured to resign. I have not had any Special Board meetings nor any Board meetings after I left the company nor had Dan Judd after he left.

Whatever actions they are taking may not be legal in my opinion and not to the benefit of the company. We have never voted on anything to my knowledge. The company is in liquidation mode and there is too much conflict of interest. Doubling the amount of shares at a discounted rate in order to have complete control is theft also in my opinion.

I have seen this happen when I merged my company into Sitestar and other management took over. My large ownership position was diluted and the share price crashed to under a penny. That other management also created a separate company, borrowed money, invested it into different things and to this day, I don't know where that money went. I hope this doesn't happen here.

There is no reason to issue more shares as they have enough cash. They kicked out the renters from the rental properties and sold most of the properties. There isn't going to be much of a business left soon. This HVAC business makes no sense. Does anyone in management know anything about that business?

I for one am not going to vote these guys in on the Proxy. I am not sure that they even have proper authorization to even hold the vote. Why would they need to? They have complete control.

Frank
"
Title: Re: SYTE - Sitestar
Post by: Ballinvarosig Investors on September 09, 2016, 01:10:36 PM
Q2 results out

http://www.otcmarkets.com/edgar/GetFilingPdf?FilingID=11587310
Title: Re: SYTE - Sitestar
Post by: Gamecock-YT on September 09, 2016, 05:36:34 PM
Anyone else going to the shareholder meeting?  If so let me know I would be happy to organize a meet-up the night before.

There's a few COBFers in the Charlotte area that could be interested.
Title: Re: SYTE - Sitestar
Post by: eclecticvalue on September 09, 2016, 10:28:45 PM
Will there be someone taking notes at the annual meeting?
Title: Re: SYTE - Sitestar
Post by: TBW on September 10, 2016, 05:40:37 PM
Planning on meeting sunday night in Charlotte at 9pm. PM me for more details will pick a place when I get a sense for how many people want to join.
Title: Re: SYTE - Sitestar
Post by: LR1400 on September 13, 2016, 09:58:16 AM
I don't have a clear picture as to why they are liquidating the real estate portfolio. I believe someone noted they are moving that capital to the HVAC business.

Is the real estate overvalued and they are able to sell out for large numbers?

Renting out houses is reasonably passive, especially when using a property manager. Often you get ok cash flow and long term wealth when held for awhile.
I'll be watching that HVAC business, that could do pretty decently. It could be a good roll-up platform. I do see HVAC being reasonably hard to scale though. I understand it has been done, but it seems tough.
Title: Re: SYTE - Sitestar
Post by: rkbabang on September 13, 2016, 10:18:03 AM
I don't have a clear picture as to why they are liquidating the real estate portfolio. I believe someone noted they are moving that capital to the HVAC business.

Is the real estate overvalued and they are able to sell out for large numbers?

Renting out houses is reasonably passive, especially when using a property manager. Often you get ok cash flow and long term wealth when held for awhile.
I'll be watching that HVAC business, that could do pretty decently. It could be a good roll-up platform. I do see HVAC being reasonably hard to scale though. I understand it has been done, but it seems tough.

I'm assuming they think that they can earn loftier returns elsewhere.  I'm just glad that many of these properties are no longer going to be sitting vacant and deteriorating anymore.  If you are not going to make use of them in some productive manner (and the former management wasn't) selling them is certainly the best option.  It also seems as if they are getting slightly more for them than expected which is a nice bonus.   Now we will see how the current management uses the capital.
Title: Re: SYTE - Sitestar
Post by: LR1400 on September 13, 2016, 12:29:23 PM
I don't have a clear picture as to why they are liquidating the real estate portfolio. I believe someone noted they are moving that capital to the HVAC business.

Is the real estate overvalued and they are able to sell out for large numbers?

Renting out houses is reasonably passive, especially when using a property manager. Often you get ok cash flow and long term wealth when held for awhile.
I'll be watching that HVAC business, that could do pretty decently. It could be a good roll-up platform. I do see HVAC being reasonably hard to scale though. I understand it has been done, but it seems tough.

I'm assuming they think that they can earn loftier returns elsewhere.  I'm just glad that many of these properties are no longer going to be sitting vacant and deteriorating anymore.  If you are not going to make use of them in some productive manner (and the former management wasn't) selling them is certainly the best option.  It also seems as if they are getting slightly more for them than expected which is a nice bonus.   Now we will see how the current management uses the capital.

I wasn't sure if the properties were vacant or not. Vacant property that can't be rented at reasonable rates....makes sense to sell. The former CEO said new management forced tenants out and then sold...
Title: Re: SYTE - Sitestar
Post by: rkbabang on September 13, 2016, 12:32:49 PM
I don't have a clear picture as to why they are liquidating the real estate portfolio. I believe someone noted they are moving that capital to the HVAC business.

Is the real estate overvalued and they are able to sell out for large numbers?

Renting out houses is reasonably passive, especially when using a property manager. Often you get ok cash flow and long term wealth when held for awhile.
I'll be watching that HVAC business, that could do pretty decently. It could be a good roll-up platform. I do see HVAC being reasonably hard to scale though. I understand it has been done, but it seems tough.

I'm assuming they think that they can earn loftier returns elsewhere.  I'm just glad that many of these properties are no longer going to be sitting vacant and deteriorating anymore.  If you are not going to make use of them in some productive manner (and the former management wasn't) selling them is certainly the best option.  It also seems as if they are getting slightly more for them than expected which is a nice bonus.   Now we will see how the current management uses the capital.

I wasn't sure if the properties were vacant or not. Vacant property that can't be rented at reasonable rates....makes sense to sell. The former CEO said new management forced tenants out and then sold...

They were not all vacant, but unless I am mistaken, most of them were.
Title: Re: SYTE - Sitestar
Post by: LR1400 on September 13, 2016, 12:48:03 PM
I don't have a clear picture as to why they are liquidating the real estate portfolio. I believe someone noted they are moving that capital to the HVAC business.

Is the real estate overvalued and they are able to sell out for large numbers?

Renting out houses is reasonably passive, especially when using a property manager. Often you get ok cash flow and long term wealth when held for awhile.
I'll be watching that HVAC business, that could do pretty decently. It could be a good roll-up platform. I do see HVAC being reasonably hard to scale though. I understand it has been done, but it seems tough.

I'm assuming they think that they can earn loftier returns elsewhere.  I'm just glad that many of these properties are no longer going to be sitting vacant and deteriorating anymore.  If you are not going to make use of them in some productive manner (and the former management wasn't) selling them is certainly the best option.  It also seems as if they are getting slightly more for them than expected which is a nice bonus.   Now we will see how the current management uses the capital.

I wasn't sure if the properties were vacant or not. Vacant property that can't be rented at reasonable rates....makes sense to sell. The former CEO said new management forced tenants out and then sold...

They were not all vacant, but unless I am mistaken, most of them were.

I think the annual report said 8 were occupied. I wonder why they didn't know this going in/through due diligence. I like most of their approach and it is something to watch and possibly emulate.
Title: Re: SYTE - Sitestar
Post by: rkbabang on September 13, 2016, 12:54:52 PM
I don't have a clear picture as to why they are liquidating the real estate portfolio. I believe someone noted they are moving that capital to the HVAC business.

Is the real estate overvalued and they are able to sell out for large numbers?

Renting out houses is reasonably passive, especially when using a property manager. Often you get ok cash flow and long term wealth when held for awhile.
I'll be watching that HVAC business, that could do pretty decently. It could be a good roll-up platform. I do see HVAC being reasonably hard to scale though. I understand it has been done, but it seems tough.

I'm assuming they think that they can earn loftier returns elsewhere.  I'm just glad that many of these properties are no longer going to be sitting vacant and deteriorating anymore.  If you are not going to make use of them in some productive manner (and the former management wasn't) selling them is certainly the best option.  It also seems as if they are getting slightly more for them than expected which is a nice bonus.   Now we will see how the current management uses the capital.

I wasn't sure if the properties were vacant or not. Vacant property that can't be rented at reasonable rates....makes sense to sell. The former CEO said new management forced tenants out and then sold...

They were not all vacant, but unless I am mistaken, most of them were.

I think the annual report said 8 were occupied. I wonder why they didn't know this going in/through due diligence. I like most of their approach and it is something to watch and possibly emulate.

They did know this going in.  The fact that SYTE wasn't doing anything with the properties it owned, and some of them needed significant work that wasn't being done, was one of the reasons for the activism which eventually led to the management change.


My initial thesis was that SYTE was sitting on value that wasn't being utilized and the addition of Jeff Moore to the board was a sign that management was ready to start renovating and doing something with these properties. That didn't turn out to be the case.  I didn't expect what happened.
Title: Re: SYTE - Sitestar
Post by: LR1400 on September 13, 2016, 01:44:30 PM
I don't have a clear picture as to why they are liquidating the real estate portfolio. I believe someone noted they are moving that capital to the HVAC business.

Is the real estate overvalued and they are able to sell out for large numbers?

Renting out houses is reasonably passive, especially when using a property manager. Often you get ok cash flow and long term wealth when held for awhile.
I'll be watching that HVAC business, that could do pretty decently. It could be a good roll-up platform. I do see HVAC being reasonably hard to scale though. I understand it has been done, but it seems tough.

I'm assuming they think that they can earn loftier returns elsewhere.  I'm just glad that many of these properties are no longer going to be sitting vacant and deteriorating anymore.  If you are not going to make use of them in some productive manner (and the former management wasn't) selling them is certainly the best option.  It also seems as if they are getting slightly more for them than expected which is a nice bonus.   Now we will see how the current management uses the capital.

I wasn't sure if the properties were vacant or not. Vacant property that can't be rented at reasonable rates....makes sense to sell. The former CEO said new management forced tenants out and then sold...

They were not all vacant, but unless I am mistaken, most of them were.

I think the annual report said 8 were occupied. I wonder why they didn't know this going in/through due diligence. I like most of their approach and it is something to watch and possibly emulate.

They did know this going in.  The fact that SYTE wasn't doing anything with the properties it owned, and some of them needed significant work that wasn't being done, was one of the reasons for the activism which eventually led to the management change.


My initial thesis was that SYTE was sitting on value that wasn't being utilized and the addition of Jeff Moore to the board was a sign that management was ready to start renovating and doing something with these properties. That didn't turn out to be the case.  I didn't expect what happened.

That would've probably worked well until the dilution. The price is too high now.

Hopefully everyone got in pretty early on this. Buying distressed property, renovating then leasing or selling has worked for lots of people.

Do you feel the HVAC business is truly scale-able, at least with minimal capital?
Title: Re: SYTE - Sitestar
Post by: rkbabang on September 14, 2016, 07:19:54 AM
That would've probably worked well until the dilution. The price is too high now.

Hopefully everyone got in pretty early on this. Buying distressed property, renovating then leasing or selling has worked for lots of people.

Do you feel the HVAC business is truly scale-able, at least with minimal capital?

I don't know anything about the HVAC business.  It was completely off my radar until this.   I'm still trying to figure out what they see in it.  I was under the impression that HVAC businesses were mostly small local owner-operator/father-son type companies without many employees or much scale.  That is certainly true here in the northeast, I don't know anything about the southwest where they appear to be focussing.

Most HVAC related public companies are equipment manufacturers, not installers.  I can find only one public company that appears to be solely in the HVAC installation business. NYSE:FIX
It is almost a $1B market cap company, profitable, pays a dividend, but doesn't appear to be rapidly growing.
Title: Re: SYTE - Sitestar
Post by: LR1400 on September 14, 2016, 09:28:24 AM
That would've probably worked well until the dilution. The price is too high now.

Hopefully everyone got in pretty early on this. Buying distressed property, renovating then leasing or selling has worked for lots of people.

Do you feel the HVAC business is truly scale-able, at least with minimal capital?

I don't know anything about the HVAC business.  It was completely off my radar until this.   I'm still trying to figure out what they see in it.  I was under the impression that HVAC businesses were mostly small local owner-operator/father-son type companies without many employees or much scale.  That is certainly true here in the northeast, I don't know anything about the southwest where they appear to be focussing.

Most HVAC related public companies are equipment manufacturers, not installers.  I can find only one public company that appears to be solely in the HVAC installation business. NYSE:FIX
It is almost a $1B market cap company, profitable, pays a dividend, but doesn't appear to be rapidly growing.

I read about the industry consolidating years ago and perhaps it is or will be doing that again. I also view it as a largely small, regional business. That doesn't make them bad, however, they rely on local knowledge/connections or low price. A friend owns one and does reasonably well with it, he will end up reasonably wealthy, but without him and his partner the business would struggle to exist. Basically, the owner of most of these is the brand. Now, rolling them up in a region and rebranding, maybe that would work.

I view the industry as having tow segments:

1. Service/Maintenance
2. Contracting

Service and maintenance seems repeatable and somewhat easier to scale. I am assuming most systems are similar these days and expertise can be gained and passed on relatively quickly. The volume of service and maintenance should be more consistent as well. The contracting side is going to be project based and dependent on microeconomics of the operating area and somewhat dependent on overall macro levels and trends. This is going to be cyclical. Contracting requires more detailed knowledge in estimating, project management, negotiating, etc.

In my view both segments are primarily price driven, so being the low cost operator is essential.

Most every contracting business is going to follow this model.
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on September 16, 2016, 06:53:36 AM
Why I'm Withholding My Votes For All Sitestar Directors http://www.inelegantinvestor.com/2016/09/16/im-withholding-votes-sitestar-directors/
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on September 19, 2016, 07:54:51 AM
Massive dilution continues as sitestar commits more than its total equity to new fund.
Sitestar to Make a Seed Investment in Alluvial Fund, LP

LYNCHBURG, VA--(Marketwired - September 19, 2016) - Sitestar Corporation (OTCQB: SYTE) today announced an agreement with Alluvial Capital Management, LLC to make a seed investment in a soon to be launched private investment partnership. The partnership will be managed by David Waters. Alluvial Capital will act as the general partner and Sitestar will invest in the private investment partnership as a limited partner.

"We are thrilled to invest in David and provide seed capital for the launch of his investment partnership. David has proven himself as a talented investor and committed fiduciary. He has a strong track record of uncovering previously unknown companies in his client accounts through Alluvial Capital and through his blog at www.otcadventures.com. We are excited to team up with him," said Steven Kiel, Sitestar's CEO.

"I am extremely excited to partner with Sitestar. I have enjoyed watching Sitestar's turnaround and I expect great things from the company. I look forward to a long and profitable partnership and I am certain that both Sitestar shareholders and Alluvial clients will benefit from this arrangement," said David Waters, Alluvial Capital's Managing Member.

The private investment partnership, to be named Alluvial Fund, LP, has a target launch date of January 1, 2017. Sitestar has agreed to make a seed investment of $10 million, which will be funded through cash on hand and through the proceeds of a private placement. In conjunction with the investment, Sitestar will be developing an asset management business.
Title: Re: SYTE - Sitestar
Post by: gg on September 19, 2016, 08:12:22 AM
$10 million???

Anyone know how big Kiel's fund us? I'm surprised they can be sure they will be raise 10 million unless it's raised already...
Title: Re: SYTE - Sitestar
Post by: writser on September 19, 2016, 08:12:44 AM
I'm happy for Dave, he seems a nice guy and a good investor. On the other hand I'm glad I'm not a minority investor. It would have been courteous if SYTE returned cash to shareholders so they could decide for themselves whether they want to invest in A) a HVAC business or B) a microcap fund encapsulated in a microcap stock. Now it's forced down your throat, as are the private placements. This is a reverse listing of a private investment vehicle. Also it would've been nice if they gave some information about the price range (and the buyers) of the private placement in the press release.
Title: Re: SYTE - Sitestar
Post by: eclecticvalue on September 19, 2016, 08:21:32 AM
Wow........... I was excited for the rollup of the HVAC business and now they are branching out to another business already.
Title: Re: SYTE - Sitestar
Post by: Jurgis on September 19, 2016, 08:24:04 AM
On the other hand I'm glad I'm not a minority investor. It would have been courteous if SYTE returned cash to shareholders so they could decide for themselves whether they want to invest in A) a HVAC business or B) a microcap fund encapsulated in a microcap stock. Now it's forced down your throat, as are the private placements.

OTOH, if SYTE returned cash, minorities would have received ~book == ~$4.X
Now they can sell their shares at >1.5 book or so assuming market is liquid at $7 and laugh their way to the bank.

The patsies are minorities buying at $7-8 IMO. But sure they have some motivation to pay >1.5 book for a diluting hedge fund...  ::)

Edit: and BTW, you could invest with Dave directly without paying 1.5x recently. Maybe no longer ...
Title: Re: SYTE - Sitestar
Post by: writser on September 19, 2016, 08:34:17 AM
Sure, if I owned shares I'd have sold them by now and would probably be content with my returns. But the fact that the market presents me a juicy bid doesn't necessarily mean I agree with the course of action taken by the company.
Title: Re: SYTE - Sitestar
Post by: ratiman on September 19, 2016, 08:47:32 AM
So beyond all of the obvious problems, no ownership of the GP? Just passive investment as LPs, paying the manager a fee?  Apparently by "asset management business" SYTE means that it will be paying fees to asset managers.
Title: Re: SYTE - Sitestar
Post by: oddballstocks on September 19, 2016, 08:57:18 AM
This is quite the evolution!

Regarding Dave's fund, this is fascinating.  I know he's been thinking about this for a few years because we've been talking about the idea over beers for a few years.  This makes SYTE very attractive to me at this point.  Dave's fund will be a hedge fund only available to accredited investors.  I know some of the stuff he looks at, I won't share details on here, but it's some of the most attractive/esoteric/illiquid stuff I've ever seen.  Mostly strange securities in strange markets that are closed to individuals.  Things I'd like to have some exposure to, but couldn't do it on my own.

Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on September 19, 2016, 09:15:27 AM
Dave was one of Kiel's nominees in the proxy fight. He didn't make it onto the Board in the settlement. Total number of shares he owned then: 0
Title: Re: SYTE - Sitestar
Post by: Hielko on September 19, 2016, 09:50:18 AM
So beyond all of the obvious problems, no ownership of the GP? Just passive investment as LPs, paying the manager a fee?  Apparently by "asset management business" SYTE means that it will be paying fees to asset managers.
Yeah, providing 10 million in seed fund without getting a stake in the GP seems like a crappy deal to me. But perhaps at least the fee structure is good...
Title: Re: SYTE - Sitestar
Post by: Poor Charlie on September 19, 2016, 10:37:32 AM
So beyond all of the obvious problems, no ownership of the GP? Just passive investment as LPs, paying the manager a fee?  Apparently by "asset management business" SYTE means that it will be paying fees to asset managers.
Yeah, providing 10 million in seed fund without getting a stake in the GP seems like a crappy deal to me. But perhaps at least the fee structure is good...

Most people in finance won’t pick up a pencil without carry, so I’m sure that both the HVAC and Alluvial GPs will be getting a nice percentage of any profits.  Also, I’d bet Kiel doesn’t want to be left out and will find a way to arrange some kind of override compensation structure for himself at some point.  A lot of big stomachs to fill for such a little company. 

Truth be told, I don’t really mind the compensation though as long as it’s approved by the owners of the company, including the minority owners.  What really turned me off to this was the private placement they did.  Massively diluting existing shareholders at ‘book value’ after you (a) wrote off/down assets that were ‘cash flowing’ (phrase I believe Kiel himself used in a letter to Erhartic to point out their value) and (b) fail to mention certain off-balance sheet assets (first.com) that could have substantial value in relation to the .048 BV doesn’t strike me as aboveboard.  Doing so, however, under the guise of making quorum?  That’s just downright slippery. 
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on September 19, 2016, 10:50:04 AM
So beyond all of the obvious problems, no ownership of the GP? Just passive investment as LPs, paying the manager a fee?  Apparently by "asset management business" SYTE means that it will be paying fees to asset managers.
Yeah, providing 10 million in seed fund without getting a stake in the GP seems like a crappy deal to me. But perhaps at least the fee structure is good...

Most people in finance won’t pick up a pencil without carry, so I’m sure that both the HVAC and Alluvial GPs will be getting a nice percentage of any profits.  Also, I’d bet Kiel doesn’t want to be left out and will find a way to arrange some kind of override compensation structure for himself at some point.  A lot of big stomachs to fill for such a little company. 

Truth be told, I don’t really mind the compensation though as long as it’s approved by the owners of the company, including the minority owners.  What really turned me off to this was the private placement they did.  Massively diluting existing shareholders at ‘book value’ after you (a) wrote off/down assets that were ‘cash flowing’ (phrase I believe Kiel himself used in a letter to Erhartic to point out their value) and (b) fail to mention certain off-balance sheet assets (first.com) that could have substantial value in relation to the .048 BV doesn’t strike me as aboveboard.  Doing so, however, under the guise of making quorum?  That’s just downright slippery. 

Keep in mind- there will be another private placement to fund the Alluvial commitment, which will have to be twice the size of the last one.
Title: Re: SYTE - Sitestar
Post by: oddballstocks on September 19, 2016, 11:51:44 AM
So beyond all of the obvious problems, no ownership of the GP? Just passive investment as LPs, paying the manager a fee?  Apparently by "asset management business" SYTE means that it will be paying fees to asset managers.
Yeah, providing 10 million in seed fund without getting a stake in the GP seems like a crappy deal to me. But perhaps at least the fee structure is good...

Most people in finance won’t pick up a pencil without carry, so I’m sure that both the HVAC and Alluvial GPs will be getting a nice percentage of any profits.  Also, I’d bet Kiel doesn’t want to be left out and will find a way to arrange some kind of override compensation structure for himself at some point.  A lot of big stomachs to fill for such a little company. 

Truth be told, I don’t really mind the compensation though as long as it’s approved by the owners of the company, including the minority owners.  What really turned me off to this was the private placement they did.  Massively diluting existing shareholders at ‘book value’ after you (a) wrote off/down assets that were ‘cash flowing’ (phrase I believe Kiel himself used in a letter to Erhartic to point out their value) and (b) fail to mention certain off-balance sheet assets (first.com) that could have substantial value in relation to the .048 BV doesn’t strike me as aboveboard.  Doing so, however, under the guise of making quorum?  That’s just downright slippery. 

Keep in mind- there will be another private placement to fund the Alluvial commitment, which will have to be twice the size of the last one.

Yes, the dilution here is epic.  Glad I never pulled the trigger on this.  Might be a buy once the dilution is done and current shareholders are running for the exit.

Are you at the annual meeting?  Seems like an event you'd want to attend, especially if you have such strong feelings.
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on September 19, 2016, 12:05:33 PM
So beyond all of the obvious problems, no ownership of the GP? Just passive investment as LPs, paying the manager a fee?  Apparently by "asset management business" SYTE means that it will be paying fees to asset managers.
Yeah, providing 10 million in seed fund without getting a stake in the GP seems like a crappy deal to me. But perhaps at least the fee structure is good...

Most people in finance won’t pick up a pencil without carry, so I’m sure that both the HVAC and Alluvial GPs will be getting a nice percentage of any profits.  Also, I’d bet Kiel doesn’t want to be left out and will find a way to arrange some kind of override compensation structure for himself at some point.  A lot of big stomachs to fill for such a little company. 

Truth be told, I don’t really mind the compensation though as long as it’s approved by the owners of the company, including the minority owners.  What really turned me off to this was the private placement they did.  Massively diluting existing shareholders at ‘book value’ after you (a) wrote off/down assets that were ‘cash flowing’ (phrase I believe Kiel himself used in a letter to Erhartic to point out their value) and (b) fail to mention certain off-balance sheet assets (first.com) that could have substantial value in relation to the .048 BV doesn’t strike me as aboveboard.  Doing so, however, under the guise of making quorum?  That’s just downright slippery. 

Keep in mind- there will be another private placement to fund the Alluvial commitment, which will have to be twice the size of the last one.

Yes, the dilution here is epic.  Glad I never pulled the trigger on this.  Might be a buy once the dilution is done and current shareholders are running for the exit.

Are you at the annual meeting?  Seems like an event you'd want to attend, especially if you have such strong feelings.
Not at the meeting. I certainly would have gone pre-dilution. At this point, I had other things happening and didn't need to push them off so I could go there and have no say.  Management has demonstrated they don't give a rat's ass about shareholders.
Title: Re: SYTE - Sitestar
Post by: NeverLoseMoney on September 19, 2016, 01:33:09 PM
So beyond all of the obvious problems, no ownership of the GP? Just passive investment as LPs, paying the manager a fee?  Apparently by "asset management business" SYTE means that it will be paying fees to asset managers.
Yeah, providing 10 million in seed fund without getting a stake in the GP seems like a crappy deal to me. But perhaps at least the fee structure is good...

Most people in finance won’t pick up a pencil without carry, so I’m sure that both the HVAC and Alluvial GPs will be getting a nice percentage of any profits.  Also, I’d bet Kiel doesn’t want to be left out and will find a way to arrange some kind of override compensation structure for himself at some point.  A lot of big stomachs to fill for such a little company. 

Truth be told, I don’t really mind the compensation though as long as it’s approved by the owners of the company, including the minority owners.  What really turned me off to this was the private placement they did.  Massively diluting existing shareholders at ‘book value’ after you (a) wrote off/down assets that were ‘cash flowing’ (phrase I believe Kiel himself used in a letter to Erhartic to point out their value) and (b) fail to mention certain off-balance sheet assets (first.com) that could have substantial value in relation to the .048 BV doesn’t strike me as aboveboard.  Doing so, however, under the guise of making quorum?  That’s just downright slippery. 

Keep in mind- there will be another private placement to fund the Alluvial commitment, which will have to be twice the size of the last one.

Yes, the dilution here is epic.  Glad I never pulled the trigger on this.  Might be a buy once the dilution is done and current shareholders are running for the exit.

Are you at the annual meeting?  Seems like an event you'd want to attend, especially if you have such strong feelings.
Not at the meeting. I certainly would have gone pre-dilution. At this point, I had other things happening and didn't need to push them off so I could go there and have no say.  Management has demonstrated they don't give a rat's ass about shareholders.
I think shareholders who bought shares when Frank Erhartic was still CEO don't have that much to complain about, really. I think many people only became involved in this company after reading Jeff Moore's posts about Sitestar on his blog. He seemed to like Mr. Erhartic initially and, if I recall correctly, even visited some properties with him that Sitestar owned. I don't want to put words in Jeff's mouth, but I think it is safe to say that he misjudged Mr. Erhartic completely. How many people would even have bothered to look at this company, let alone invest in it, if it were not for those posts on Jeff's blog?

I think anyone who first invested when Mr. Erhartic was in charge deserves a huge loss on their investment. And that's ok, we all get it wrong sometimes. Luckily small shareholders received a huge bailout, because thanks to the efforts of large shareholders Jeff Moore, Steven Kiel and one or two others, value can now be salvaged instead of it continuing to be destroyed by the former CEO.

How they went about all this can definitely be questioned, but it was never going to be an ideal situation, given Mr. Erhartic's large ownership stake. That's why you'd better be damn sure about the CEO's character and behavior when he owns a lot of stock. The truth is that people screwed up investing in this company and now a few large owners are trying to make the best of a messy situation. What would the stock price be today if Mr. Erhartic was still running the show?

Disclosure: I don't own Sitestar stock and never have. I don't know Jeff Moore or Steven Kiel personally. I just read some of the things they write. They seem like honest guys to me and probably good investors as well.
Title: Re: SYTE - Sitestar
Post by: gg on September 19, 2016, 01:45:02 PM

I think shareholders who bought shares when Frank Erhartic was still CEO don't have that much to complain about, really. I think many people only became involved in this company after reading Jeff Moore's posts about Sitestar on his blog. He seemed to like Mr. Erhartic initially and, if I recall correctly, even visited some properties with him that Sitestar owned. I don't want to put words in Jeff's mouth, but I think it is safe to say that he misjudged Mr. Erhartic completely. How many people would even have bothered to look at this company, let alone invest in it, if it were not for those posts on Jeff's blog?

I think anyone who first invested when Mr. Erhartic was in charge deserves a huge loss on their investment. And that's ok, we all get it wrong sometimes. Luckily small shareholders received a huge bailout, because thanks to the efforts of large shareholders Jeff Moore, Steven Kiel and one or two others, value can now be salvaged instead of it continuing to be destroyed by the former CEO.

How they went about all this can definitely be questioned, but it was never going to be an ideal situation, given Mr. Erhartic's large ownership stake. That's why you'd better be damn sure about the CEO's character and behavior when he owns a lot of stock. The truth is that people screwed up investing in this company and now a few large owners are trying to make the best of a messy situation. What would the stock price be today if Mr. Erhartic was still running the show?

Disclosure: I don't own Sitestar stock and never have. I don't know Jeff Moore or Steven Kiel personally. I just read some of the things they write. They seem like honest guys to me and probably good investors as well.

+1.  These situations are so fluid and have many moving parts. Thus far, I don't see much for original SYTE shareholders to be unhappy about...
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on September 19, 2016, 02:17:40 PM
So beyond all of the obvious problems, no ownership of the GP? Just passive investment as LPs, paying the manager a fee?  Apparently by "asset management business" SYTE means that it will be paying fees to asset managers.
Yeah, providing 10 million in seed fund without getting a stake in the GP seems like a crappy deal to me. But perhaps at least the fee structure is good...

Most people in finance won’t pick up a pencil without carry, so I’m sure that both the HVAC and Alluvial GPs will be getting a nice percentage of any profits.  Also, I’d bet Kiel doesn’t want to be left out and will find a way to arrange some kind of override compensation structure for himself at some point.  A lot of big stomachs to fill for such a little company. 

Truth be told, I don’t really mind the compensation though as long as it’s approved by the owners of the company, including the minority owners.  What really turned me off to this was the private placement they did.  Massively diluting existing shareholders at ‘book value’ after you (a) wrote off/down assets that were ‘cash flowing’ (phrase I believe Kiel himself used in a letter to Erhartic to point out their value) and (b) fail to mention certain off-balance sheet assets (first.com) that could have substantial value in relation to the .048 BV doesn’t strike me as aboveboard.  Doing so, however, under the guise of making quorum?  That’s just downright slippery. 

Keep in mind- there will be another private placement to fund the Alluvial commitment, which will have to be twice the size of the last one.

Yes, the dilution here is epic.  Glad I never pulled the trigger on this.  Might be a buy once the dilution is done and current shareholders are running for the exit.

Are you at the annual meeting?  Seems like an event you'd want to attend, especially if you have such strong feelings.
Not at the meeting. I certainly would have gone pre-dilution. At this point, I had other things happening and didn't need to push them off so I could go there and have no say.  Management has demonstrated they don't give a rat's ass about shareholders.
I think shareholders who bought shares when Frank Erhartic was still CEO don't have that much to complain about, really. I think many people only became involved in this company after reading Jeff Moore's posts about Sitestar on his blog. He seemed to like Mr. Erhartic initially and, if I recall correctly, even visited some properties with him that Sitestar owned. I don't want to put words in Jeff's mouth, but I think it is safe to say that he misjudged Mr. Erhartic completely. How many people would even have bothered to look at this company, let alone invest in it, if it were not for those posts on Jeff's blog?

I think anyone who first invested when Mr. Erhartic was in charge deserves a huge loss on their investment. And that's ok, we all get it wrong sometimes. Luckily small shareholders received a huge bailout, because thanks to the efforts of large shareholders Jeff Moore, Steven Kiel and one or two others, value can now be salvaged instead of it continuing to be destroyed by the former CEO.

How they went about all this can definitely be questioned, but it was never going to be an ideal situation, given Mr. Erhartic's large ownership stake. That's why you'd better be damn sure about the CEO's character and behavior when he owns a lot of stock. The truth is that people screwed up investing in this company and now a few large owners are trying to make the best of a messy situation. What would the stock price be today if Mr. Erhartic was still running the show?

Disclosure: I don't own Sitestar stock and never have. I don't know Jeff Moore or Steven Kiel personally. I just read some of the things they write. They seem like honest guys to me and probably good investors as well.
I can't speak for others, but I had already owned SYTE for some time before Jeff and I first discussed it in August 2011(I believe right after his first post about it). I never bought based on Mr. Erhartic or any other manager. I bought based on my belief that the stock was trading for less than the value of its assets. When I ultimately became disillusioned with Mr. Erhartic's management, I spoke with likeminded shareholders. I supported Mr. Kiel and Mr. Moore. I believe that some of my disclosures led directly to Mr. Erhartic's ouster.

Mr. Kiel owned just over 6% of the company. It was only through a settlement with prior management that he obtained a Board seat. One of the consistent demands of Mr. Moore and Mr. Kiel was for a shareholder meeting to allow all shareholders to have a voice in the company. At the time, Mr. Erhartic owned over 33% of the company. They warned him about making any material moves without shareholder input.

Observe what happened as soon as Mr. Kiel and his 6% were in charge. A shareholder meeting was promised, but not delivered until Mr. Kiel had changed the company's strategy entirely and transformed his 6% stake into a 42% stake- at a discount to market. Apparently, what is good for the goose is not good for the gander.
Title: Re: SYTE - Sitestar
Post by: Ballinvarosig Investors on September 19, 2016, 02:21:26 PM
I think shareholders who bought shares when Frank Erhartic was still CEO don't have that much to complain about, really.
So you're saying because Steve Kiel is only slightly worse than Erhartic, investors should be happy with what they've got?
I think many people only became involved in this company after reading Jeff Moore's posts about Sitestar on his blog.
Nonsense. Most people got involved because of the cash flow generated by the internet business.
How many people would even have bothered to look at this company, let alone invest in it, if it were not for those posts on Jeff's blog?
Jeff is a smart fellow and provided insight, no doubt whatsoever, but the company was followed before he got involved.
I think anyone who first invested when Mr. Erhartic was in charge deserves a huge loss on their investment.
This is a ridiculous statement. Just because Erhartic was a lousy CEO, it doesn't automatically make Sitestar a zero.
Luckily small shareholders received a huge bailout, because thanks to the efforts of large shareholders Jeff Moore, Steven Kiel and one or two others, value can now be salvaged instead of it continuing to be destroyed by the former CEO.
You have a funny definition of a bailout. But yes, value is being salvaged, it's been salvaged for the benefit of Steve Kiel.
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on September 19, 2016, 02:25:11 PM
Minority Shareholders Deliver Strong Rebuke To Steven Kiel And His Cronies  http://www.inelegantinvestor.com/2016/09/19/minority-shareholders-deliver-strong-rebuke-steven-kiel-cronies/
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on September 19, 2016, 02:26:24 PM
I think shareholders who bought shares when Frank Erhartic was still CEO don't have that much to complain about, really.
So you're saying because Steve Kiel is only slightly worse than Erhartic, investors should be happy with what they've got?
I think many people only became involved in this company after reading Jeff Moore's posts about Sitestar on his blog.
Nonsense. Most people got involved because of the cash flow generated by the internet business.
How many people would even have bothered to look at this company, let alone invest in it, if it were not for those posts on Jeff's blog?
Jeff is a smart fellow and provided insight, no doubt whatsoever, but the company was followed before he got involved.
I think anyone who first invested when Mr. Erhartic was in charge deserves a huge loss on their investment.
This is a ridiculous statement. Just because Erhartic was a lousy CEO, it doesn't automatically make Sitestar a zero.
Luckily small shareholders received a huge bailout, because thanks to the efforts of large shareholders Jeff Moore, Steven Kiel and one or two others, value can now be salvaged instead of it continuing to be destroyed by the former CEO.
You have a funny definition of a bailout. But yes, value is being salvaged, it's been salvaged for the benefit of Steve Kiel.
Jonathan Dash was activist here long before Kiel, et. al.
Title: Re: SYTE - Sitestar
Post by: Ballinvarosig Investors on September 19, 2016, 02:35:07 PM
+1.  These situations are so fluid and have many moving parts. Thus far, I don't see much for original SYTE shareholders to be unhappy about...
Are you just replying for the sake of it? If you had followed this situation, you'd know that Inelegant Investor has a significant shareholding of the company and has been blogging about Sitestar for years. You think it's ok that large shareholders should club together to dilute other vocal and minority shareholders like II in order to benefit themselves?
Title: Re: SYTE - Sitestar
Post by: Max Alpha on September 19, 2016, 03:52:15 PM
What a circus.

The value investing community love throwing stones about shareholder representation and ethics from the outside but once a pot of gold is in sight the average value investor has the same motivations of greed as any other.

This nonsense about a satisfactory end justifying questionable means is the same backwards thinking that prevents people like Biglari from being held to account.
Title: Re: SYTE - Sitestar
Post by: KJP on September 19, 2016, 04:35:41 PM
So beyond all of the obvious problems, no ownership of the GP? Just passive investment as LPs, paying the manager a fee?  Apparently by "asset management business" SYTE means that it will be paying fees to asset managers.

Although Sitestar isn't getting an equity stake in the GP, it is getting a portion of the management fees generated by the fund, according to a letter that Alluvial sent to its clients.
Title: Re: SYTE - Sitestar
Post by: stahleyp on September 19, 2016, 04:37:25 PM
I've not kept up with this a lot but if they seeded with $10 million and got no ownership stake that is wild. I believe even MKL got a piece of good haven (granted it was a mutual fund and not a hedge fund but still) when they helped seed them.
Title: Re: SYTE - Sitestar
Post by: NeverLoseMoney on September 19, 2016, 04:44:33 PM
I think shareholders who bought shares when Frank Erhartic was still CEO don't have that much to complain about, really.
So you're saying because Steve Kiel is only slightly worse than Erhartic, investors should be happy with what they've got?
I'm saying those early investors mainly have themselves to blame if they do feel unhappy today. I'm certainly not saying Steven Kiel is worse than Frank Erhartic.
I think many people only became involved in this company after reading Jeff Moore's posts about Sitestar on his blog.
Nonsense. Most people got involved because of the cash flow generated by the internet business.
How many people would even have bothered to look at this company, let alone invest in it, if it were not for those posts on Jeff's blog?
Jeff is a smart fellow and provided insight, no doubt whatsoever, but the company was followed before he got involved.
Fair enough. I don't know what moved people to invest in Sitestar. My impression is that those posts by Jeff gave at least some investors the feeling that they got to know Frank Erhartic and that this feeling gave them increased confidence in the investment. If so, they were very wrong.
I think anyone who first invested when Mr. Erhartic was in charge deserves a huge loss on their investment.
This is a ridiculous statement. Just because Erhartic was a lousy CEO, it doesn't automatically make Sitestar a zero.
I didn't say "a zero". I am saying that if you invest in a company where the CEO has a large stake in the business and he engages in the kinds of acts that are being described in the lawsuit, then you're going to get a terrible result if that CEO keeps running the show for many years. So activist intervention was required to salvage the situation. If people aren't happy with the activists that turned up and what they did subsequently, than that means that they shouldn't have invested in a company that required intervention. I think investors should own up to their mistakes. We all make them. The only question that matters after making one is: what could I have done differently? I just see a lot of finger-pointing, but no people that admit they got it wrong by investing in this company when Mr. Erhartic was the CEO.
Luckily small shareholders received a huge bailout, because thanks to the efforts of large shareholders Jeff Moore, Steven Kiel and one or two others, value can now be salvaged instead of it continuing to be destroyed by the former CEO.
You have a funny definition of a bailout. But yes, value is being salvaged, it's been salvaged for the benefit of Steve Kiel.
My impression of Steven Kiel is different than yours, but I could be wrong. Other investors don't seem to see things as negatively yet, the stock hasn't declined much after today's news. I would have expected at least some large shareholders to be selling strongly, judged by the posts of some large holders in this thread.
Title: Re: SYTE - Sitestar
Post by: ScottHall on September 19, 2016, 05:43:34 PM
If you guys have a problem with what they're doing, maybe you should put up or shut up. Complaining isn't going to solve any of the perceived problems.

No position.
Title: Re: SYTE - Sitestar
Post by: TBW on September 19, 2016, 05:47:07 PM
I don't think people are thinking about this dilution correctly.  Sure your ownership percentage is less but given that the cash is coming to the company your asset base is a lot higher.

For example even at the really low price of 0.048 your dilution in my estimation is only ~10%.  The previous raise was more like 20%.  So to keep it simple call it 30% all-in.  These guys have tracks records in the 20% annual return range so if you ascribe any value to that  (which you certainly don't have to) say a dollar raised this year makes a 20% return and discount it back at a rate of 10% to today, that would add back ~9%.  So you are looking at dilution in the range of 20 to 30%.  I am not sure that is as terrible as everyone seems to think.  If one looks at the high stock price of .08 (not that many shares actually changed hands there) it's only down 14% from there.  So unless a seller is motivated the mkts appear to be seeing this the way I am.

Initially I too really did not like the price, the mechanism to raise capital and also did not understand the quorum issue.  I emailed management, they responded immediately and after a discussion I really think they are doing the right thing given the situation at hand.  I strongly urge you to reach out and I would be surprised if you didn't think so too after speaking to them.

I personally think management is doing some impressive things.  I did not know them prior to meeting them today at the meeting and came away very impressed.

I think if one was to take issue with their strategies or future plans for the company that is fine as everyone looks at business opportunities differently and everyone is entitled to their opinions.  However taking issue with the character of management given the capital raises is misguided until you hear the whole story.
Title: Re: SYTE - Sitestar
Post by: matts on September 19, 2016, 06:10:04 PM
I don't think people are thinking about this dilution correctly.  Sure your ownership percentage is less but given that the cash is coming to the company your asset base is a lot higher.

For example even at the really low price of 0.048 your dilution in my estimation is only ~10%.  The previous raise was more like 20%.  So to keep it simple call it 30% all-in.  These guys have tracks records in the 20% annual return range so if you ascribe any value to that  (which you certainly don't have to) say a dollar raised this year makes a 20% return and discount it back at a rate of 10% to today, that would add back ~9%.  So you are looking at dilution in the range of 20 to 30%.  I am not sure that is as terrible as everyone seems to think.  If one looks at the high stock price of .08 (not that many shares actually changed hands there) it's only down 14% from there.  So unless a seller is motivated the mkts appear to be seeing this the way I am.

Initially I too really did not like the price, the mechanism to raise capital and also did not understand the quorum issue.  I emailed management, they responded immediately and after a discussion I really think they are doing the right thing given the situation at hand.  I strongly urge you to reach out and I would be surprised if you didn't think so too after speaking to them.

I personally think management is doing some impressive things.  I did not know them prior to meeting them today at the meeting and came away very impressed.

I think if one was to take issue with their strategies or future plans for the company that is fine as everyone looks at business opportunities differently and everyone is entitled to their opinions.  However taking issue with the character of management given the capital raises is misguided until you hear the whole story.

OK, so can you fill us in then?
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on September 19, 2016, 06:18:42 PM
If you guys have a problem with what they're doing, maybe you should put up or shut up. Complaining isn't going to solve any of the perceived problems.

No position.
How would you suggest we go about "putting up"?
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on September 19, 2016, 06:21:35 PM
I don't think people are thinking about this dilution correctly.  Sure your ownership percentage is less but given that the cash is coming to the company your asset base is a lot higher.

For example even at the really low price of 0.048 your dilution in my estimation is only ~10%.  The previous raise was more like 20%.  So to keep it simple call it 30% all-in.  These guys have tracks records in the 20% annual return range so if you ascribe any value to that  (which you certainly don't have to) say a dollar raised this year makes a 20% return and discount it back at a rate of 10% to today, that would add back ~9%.  So you are looking at dilution in the range of 20 to 30%.  I am not sure that is as terrible as everyone seems to think.  If one looks at the high stock price of .08 (not that many shares actually changed hands there) it's only down 14% from there.  So unless a seller is motivated the mkts appear to be seeing this the way I am.

Initially I too really did not like the price, the mechanism to raise capital and also did not understand the quorum issue.  I emailed management, they responded immediately and after a discussion I really think they are doing the right thing given the situation at hand.  I strongly urge you to reach out and I would be surprised if you didn't think so too after speaking to them.

I personally think management is doing some impressive things.  I did not know them prior to meeting them today at the meeting and came away very impressed.

I think if one was to take issue with their strategies or future plans for the company that is fine as everyone looks at business opportunities differently and everyone is entitled to their opinions.  However taking issue with the character of management given the capital raises is misguided until you hear the whole story.
Yes my asset value was not fully diluted, but my voting rights were.  I have emailed management and have generally gotten no response. I believe I have heard the whole story. If there is more to it, by all means, share it.
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on September 19, 2016, 06:23:30 PM
What a circus.

The value investing community love throwing stones about shareholder representation and ethics from the outside but once a pot of gold is in sight the average value investor has the same motivations of greed as any other.

This nonsense about a satisfactory end justifying questionable means is the same backwards thinking that prevents people like Biglari from being held to account.
Biglari is an apt comparison. How long before the company changes its name to Kiel Holdings?
Title: Re: SYTE - Sitestar
Post by: Spekulatius on September 19, 2016, 06:54:54 PM
This is an Animal Farm and we know who the pigs are.
Title: Re: SYTE - Sitestar
Post by: rkbabang on September 19, 2016, 07:32:42 PM
What a circus.

The value investing community love throwing stones about shareholder representation and ethics from the outside but once a pot of gold is in sight the average value investor has the same motivations of greed as any other.

This nonsense about a satisfactory end justifying questionable means is the same backwards thinking that prevents people like Biglari from being held to account.

+1
It's always so easy to justify it to yourself. "It's okay when I do it"
:(
Title: Re: SYTE - Sitestar
Post by: IceCreamMan on September 19, 2016, 10:43:32 PM
I took notes at the meeting yesterday and am posting them below.

Steve Kiel did most of the talking. I missed his opening comments and then he introduced the rest of the board of directors.

He announced that a press release had gone out at 10:30 and read it aloud. It announced a seed investment with Dave Waters' Alluvial Capital.

The rest of the meeting was in the Q and A format.

With the HVAC fund, they're targeting pre-tax ROE of 25% in year 1. This is after the profit share agreement.
Nathan Reid (HVAC) hired a COO.
Steve met Nathan met 6-7 years ago at a Berkshire meeting. Nathan discussed the HVAC idea at this year's Markel breakfast.

Steve said that Sitestar will share in the revenue stream of Alluvial.

With regard to Alluvial, Sitestar must consider 40 Act requirements, which limit investment securities to 40% of assets.

All prior goodwill was attributed to the internet business. Going forward, it will probably be attributed to the HVAC business.

They are continuing to cut costs in the internet business. There was a tiny increase in revenue from Q1 to Q2. There shouldn't be seasonality in the business.

There was a question about why additional domain names were purchased. Steve said that it was to keep the business of customers using e-mail addresses on domains that Sitestar didn't own.
The highest margin revenue is dial-up and e-mail addresses. I think he said that 75-80% margin is typical for dial-up and storage.
first.com is on the books for $200k and Sitestar has received offers above $200k, but they are hoping for more.

DSL and fiber are lower margin, but Sitestar may get revenue growth from these services.

Managers such as Nathan and Dave make their own decisions. Steve is responsible for making decisions on securities in the investment portfolio at the corporate level. Approval for subsidiaries is at the board level.

A question came about the pricing of the capital raise. Steve said that some things about the private placement can't be discussed. The company was not close to reaching a quorum. The SEC would not have approved a rights offering, which requires an S-1 filing. They had met zero out of the five requirements to issue shares electronically. (It sounded like he thought they would eventually meet those requirements.) He said that there would not have been interest from investors at a price above book value after considering the illiquidity and frictional costs of the unregistered shares.

Question about capital structure and leverage. Earn-outs are on the balance sheet as borrowings. Basically, none of the segments use debt. The plan in the future is "to be determined." Sitestar currently has the ability to issue preferred, but it is unlikely to do so because the market would demand interest rates that are too high. The new CFO will go to banks to ask about borrowing against the company's rental properties and see what loans are available.

Question about corporate expenses run rate. Q2 was "out of control." He wants the company "as lean as possible" but "run like a public company" (I think with regard to audit and filing expenses). The company hired a consultant to advise on internal controls. The new CFO can do some of the accounting work that was outsourced.

Question about how the company will use the HVAC cash flows. Steve hopes to reinvest them. Investment opportunities are good because sellers of HVAC companies are limited in their choices of buyers.

Compared to when he joined the company, Steve is more optimistic about the internet business and less optimistic about the real estate.

Question about return hurdles or targets for investment securities portfolio. Steve avoids these because he thinks that they could change and feels that investing is more of an art than a science.
Question about conflict of interest from managing outside money in addition to Sitestar's portfolio. He says that Sitestar's portfolio currently consists of two holdings that are highly liquid and low risk, and therefore would not be suitable holdings for any of the outside partnerships that are being managed. Policies will be put into place for the board of directors to prevent conflicts of interest.

Question about performing shareholder activism on stock holdings. He wants Sitestar to be known for solving problems. Maybe provide resources along with investments. But not a white knight like Berkshire. Sometimes there will be opportunities to help investee companies. He sees optionality in buying private companies.

Steve says he aspires to the "Outsiders" companies: centralized capital allocation, decentralized operations, and a familial culture.

I got the impression that Sitestar's management team isn't allowed to solicit for the newly announced private placement. If you're interested in participating, it may be a good idea to contact management for further information.
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on September 20, 2016, 06:38:46 AM
I took notes at the meeting yesterday and am posting them below.

A question came about the pricing of the capital raise. Steve said that some things about the private placement can't be discussed. The company was not close to reaching a quorum. The SEC would not have approved a rights offering, which requires an S-1 filing. They had met zero out of the five requirements to issue shares electronically. (It sounded like he thought they would eventually meet those requirements.) He said that there would not have been interest from investors at a price above book value after considering the illiquidity and frictional costs of the unregistered shares.


Thanks for the notes. The repeated claim by Mr. Kiel that there would not have been interest at a higher price is dubious. As it is, the vast majority of the placement was taken up by Kiel through Arquitos and Santa Monica Partners. How was this conflict cleared to arrive at a fair value and avoid self-dealing?
Title: Re: SYTE - Sitestar
Post by: roark33 on September 20, 2016, 08:41:24 AM
My legal background tells that not being "allowed" to disclose details of an already completed private placement is complete BS. 

Title: Re: SYTE - Sitestar
Post by: LR1400 on September 20, 2016, 11:36:29 AM
What total size are they talking about for the HVAC rollup?
Title: Re: SYTE - Sitestar
Post by: Poor Charlie on September 20, 2016, 12:08:09 PM
So beyond all of the obvious problems, no ownership of the GP? Just passive investment as LPs, paying the manager a fee?  Apparently by "asset management business" SYTE means that it will be paying fees to asset managers.

Although Sitestar isn't getting an equity stake in the GP, it is getting a portion of the management fees generated by the fund, according to a letter that Alluvial sent to its clients.

Was this information in one of the Alluvial quarterly reports?  I'm curious if it's a percent of revenues or percent of profits?  Also curious to know the total amount of capital they're looking to raise and what the incentive fee arrangement would look like?  Thanks!
Title: Re: SYTE - Sitestar
Post by: KJP on September 20, 2016, 12:17:58 PM
So beyond all of the obvious problems, no ownership of the GP? Just passive investment as LPs, paying the manager a fee?  Apparently by "asset management business" SYTE means that it will be paying fees to asset managers.

Although Sitestar isn't getting an equity stake in the GP, it is getting a portion of the management fees generated by the fund, according to a letter that Alluvial sent to its clients.

Was this information in one of the Alluvial quarterly reports?  I'm curious if it's a percent of revenues or percent of profits?  Also curious to know the total amount of capital they're looking to raise and what the incentive fee arrangement would look like?  Thanks!

The information was in a letter to clients sent out yesterday.  The letter provided no additional information on the issues you mentioned.
Title: Re: SYTE - Sitestar
Post by: Sunrider on September 20, 2016, 12:56:22 PM
A somewhat simple question on the dilution point - there are 100 shares and the book value is $100, assume all in cash. Management raises new funds to invest in [hedge fund] or [toilets] or [mars greenhouses]. The total size is 1000 shares for $1000.

Effect immediately after:

1100 shares with cash book value (=equity value) of $1100.

No dilution - but of course investing that cash into [] may or may not be a good use of funds.

... just wondered why people complain about 'dilution' for the Alluvial raise - shares get issued for cash, which accrues to equity value, so that's not really dilution, no?

Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on September 20, 2016, 01:02:38 PM
A somewhat simple question on the dilution point - there are 100 shares and the book value is $100, assume all in cash. Management raises new funds to invest in [hedge fund] or [toilets] or [mars greenhouses]. The total size is 1000 shares for $1000.

Effect immediately after:

1100 shares with cash book value (=equity value) of $1100.

No dilution - but of course investing that cash into [] may or may not be a good use of funds.

... just wondered why people complain about 'dilution' for the Alluvial raise - shares get issued for cash, which accrues to equity value, so that's not really dilution, no?


Perhaps I'm being imprecise but I've been referring to dilution of my voting power, which has been quite significant.
Title: Re: SYTE - Sitestar
Post by: Tim Eriksen on September 20, 2016, 01:23:31 PM
A somewhat simple question on the dilution point - there are 100 shares and the book value is $100, assume all in cash. Management raises new funds to invest in [hedge fund] or [toilets] or [mars greenhouses]. The total size is 1000 shares for $1000.

Effect immediately after:

1100 shares with cash book value (=equity value) of $1100.

No dilution - but of course investing that cash into [] may or may not be a good use of funds.

... just wondered why people complain about 'dilution' for the Alluvial raise - shares get issued for cash, which accrues to equity value, so that's not really dilution, no?

In the case of all cash you are correct.  There is no dilution.  The reason that there is no dilution is not that the issuance is at book value, it is that intrinsic value and book value are "identical" in your scenario.  That is rarely the case.  If you believe intrinsic value is substantially higher than book value you will believe you are being diluted.  The challenge with Sitestar is what is/was intrinsic value as a going concern?  What is/was it in liquidation?  What is it after the HVAC deal?  What is it after the Alluvial deal?     
Title: Re: SYTE - Sitestar
Post by: Sunrider on September 20, 2016, 11:37:29 PM
Agree with one caveat - pre Alluvial BV matters, not value after, which is contingent on the raise. Also straight after the raise, the company has not economically diluted shareholders, provided it issues at BV and BV is appropriate. The decision as to what to do with the cash raised is a secondary matter.

I do agree, by the way, with the notions expressed here that the private placement doesn't just smell fishy (including justifications provided) but stinks.

C.


A somewhat simple question on the dilution point - there are 100 shares and the book value is $100, assume all in cash. Management raises new funds to invest in [hedge fund] or [toilets] or [mars greenhouses]. The total size is 1000 shares for $1000.

Effect immediately after:

1100 shares with cash book value (=equity value) of $1100.

No dilution - but of course investing that cash into [] may or may not be a good use of funds.

... just wondered why people complain about 'dilution' for the Alluvial raise - shares get issued for cash, which accrues to equity value, so that's not really dilution, no?

In the case of all cash you are correct.  There is no dilution.  The reason that there is no dilution is not that the issuance is at book value, it is that intrinsic value and book value are "identical" in your scenario.  That is rarely the case.  If you believe intrinsic value is substantially higher than book value you will believe you are being diluted.  The challenge with Sitestar is what is/was intrinsic value as a going concern?  What is/was it in liquidation?  What is it after the HVAC deal?  What is it after the Alluvial deal?     
Title: Re: SYTE - Sitestar
Post by: hillfronter83 on September 21, 2016, 07:00:04 AM
The whole market cap of Sitestar is only a few millions. I found it hard to believe people, especially successful aspiring money managers, would risk their reputation for such amount. While I understand why minority holders are frustrated with lack of transparency, I would give them the benefit of doubt given some respected people from this board are involved such as Keith, Dave, etc.
Title: Re: SYTE - Sitestar
Post by: Foreign Tuffett on September 22, 2016, 01:17:03 AM
Is part of the shareholder unhappiness that what was originally thought of as a value investment has turned into something more reminiscent of a venture capital fund?

Disclosure: I have never held a position in this and don't plan to.
Title: Re: SYTE - Sitestar
Post by: Spekulatius on September 22, 2016, 03:50:40 AM
Is part of the shareholder unhappiness that what was originally thought of as a value investment has turned into something more reminiscent of a venture capital fund?

Disclosure: I have never held a position in this and don't plan to.

Yes, that is how I see it. The direction of the company was completely changed (scope of business, capital raises) and with none of the changes, existing minority shareholders had a say. That's said, those that don't like it, can exit their position at a fair price (imo) right now.

FWIW, I don't own this (never did), nor do I plan to.
Title: Re: SYTE - Sitestar
Post by: andgroup on September 27, 2016, 05:40:56 PM
I have just gotten a chance to sit down and read thru all of these messages.  I have a few things to say.

1.) I invested in this stock after I found out that Steven Kiel was getting involved, I have followed him for 3-4 years now.
2.) If I only thought the stock would go from 4.8 cents per share to 6.6 cents per share, I would have never purchased it to begin with.
3.) Here you have a man who has brought tremendous resources to bare in cleaning everything up, and installing control systems, and preparing this company for the future.
4.) You now have an operator with a tremendous track record.
5.) You have his word that he will not invest in these private companies unless he can see more potential in them than in public markets, and his track record prior to this investment operation was phenomenal.
6.) You have a tremendous amount of capital being attracted to this company relative to what it was just a few months back.

If you do consider this to be your company, as I do, I cannot for the life of me see why you would be anything but grateful that the stagnant asset you held continues to mushroom in future potential.

If you are that concerned about the 4.8 cents to the 6.6 cents differential, you are probably not a long term investor and not suited for this stock anyways.

My opinion is that Steven Kiel honestly believed he could not do the things he needed to do for the company without making a huge statement about who the new sheriff in town was - both to current shareholders and to the former CEO, and he might have even been struggling with a bit of insecurity in the sense that he did not want to take any chances of losing control over something he has put so much effort into (without pay no less), especially if it is going to be a vehicle into which he will be depositing some of his best ideas.

At this juncture, I personally believe that the company and its expanding assets are in excellent hands, and further, I believe that Steven knows very well, that if he should permanently lose his reputational advantage (which may have taken a small hit here in the beginning -- but I believe will be fully regained in time), that he will lose far more in the long run, than any temporary advantages that strategy would grant him in the short run.

I believe this because after my interactions with Steven, I do not regard him to be a small minded, short term, range of the moment thinker.  I believe he has a much larger vision in mind for this company, and I am glad to be a part.

For the record Buffett completely changed the scope and direction of Berkshire Hathaway as well, and I don't see many people who started with him in the beginning who are bitching now.

"I have yet to find the man, however exalted his station, who did not do better work and put forth greater effort under a spirit of approval than under a spirit of criticism."   --- Charles Schwab

Sincerely,
John Woods
Title: Re: SYTE - Sitestar
Post by: LR1400 on September 27, 2016, 09:11:30 PM
I like the idea of freeing up capital and moving it toward seemingly higher value assets/companies. I am still curious as to why they chose HVAC.

Not a shareholder, but learning a lot and would like to follow some of this path in the future. The dilution item is still troubling even if it does erode value per share.

They seem Iike good people who may have taken slight advantage of shareholders for their own benefit.
Title: Re: SYTE - Sitestar
Post by: andgroup on September 28, 2016, 07:00:12 AM
Right.  But here is the thing.  Steven is not just freeing up capital and moving towards higher value assets, that's one part of it to be sure. 

He is also adding additional capital itself into the mix, and on top of that he is locking in some tremendous brain power who now have skin in the game, and doing it at a reasonable price point which basically puts a floor under the stock, and will be used to our advantage going forward.

So you are either in one of two camps.

1.) You believe that Steven Kiel and his group are a bunch of crooks who took over a 3-4 million dollar company, put tons of time and resources into cleaning everything up and building a solid platform for future growth, and then added another 4 million, and now another 10 million in capital to this operation, just so he could figure out how to retroactively screw you out of a small slice of your original buy in at the 3-4 million dollar price level.

or

2.) You believe that Steven Kiel and his group took over a company, made substantial investments of time and resources and capital without drawing a salary and added a ton of brain power to the operational side and the capital allocation side, because he actually believes that they can do what they love to do, which is to compound money at a high rate of return for many years to come.

And to be honest... I remember that when I first bought into this deal, that I was worried that Steven's fund only owned 4-6% of the company, because it would be so easy for him to get frustrated, call it quits, and leave.  So the increase in his share of the company actually made me feel much safer, and showed a much higher degree of commitment to the future of this company than I had originally anticipated, and probably is one of the reasons that there has not been much volatility in the stock price.

So my message to Steven is that I trust your judgement, ignore the critics, and focus on what you are there to do, which is to compound money, using whatever vehicle you think gives us the best risk/reward profile.

Thanks,
John Woods
Title: Re: SYTE - Sitestar
Post by: LR1400 on September 28, 2016, 07:37:24 AM
Right.  But here is the thing.  Steven is not just freeing up capital and moving towards higher value assets, that's one part of it to be sure. 

He is also adding additional capital itself into the mix, and on top of that he is locking in some tremendous brain power who now have skin in the game, and doing it at a reasonable price point which basically puts a floor under the stock, and will be used to our advantage going forward.

So you are either in one of two camps.

1.) You believe that Steven Kiel and his group are a bunch of crooks who took over a 3-4 million dollar company, put tons of time and resources into cleaning everything up and building a solid platform for future growth, and then added another 4 million, and now another 10 million in capital to this operation, just so he could figure out how to retroactively screw you out of a small slice of your original buy in at the 3-4 million dollar price level.

or

2.) You believe that Steven Kiel and his group took over a company, made substantial investments of time and resources and capital without drawing a salary and added a ton of brain power to the operational side and the capital allocation side, because he actually believes that they can do what they love to do, which is to compound money at a high rate of return for many years to come.

And to be honest... I remember that when I first bought into this deal, that I was worried that Steven's fund only owned 4-6% of the company, because it would be so easy for him to get frustrated, call it quits, and leave.  So the increase in his share of the company actually made me feel much safer, and showed a much higher degree of commitment to the future of this company than I had originally anticipated, and probably is one of the reasons that there has not been much volatility in the stock price.

So my message to Steven is that I trust your judgement, ignore the critics, and focus on what you are there to do, which is to compound money, using whatever vehicle you think gives us the best risk/reward profile.

Thanks,
John Woods

He's probably a decent guy that should've handled the rights offering differently. It makes sense that you feel safer with him having more skin in the game, he also has a relatively low risk opportunity to dramatically increase his net worth. I would forego a salary for that opportunity as well.

I personally don't put too much weight into brain power in mature industries. Certainly poor brain power can cause problems, however, great brain power in mature industries rarely makes much difference in my experience, meaning it won't lead to out-sized returns alone.
Title: Re: SYTE - Sitestar
Post by: andgroup on September 28, 2016, 07:51:47 AM
I agree with your comment that brain power in mature industries tends not to add much value.  Where I trust Steven is in this regard, that he has said that he would not commit capital unless he believed there was a chance for higher returns than he had been able to generate in the public markets.

So he has obviously seen something in this space that has convinced him that he can achieve high returns here, or at least that he cannot find better returns elsewhere that promise safety of capital.  None of this means that he will be right, but his judgement has been very solid in the past, and I think the bar has got to be pretty high for him to believe in something enough to commit capital.  He's human, he will make mistakes from time to time.

But based on all the information I can gather, I just happen to hold the view that he will be right more often than he is wrong.
Title: Re: SYTE - Sitestar
Post by: Jurgis on September 28, 2016, 08:23:48 AM
I should probably not post here, since I have no interest in SYTE (anymore). And I may remove this message in 10... 9...

In the meantime though, I don't see what's to be excited about. So a bunch of smart guys take over SYTE and the best idea they have is ... drumroll ... dilute and invest into a new hedge fund. I thought these are smart guys who are running their own hedge funds. If they wanted invest in stocks, why did they not invest in stocks directly from SYTE? If they have no good ideas where to invest money, then why do they believe that hiring another hedgie is a solution? Overall, what's the point of a structure where hedge fund invests in SYTE which in turn invests into another hedge fund that invests into some stocks? I guess it would look worse if their hedge fund would invest directly into another hedge fund - that would be admission that they don't have ideas themselves, no?

To make this post somewhat relevant, I've seen these gymnastics in other places that won't be named (apart from SYTE I'll criticize by category like Buffett ;)) and I haven't seen this lead to great results. IMO every layer added usually means worse results.
Title: Re: SYTE - Sitestar
Post by: andgroup on September 28, 2016, 08:44:58 AM
You mean like the gymnastics that Buffett and Munger pulled by using Blue Chip Stamps to acquire See's Candy, or buy up shares in Wesco?  Or the numerous other deals they did like that?  Yeah, you're right, that didn't work out too well.
Title: Re: SYTE - Sitestar
Post by: Ballinvarosig Investors on September 28, 2016, 09:14:00 AM
Finally sold out, so this will be the last comment from me unless Sitestar somehow becomes attractive again.

Firstly, when I bought my shares several years ago, the stock price was below the sum of the parts valuation. When the likes of Jeff Moore got involved I thought finally there were enough shareholders behind the thing that we could see full value of the company unlocked. At that point, no one suspected how bad things were at the top, let alone that management needed to be booted out. Needless to say, I was fine with this, and hoped that with shareholders running the company, they would do their best to maximise shareholder value (I assumed the company would be liquidated, or run as a going concern). At no point did I even consider what would happen next. I guess it's at this point, my thoughts diverged with those of management. Whatever you say about the investment properties, or the internet business, at least you could get a handle on the value of these things. The same cannot be said of Alluvial's hedge fund, or the HVAC value fund that Sitestar have gotten into. For me, these vehicles are too opaque, there is no transparency with them whatsoever (what exactly are we invested in here, what is the fee structure, etc.). Perhaps these are great opportunities, perhaps Steve Kiel is a great guy, we have to take their word for it. As a fiduciary, I feel I just can't take that chance. Especially when I look at what happened to SED Intl, Steak and Shake, Chanticleer, etc. I've learned having a value guy at the helm hasn't been a guarantee that delivers the best outcome for shareholders. That is why I am out.
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on September 28, 2016, 11:23:53 AM
All of you who are making excuses are missing the point. Steven Kiel may be the greatest investor ever. He may be making choices that will ultimately enrich holders of Sitestar. That is irrelevant- the ends do not justify the means. He said one thing before he was in control and did the opposite when he was.  He and his handpicked Board voted themselves the right to buy a huge number of shares at below market and below intrinsic value, with no independent oversight. Others were not allowed to participate. There is a massive conflict of interest here. 

The posts speculating about Kiel's "insecurity" and such are laughable ex post facto justifications of actions that were clearly and undeniably unethical. People who behave unethically typically do not do so only once.

Title: Re: SYTE - Sitestar
Post by: andgroup on September 28, 2016, 12:11:49 PM
I'm not missing your point, I just choose not to place as much weight on your point as you do.

Some people hold principled philosophies and some people hold pragmatic philosophies and some people hold a mixture.

Investing is a probabilistic endeavor and when I place myself in Steven's shoes I can think of many reasons that he could have made the choices he did and still felt like he wasn't being unethical at all.

The volume on that stock averages what 50,000 shares per day at .06 cents per share that is 3,000 dollars per day?  Could he have raised the money he needed (3-4 million) to do these next deals by dumping those shares on the open market?  Or would that have collapsed the stock price due to a lack of demand for the shares?  Would that be fair to current shareholders or to the people in his fund? 

So he placed the shares in bulk with lockup provisions. He raised needed capital without crashing the stock price and boxed out the former CEO.  Acquired more capital to do even larger deals. Probably gave other larger investors confidence to invest even more capital because he is firmly in control now.

If you are going to be waiting around to find anyone on this planet who has zero perceptions against them of being unethical before you invest. You might want to upgrade the size of your mattress.

I personally do not believe that it follows, that just because us smaller shareholders got clipped a bit while he was trying to locate the right structure that this automatically means Steven Kiel is unethical or dishonest.

If you want to make the private placement your own grandstanding issue that's fine. Sell. I could be wrong, but I do not agree with you.
Title: Re: SYTE - Sitestar
Post by: frugalchief on October 01, 2016, 12:09:34 PM
I like the idea of freeing up capital and moving it toward seemingly higher value assets/companies. I am still curious as to why they chose HVAC.

Not a shareholder, but learning a lot and would like to follow some of this path in the future. The dilution item is still troubling even if it does erode value per share.

They seem Iike good people who may have taken slight advantage of shareholders for their own benefit.

I'm not a shareholder...actually just came across the company yesterday (forgot where), then found this thread.  I have interest in Sitestar b/c my background follows a lot of their progression....started in real estate investing, brokerage, and property management, then became CFO at a 'mom & pop' HVAC business.  HVAC is a great industry to get into, IMO.  If they are doing it right and not overpaying, it could compound for them greatly.
Title: Re: SYTE - Sitestar
Post by: LR1400 on October 01, 2016, 07:22:32 PM
I like the idea of freeing up capital and moving it toward seemingly higher value assets/companies. I am still curious as to why they chose HVAC.

Not a shareholder, but learning a lot and would like to follow some of this path in the future. The dilution item is still troubling even if it does erode value per share.

They seem Iike good people who may have taken slight advantage of shareholders for their own benefit.

I'm not a shareholder...actually just came across the company yesterday (forgot where), then found this thread.  I have interest in Sitestar b/c my background follows a lot of their progression....started in real estate investing, brokerage, and property management, then became CFO at a 'mom & pop' HVAC business.  HVAC is a great industry to get into, IMO.  If they are doing it right and not overpaying, it could compound for them greatly.

What kind of returns and margins do you see in the HVAC sector?

What size total revenue numbers are these companies typically?
Title: Re: SYTE - Sitestar
Post by: frugalchief on October 03, 2016, 07:54:47 PM
I believe your pre-tax earnings should be 15%-25% of revenue.  We are small, 7.5 employees, will do about $2mm in revenues this year.  Did $1.25mm last year.  We are 3.5 years young, and previous capital allocation was awful, resulting in 0% return, even negative.  (There was no 'business' focus on the business, so things will change)

Most companies I'd guess are doing revenue of $500,000 - $5,000,000.  This industry is a majority of mom & pop companies...lots of single operators, and single operators + helpers...not ran like a business, just provides an income/lifestyle.  Companies with a few technicians (2-5) - probably average $1mm - $5mm.  I believe there are few companies (in the area I live - South Texas) that dominate and probably do $10-25mm, with the largest company maybe doing $50mm.  This is purely a guess, but I see a trend....a mature operation should produce $1mm per technician (It's about what we are doing in our operation).

One thing the biggest players do is add plumbing and electrical services into their HVAC business.  It's a great play - you become THE company to take care of issues in your neighbors homes.  Something that'd be nice for Sitestar to maybe think about to create more value for those customers.

It's a seasonal business.  Summers are tough work, but we can shoot the lights out.  About this time of year it gets tough.  Our worst month (January 2016) was 15% of our best month (July 2016) (**should note, January 16 was an anomaly...I really doubt we'll see that again...our winter months are usually 40-50% of our summer months).  I'd imagine the HVAC business they are building in AZ will follow similar trends.
Title: Re: SYTE - Sitestar
Post by: LR1400 on October 03, 2016, 07:58:30 PM
I believe your pre-tax earnings should be 15%-25% of revenue.  We are small, 7.5 employees, will do about $2mm in revenues this year.  Did $1.25mm last year.  We are 3.5 years young, and previous capital allocation was awful, resulting in 0% return, even negative.  (There was no 'business' focus on the business, so things will change)

Most companies I'd guess are doing revenue of $500,000 - $5,000,000.  This industry is a majority of mom & pop companies...lots of single operators, and single operators + helpers...not ran like a business, just provides an income/lifestyle.  Companies with a few technicians (2-5) - probably average $1mm - $5mm.  I believe there are few companies (in the area I live - South Texas) that dominate and probably do $10-25mm, with the largest company maybe doing $50mm.  This is purely a guess, but I see a trend....a mature operation should produce $1mm per technician (It's about what we are doing in our operation).

One thing the biggest players do is add plumbing and electrical services into their HVAC business.  It's a great play - you become THE company to take care of issues in your neighbors homes.  Something that'd be nice for Sitestar to maybe think about to create more value for those customers.

It's a seasonal business.  Summers are tough work, but we can shoot the lights out.  About this time of year it gets tough.  Our worst month (January 2016) was 15% of our best month (July 2016) (**should note, January 16 was an anomaly...I really doubt we'll see that again...our winter months are usually 40-50% of our summer months).  I'd imagine the HVAC business they are building in AZ will follow similar trends.

Great info! Thanks!

May go after something similar further east.

What are you specifically doing with regard to capital allocation that others a were lot, if you dorm mind me asking?
Title: Re: SYTE - Sitestar
Post by: frugalchief on October 04, 2016, 01:33:41 PM
Right now, the best return I can make on our money is by cutting fixed and variable costs that aren't warranted to returning more value to the company.  That's already quite a bit of savings.  Now we are focusing on building our brand more. Then we will do those add-ons I mentioned.  In our market, the best use of capital is to continue to grab market share.  While results may not be immediate, the potential return is extremely attractive.
Title: Re: SYTE - Sitestar
Post by: jawn619 on October 04, 2016, 02:01:02 PM
Finally sold out, so this will be the last comment from me unless Sitestar somehow becomes attractive again.

Firstly, when I bought my shares several years ago, the stock price was below the sum of the parts valuation. When the likes of Jeff Moore got involved I thought finally there were enough shareholders behind the thing that we could see full value of the company unlocked. At that point, no one suspected how bad things were at the top, let alone that management needed to be booted out. Needless to say, I was fine with this, and hoped that with shareholders running the company, they would do their best to maximise shareholder value (I assumed the company would be liquidated, or run as a going concern). At no point did I even consider what would happen next. I guess it's at this point, my thoughts diverged with those of management. Whatever you say about the investment properties, or the internet business, at least you could get a handle on the value of these things. The same cannot be said of Alluvial's hedge fund, or the HVAC value fund that Sitestar have gotten into. For me, these vehicles are too opaque, there is no transparency with them whatsoever (what exactly are we invested in here, what is the fee structure, etc.). Perhaps these are great opportunities, perhaps Steve Kiel is a great guy, we have to take their word for it. As a fiduciary, I feel I just can't take that chance. Especially when I look at what happened to SED Intl, Steak and Shake, Chanticleer, etc. I've learned having a value guy at the helm hasn't been a guarantee that delivers the best outcome for shareholders. That is why I am out.

+1
Title: Re: SYTE - Sitestar
Post by: globalfinancepartners on October 06, 2016, 08:02:07 AM
https://www.sec.gov/Archives/edgar/data/1096934/000072174816001689/site1005168k.htm
Title: Re: SYTE - Sitestar
Post by: dwy000 on October 06, 2016, 09:41:47 AM
Roll ups of HVAC have been tried a number of times and nobody has cracked the code.  The problem is that they are largely mom and pops who's success is tied to an owner/manager who lives the business.  The customer relationships and employee loyalties are tied largely to that owner.  Once they sell out and move on, those relationships slowly dissipate and die - especially when employees are now reporting to an Area Manager and have to focus on budgeting and targets and other "corporate" metrics.  There are very few synergies with the exception of some systems and purchasing but those tend to take more effort to integrate than they achieve in savings.

Historically the play has been to buy the mom-and-pops at 3x EBITDA with a parent that trades at 5x EBITDA and get the value pop there.  But over time that EBITDA shrinks instead of growing and the whole thing dies slowly.
Title: Re: SYTE - Sitestar
Post by: LowIQinvestor on November 09, 2016, 07:50:32 AM
Sitestar Completes a Private Placement of Common Stock
http://www.otcmarkets.com/stock/SYTE/news/Sitestar-Completes-a-Private-Placement-of-Common-Stock?id=144308&b=y

Title: Re: SYTE - Sitestar
Post by: writser on November 09, 2016, 07:54:46 AM
Respect: this is the perfect day to file that you issue stock way below market prices.
Title: Re: SYTE - Sitestar
Post by: Sunrider on November 09, 2016, 12:54:30 PM
The people participating won't be able to transfer the shares (or sell them easily) for quite a long time.

Respect: this is the perfect day to file that you issue stock way below market prices.
Title: Re: SYTE - Sitestar
Post by: writser on November 09, 2016, 01:17:06 PM
I know. They probably didn't plan it this way :) .
Title: Re: SYTE - Sitestar
Post by: rkbabang on November 16, 2016, 09:59:01 AM
A new 5+% owner.

Sitestar Corp: Eriksen Capital Management Llc Opened Big New Position (http://presstelegraph.com/2016/11/15/filing-to-follow-sitestar-corp-eriksen-capital-management-llc-opened-big-new-position/)

Title: Re: SYTE - Sitestar
Post by: Foreign Tuffett on November 16, 2016, 08:42:05 PM
Roll ups of HVAC have been tried a number of times and nobody has cracked the code.  The problem is that they are largely mom and pops who's success is tied to an owner/manager who lives the business.  The customer relationships and employee loyalties are tied largely to that owner.  Once they sell out and move on, those relationships slowly dissipate and die - especially when employees are now reporting to an Area Manager and have to focus on budgeting and targets and other "corporate" metrics.  There are very few synergies with the exception of some systems and purchasing but those tend to take more effort to integrate than they achieve in savings.

Historically the play has been to buy the mom-and-pops at 3x EBITDA with a parent that trades at 5x EBITDA and get the value pop there.  But over time that EBITDA shrinks instead of growing and the whole thing dies slowly.

Based on my (fairly limited) experience dealing with commercial HVAC companies, I agree with this 100%. The best managed companies are run by owner-operators who have worked in the business for decades and have long term customers built on personal relationships and customer trust in the owner's personal expertise and operational skill. The moat is the owner and without him/her the business would likely wither and die. Although I could very well be wrong, I see a rollup here as an uphill battle.




Title: Re: SYTE - Sitestar
Post by: wachtwoord on November 17, 2016, 01:31:53 AM
Roll ups of HVAC have been tried a number of times and nobody has cracked the code.  The problem is that they are largely mom and pops who's success is tied to an owner/manager who lives the business.  The customer relationships and employee loyalties are tied largely to that owner.  Once they sell out and move on, those relationships slowly dissipate and die - especially when employees are now reporting to an Area Manager and have to focus on budgeting and targets and other "corporate" metrics.  There are very few synergies with the exception of some systems and purchasing but those tend to take more effort to integrate than they achieve in savings.

Historically the play has been to buy the mom-and-pops at 3x EBITDA with a parent that trades at 5x EBITDA and get the value pop there.  But over time that EBITDA shrinks instead of growing and the whole thing dies slowly.

Based on my (fairly limited) experience dealing with commercial HVAC companies, I agree with this 100%. The best managed companies are run by owner-operators who have worked in the business for decades and have long term customers built on personal relationships and customer trust in the owner's personal expertise and operational skill. The moat is the owner and without him/her the business would likely wither and die. Although I could very well be wrong, I see a rollup here as an uphill battle.

So theoretically organizing it as BRK is organized stands a chance of succeeding (set of wholly owned businesses, with their original owner operators in-place, with mandate and with equity in the holding company). Excluding insurance of course.
Title: Re: SYTE - Sitestar
Post by: Spekulatius on November 17, 2016, 04:06:12 AM
Roll ups of HVAC have been tried a number of times and nobody has cracked the code.  The problem is that they are largely mom and pops who's success is tied to an owner/manager who lives the business.  The customer relationships and employee loyalties are tied largely to that owner.  Once they sell out and move on, those relationships slowly dissipate and die - especially when employees are now reporting to an Area Manager and have to focus on budgeting and targets and other "corporate" metrics.  There are very few synergies with the exception of some systems and purchasing but those tend to take more effort to integrate than they achieve in savings.

Historically the play has been to buy the mom-and-pops at 3x EBITDA with a parent that trades at 5x EBITDA and get the value pop there.  But over time that EBITDA shrinks instead of growing and the whole thing dies slowly.

Based on my (fairly limited) experience dealing with commercial HVAC companies, I agree with this 100%. The best managed companies are run by owner-operators who have worked in the business for decades and have long term customers built on personal relationships and customer trust in the owner's personal expertise and operational skill. The moat is the owner and without him/her the business would likely wither and die. Although I could very well be wrong, I see a rollup here as an uphill battle.

So theoretically organizing it as BRK is organized stands a chance of succeeding (set of wholly owned businesses, with their original owner operators in-place, with mandate and with equity in the holding company). Excluding insurance of course.

Why would an owner work for somebody else after they sell out? I imagine they would no sell in the first place, unless there is an issue with the business or a special personal situation.
Title: Re: SYTE - Sitestar
Post by: wachtwoord on November 17, 2016, 04:37:30 AM
Roll ups of HVAC have been tried a number of times and nobody has cracked the code.  The problem is that they are largely mom and pops who's success is tied to an owner/manager who lives the business.  The customer relationships and employee loyalties are tied largely to that owner.  Once they sell out and move on, those relationships slowly dissipate and die - especially when employees are now reporting to an Area Manager and have to focus on budgeting and targets and other "corporate" metrics.  There are very few synergies with the exception of some systems and purchasing but those tend to take more effort to integrate than they achieve in savings.

Historically the play has been to buy the mom-and-pops at 3x EBITDA with a parent that trades at 5x EBITDA and get the value pop there.  But over time that EBITDA shrinks instead of growing and the whole thing dies slowly.

Based on my (fairly limited) experience dealing with commercial HVAC companies, I agree with this 100%. The best managed companies are run by owner-operators who have worked in the business for decades and have long term customers built on personal relationships and customer trust in the owner's personal expertise and operational skill. The moat is the owner and without him/her the business would likely wither and die. Although I could very well be wrong, I see a rollup here as an uphill battle.

So theoretically organizing it as BRK is organized stands a chance of succeeding (set of wholly owned businesses, with their original owner operators in-place, with mandate and with equity in the holding company). Excluding insurance of course.

Why would an owner work for somebody else after they sell out? I imagine they would no sell in the first place, unless there is an issue with the business or a special personal situation.

Because they hold equity in the holding? This will lower their variance (but of course also lower their reward from their own work). This is why owner operators stay on when BRK acquires them I imagine.
Title: Re: SYTE - Sitestar
Post by: rkbabang on January 06, 2017, 05:32:03 AM
FYI, I just noticed they have a corporate website.  I'm not sure how long this has existed, so maybe it is old news to some of you.

http://sitestarcorp.com/

Title: Re: SYTE - Sitestar
Post by: fareastwarriors on January 06, 2017, 08:51:43 AM
I didn't realize Packer was on the Board...
Title: Re: SYTE - Sitestar
Post by: globalfinancepartners on January 30, 2017, 06:49:56 AM
Real Estate Investment announced -
https://www.sec.gov/Archives/edgar/data/1096934/000072174817000049/0000721748-17-000049-index.htm
Title: Re: SYTE - Sitestar
Post by: ScottHall on January 30, 2017, 11:27:22 AM
Real Estate Investment announced -
https://www.sec.gov/Archives/edgar/data/1096934/000072174817000049/0000721748-17-000049-index.htm

I've personally worked with three of the people at Huckleberry. We share some of the same social networks, so I'm pretty sure I know exactly which real estate project this is, and if so, IMO it's a pretty attractive opportunity.
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on January 30, 2017, 11:36:43 AM

I've personally worked with three of the people at Huckleberry. We share some of the same social networks, so I'm pretty sure I know exactly which real estate project this is, and if so, IMO it's a pretty attractive opportunity.
The contract specifically states 4  specific projects in the "Oak Street Properties" in Lakewood NJ with Platinum Developers as the developer:
https://www.sec.gov/Archives/edgar/data/1096934/000072174817000049/site_13.jpg

Were these the projects you were referring to? Lakewood is home to a fast growing Orthodox Jewish community of which the developer is a member. There is a huge amount of development of units for young couples and young families. I would guess that these properties are targeting that market.
Title: Re: SYTE - Sitestar
Post by: ScottHall on January 30, 2017, 11:46:57 AM

I've personally worked with three of the people at Huckleberry. We share some of the same social networks, so I'm pretty sure I know exactly which real estate project this is, and if so, IMO it's a pretty attractive opportunity.
The contract specifically states 4  specific projects in the "Oak Street Properties" in Lakewood NJ with Platinum Developers as the developer:
https://www.sec.gov/Archives/edgar/data/1096934/000072174817000049/site_13.jpg

Were these the projects you were referring to? Lakewood is home to a fast growing Orthodox Jewish community of which the developer is a member. There is a huge amount of development of units for young couples and young families. I would guess that these properties are targeting that market.

I don't feel comfortable saying more, except that the reason I found it interesting had nothing to do with location necessarily.
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on January 30, 2017, 12:07:18 PM

I don't feel comfortable saying more, except that the reason I found it interesting had nothing to do with location necessarily.

Cryptic.
Title: Re: SYTE - Sitestar
Post by: ScottHall on January 30, 2017, 12:46:02 PM

I don't feel comfortable saying more, except that the reason I found it interesting had nothing to do with location necessarily.

Cryptic.

Sorry, don't want to dish on other people's deals with potentially outdated info. Just thought people would benefit from some knowledge from someone who has met & briefly worked with Sean Sun, etc.

Sean Sun is a really bright guy. He's a good growth investor but also has a great value skill set. He doesn't (or didn't) shy away from esoteric things; he found the Walker's Manual quite fascinating, for instance. There are smart people on both sides of this deal and if I had to guess, it'll work out very well for all involved.
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on January 30, 2017, 12:53:51 PM

I don't feel comfortable saying more, except that the reason I found it interesting had nothing to do with location necessarily.

Cryptic.

Sorry, don't want to dish on other people's deals with potentially outdated info. Just thought people would benefit from some knowledge from someone who has met & briefly worked with Sean Sun, etc.

Sean Sun is a really bright guy. He's a good growth investor but also has a great value skill set. He doesn't (or didn't) shy away from esoteric things; he found the Walker's Manual quite fascinating, for instance. There are smart people on both sides of this deal and if I had to guess, it'll work out very well for all involved.
Understood.
Title: Re: SYTE - Sitestar
Post by: DooDiligence on January 30, 2017, 01:01:42 PM
Can anyone comment on this

http://www.inelegantinvestor.com/2017/01/30/steven-kiel-continues-enrich-pockets-sitestar-shareholders/
Title: Re: SYTE - Sitestar
Post by: maybe4less on January 30, 2017, 01:28:01 PM
Can anyone comment on this

http://www.inelegantinvestor.com/2017/01/30/steven-kiel-continues-enrich-pockets-sitestar-shareholders/

At the very least there seems to be a misunderstanding of how Dodd-Frank-mandated shareholder advisory votes on compensation work. They are backwards looking, so last year's annual meeting had to do with 2015's compensation, not 2016's or 2017's.

I'm also not sure why anyone would expect the CEO to work for free. Yes, he controls a lot of stock, but being the CEO of a public company is a lot more work than being a passive shareholder, regardless of how big the company it is. I don't think a relatively small salary is egregious.
Title: Re: SYTE - Sitestar
Post by: DooDiligence on January 30, 2017, 01:48:55 PM
Can anyone comment on this

http://www.inelegantinvestor.com/2017/01/30/steven-kiel-continues-enrich-pockets-sitestar-shareholders/

At the very least there seems to be a misunderstanding of how Dodd-Frank-mandated shareholder advisory votes on compensation work. They are backwards looking, so last year's annual meeting had to do with 2015's compensation, not 2016's or 2017's.

I'm also not sure why anyone would expect the CEO to work for free. Yes, he controls a lot of stock, but being the CEO of a public company is a lot more work than being a passive shareholder, regardless of how big the company it is. I don't think a relatively small salary is egregious.

Thanks (I was a bit surprised to see Inelegants article & was just curious to hear opinions...)

I was under the impression that these guys are really trying to sort out a mess & have good intentions.

Title: Re: SYTE - Sitestar
Post by: TBW on January 30, 2017, 01:49:33 PM
Imo that blog post is just wrong. Steve Kiel will get 100k + 150k bonus if book value goes up 20% in a year. (Formula is 10x book value change - 5% hurdle x base salary).

To me that seems like a great deal for shareholders. I for one have been very impressed by what the guys have achieved so far.

That shareholder has had a problem from the start with new management. I think he is misguided. But time will tell.
Title: Re: SYTE - Sitestar
Post by: Parsad on January 30, 2017, 01:56:09 PM
Can anyone comment on this

http://www.inelegantinvestor.com/2017/01/30/steven-kiel-continues-enrich-pockets-sitestar-shareholders/

At the very least there seems to be a misunderstanding of how Dodd-Frank-mandated shareholder advisory votes on compensation work. They are backwards looking, so last year's annual meeting had to do with 2015's compensation, not 2016's or 2017's.

I'm also not sure why anyone would expect the CEO to work for free. Yes, he controls a lot of stock, but being the CEO of a public company is a lot more work than being a passive shareholder, regardless of how big the company it is. I don't think a relatively small salary is egregious.

That article is somewhat off the mark.  Not sure how much of a discount the shares were being bought for against market price, so I can't comment there.  In terms of salary, the number doesn't look egregious at all and his bonus is performance-based. 

Yes, he may be running his investment fund, but that doesn't mean that he isn't working hard at Sitestar.  I run Corner Market Capital, but I personally put in a lot of hours at PDH, at the expense of my evenings, leisure time, holidays and weekends.  You combine my time on CMC stuff and PDH stuff and I'm closing in on 90 hours per week!  To tell you the truth...running PDH is far, far more difficult and time-consuming than running an investment fund...simply due to all of the operations, components, employees, day to day stuff, etc. 

Cheers!
Title: Re: SYTE - Sitestar
Post by: Jurgis on January 30, 2017, 02:59:58 PM
Can anyone comment on this

http://www.inelegantinvestor.com/2017/01/30/steven-kiel-continues-enrich-pockets-sitestar-shareholders/

At the very least there seems to be a misunderstanding of how Dodd-Frank-mandated shareholder advisory votes on compensation work. They are backwards looking, so last year's annual meeting had to do with 2015's compensation, not 2016's or 2017's.

I'm also not sure why anyone would expect the CEO to work for free. Yes, he controls a lot of stock, but being the CEO of a public company is a lot more work than being a passive shareholder, regardless of how big the company it is. I don't think a relatively small salary is egregious.

The salary is possibly not egregious.

The stock deals at 20-30% market price discounts to buddies is another question.
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on January 30, 2017, 03:08:09 PM
Just got back to my desk and saw that my post had been posted here, and commented upon. I appreciate everyone's perspective and I will attempt to respond with my own thoughts.

I understand how Dodd/Frank works. I do, however, think that it is curious that rather than award Mr. Kiel a compensation package before the annual meeting so that shareholders might give their input, the company allowed the annual meeting to pass with him receiving no salary and only grant him one afterwards. Also, though it is modest, he is being doubly compensated as funds that he manages own the majority of the company's equity.


Thanks (I was a bit surprised to see Inelegants article & was just curious to hear opinions...)

I was under the impression that these guys are really trying to sort out a mess & have good intentions.

I can't speak to their intentions, just to their actions. Mr. Kiel wanted majority control of the company. In order to get it, rather than purchasing shares on the open market, he issued shares to his funds at well below what it would have cost him to buy those shares on the market. Shareholders were not willing to sell him their voting rights at $.048 a share. There is an alternate history where Mr. Kiel could have chosen to work with existing shareholders rather than seize control from them. He did not, despite, in my case, multiple offers.

That article is somewhat off the mark.  Not sure how much of a discount the shares were being bought for against market price, so I can't comment there.  In terms of salary, the number doesn't look egregious at all and his bonus is performance-based. 

Yes, he may be running his investment fund, but that doesn't mean that he isn't working hard at Sitestar.  I run Corner Market Capital, but I personally put in a lot of hours at PDH, at the expense of my evenings, leisure time, holidays and weekends.  You combine my time on CMC stuff and PDH stuff and I'm closing in on 90 hours per week!  To tell you the truth...running PDH is far, far more difficult and time-consuming than running an investment fund...simply due to all of the operations, components, employees, day to day stuff, etc. 

Cheers!
Parsad, I appreciate your response. As a shareholder of PDH, I have no problem with your compensation- but it was an arrangement I entered into knowingly when I purchased my shares. When Mr. Kiel, et. al. were selling themselves shares at $.048, the market bid and ask were each above $.08. If Mr. Kiel wanted full control of the company, he should have paid a premium to that- not received a discount. Further, given that he is compensated by investors in his funds for managing the capital that he has invested in SYTE, he is getting paid twice for managing the same money.
The issue here is not about Mr. Kiel's results or what he deserves, but how he went about it. You very publicly split with Mr. Biglari when he began taking by force things that he could have gotten cooperatively had he just tried. Mr. Kiel chose to take what he wanted rather than allow the owners of the company to decide on their future. That is really my objection here.



To me that seems like a great deal for shareholders. I for one have been very impressed by what the guys have achieved so far.

That shareholder has had a problem from the start with new management. I think he is misguided. But time will tell.
I do have a problem with this management, but not from the start. I was quite supportive of them, in fact. My problem began when Mr. Kiel decided he needed a public company vehicle and created one against the interests of outside shareholders.
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on January 30, 2017, 03:10:14 PM

The salary is possibly not egregious.

The stock deals at 20-30% market price discounts to buddies is another question.
I don't think the salary is egregious in and of itself. I think that looking at it as part of a series of events that willfully disregards shareholder input gives it a very different color.
Title: Re: SYTE - Sitestar
Post by: Parsad on January 30, 2017, 03:10:40 PM
Can anyone comment on this

http://www.inelegantinvestor.com/2017/01/30/steven-kiel-continues-enrich-pockets-sitestar-shareholders/

At the very least there seems to be a misunderstanding of how Dodd-Frank-mandated shareholder advisory votes on compensation work. They are backwards looking, so last year's annual meeting had to do with 2015's compensation, not 2016's or 2017's.

I'm also not sure why anyone would expect the CEO to work for free. Yes, he controls a lot of stock, but being the CEO of a public company is a lot more work than being a passive shareholder, regardless of how big the company it is. I don't think a relatively small salary is egregious.

The salary is possibly not egregious.

The stock deals at 20-30% market price discounts to buddies is another question.

20-30% discounts?  That isn't ethical.  If they are issuing such huge discounts, then the placement should be open to all shareholders.  Cheers!
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on January 30, 2017, 03:14:53 PM
Can anyone comment on this

http://www.inelegantinvestor.com/2017/01/30/steven-kiel-continues-enrich-pockets-sitestar-shareholders/

At the very least there seems to be a misunderstanding of how Dodd-Frank-mandated shareholder advisory votes on compensation work. They are backwards looking, so last year's annual meeting had to do with 2015's compensation, not 2016's or 2017's.

I'm also not sure why anyone would expect the CEO to work for free. Yes, he controls a lot of stock, but being the CEO of a public company is a lot more work than being a passive shareholder, regardless of how big the company it is. I don't think a relatively small salary is egregious.

The salary is possibly not egregious.

The stock deals at 20-30% market price discounts to buddies is another question.

20-30% discounts?  That isn't ethical.  If they are issuing such huge discounts, then the placement should be open to all shareholders.  Cheers!
Exactly! Especially for a control position. Mr. Kiel claimed on this thread that the intrinsic value was lower than the market price- that is entirely irrelevant.
Title: Re: SYTE - Sitestar
Post by: Tim Eriksen on January 30, 2017, 04:40:35 PM
I beg to differ that he is getting paid twice to manage the same money.  They are two separate issues it is just that the same person is doing both.  He is getting paid as a fund manager to allocate capital.  He is also getting paid as the CEO which entails a whole lot more than managing the company's capital.  Being in that situation as a part time CEO I can attest to the different use of time.  It is not an overlap.  I suspect you would have no problem if a hired CEO got paid that amount.  To expect him to work for nothing when you would happily pay someone else shows the rationale of your argument is flawed. 

     
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on January 30, 2017, 04:49:02 PM
I beg to differ that he is getting paid twice to manage the same money.  They are two separate issues it is just that the same person is doing both.  He is getting paid as a fund manager to allocate capital.  He is also getting paid as the CEO which entails a whole lot more than managing the company's capital.  Being in that situation as a part time CEO I can attest to the different use of time.  It is not an overlap.  I suspect you would have no problem if a hired CEO got paid that amount.  To expect him to work for nothing when you would happily pay someone else shows the rationale of your argument is flawed. 

     
The company has one operating business- the ISP. The employee in charge of the ISP makes around $35,000, if I recall correctly. The vast majority of the firm's capital is now tied up in various investment partnerships- HVAC, Alluvial, and now Huckleberry. For all practical purposes, this is a Fund of Funds. His salary as CEO is primarily tied to his capital allocation.

I think it would also be relevant to disclose that you were one of the select few who was allowed to participate in the second below market private placement, purchasing 10,000,000 shares at $.05 when trades on the open market were crossing well above $.08
Title: Re: SYTE - Sitestar
Post by: Parsad on January 30, 2017, 04:57:55 PM
Hi Inelegant,

Didn't realize you wrote that post...thought it was written by someone else and posted to your site.

In terms of your comments:

Also, though it is modest, he is being doubly compensated as funds that he manages own the majority of the company's equity.

This isn't quite correct.  Owning a significant amount of a company in the funds is a double-edged sword.  He will benefit greatly if things work out well.  If things go sideways, he receives no compensation from either the fund or Sitestar.  If things work out poorly even though he worked hard and diligently, he will not only have worked for free at Sitestar, but will not receive any compensation from his fund until he reaches his high watermark. 

Again, this is based him operating a fund like mine with only an incentive fee and no management fee.  If he has a management fee, then this doesn't apply.  Also, if there was an agreement with shareholders before the AGM that he would work for free, and then suddenly added a compensation package after the AGM, that isn't ethical either.  Is that what happened?

When Mr. Kiel, et. al. were selling themselves shares at $.048, the market bid and ask were each above $.08.

If this is correct also, then I agree that this is completely unethical!

Cheers!
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on January 30, 2017, 05:05:36 PM
Hi Inelegant,

Didn't realize you wrote that post...thought it was written by someone else and posted to your site.

In terms of your comments:

Also, though it is modest, he is being doubly compensated as funds that he manages own the majority of the company's equity.

This isn't quite correct.  Owning a significant amount of a company in the funds is a double-edged sword.  He will benefit greatly if things work out well.  If things go sideways, he receives no compensation from either the fund or Sitestar.  If things work out poorly even though he worked hard and diligently, he will not only have worked for free at Sitestar, but will not receive any compensation from his fund until he reaches his high watermark. 

Again, this is based him operating a fund like mine with only an incentive fee and no management fee.  If he has a management fee, then this doesn't apply.  Also, if there was an agreement with shareholders before the AGM that he would work for free, and then suddenly added a compensation package after the AGM, that isn't ethical either.  Is that what happened?

When Mr. Kiel, et. al. were selling themselves shares at $.048, the market bid and ask were each above $.08.

If this is correct also, then I agree that this is completely unethical!

Cheers!
The AGM was four months ago. As you know, the proxy includes an advisory vote on executive compensation. He was receiving nothing at that time. Four months later, this was added. Was there explicit agreement? No. But I would argue that it was implicit. This comes down to a question of what is legal and what is proper. I would argue that it is legal, but improper.

I believe my statement about the bid & ask to be true, but it is possible my memory is faulty. I can assure you that the market trades were happening well above the price Mr. Kiel paid. He justified that earlier in this thread by stating that the shares are restricted and the restrictions depress their value.

Keep up the good work at PDH. I know it's been a challenging year, but I think the moves you are making make eminent sense.
Title: Re: SYTE - Sitestar
Post by: Parsad on January 30, 2017, 05:12:11 PM
I beg to differ that he is getting paid twice to manage the same money.  They are two separate issues it is just that the same person is doing both.  He is getting paid as a fund manager to allocate capital.  He is also getting paid as the CEO which entails a whole lot more than managing the company's capital.  Being in that situation as a part time CEO I can attest to the different use of time.  It is not an overlap.  I suspect you would have no problem if a hired CEO got paid that amount.  To expect him to work for nothing when you would happily pay someone else shows the rationale of your argument is flawed. 

     
The company has one operating business- the ISP. The employee in charge of the ISP makes around $35,000, if I recall correctly. The vast majority of the firm's capital is now tied up in various investment partnerships- HVAC, Alluvial, and now Huckleberry. For all practical purposes, this is a Fund of Funds. His salary as CEO is primarily tied to his capital allocation.

I think it would also be relevant to disclose that you were one of the select few who was allowed to participate in the second below market private placement, purchasing 10,000,000 shares at $.05 when trades on the open market were crossing well above $.08

Yes, it has one business now, but he's getting paid to grow and add businesses, correct? 

When I took over PDH, it only had one operating business (China) and the Burnaby clinic was shut down.  Now China (I will discuss in the letter, but obvious) is the more troubled business, the Burnaby clinic is operating great and growing, and we have two other businesses...Sequant Re, GOeVisit.com, an investment portfolio (Russell Breweries and other holdings) and real estate development (Kingswood).  And there were probably discussions with four other businesses we didn't close, but were in negotiations with.  So all of that takes a considerable amount of work.

If all Kiel is going to do is manage the one existing ISP, then you might be able to make a case.  If he is being paid to grow and add businesses, then he has to receive some sort of compensation.

I do think you have a real case with the share discount though.  Doesn't matter if intrinsic value was lower.  If there were bids at around $0.08, you can't issue a nearly 40% discount...it's just not right...even if volume is thin.  Cheers! 
Title: Re: SYTE - Sitestar
Post by: Tim Eriksen on January 30, 2017, 05:16:19 PM
I beg to differ that he is getting paid twice to manage the same money.  They are two separate issues it is just that the same person is doing both.  He is getting paid as a fund manager to allocate capital.  He is also getting paid as the CEO which entails a whole lot more than managing the company's capital.  Being in that situation as a part time CEO I can attest to the different use of time.  It is not an overlap.  I suspect you would have no problem if a hired CEO got paid that amount.  To expect him to work for nothing when you would happily pay someone else shows the rationale of your argument is flawed. 

     
The company has one operating business- the ISP. The employee in charge of the ISP makes around $35,000, if I recall correctly. The vast majority of the firm's capital is now tied up in various investment partnerships- HVAC, Alluvial, and now Huckleberry. For all practical purposes, this is a Fund of Funds. His salary as CEO is primarily tied to his capital allocation.

I think it would also be relevant to disclose that you were one of the select few who was allowed to participate in the second below market private placement, purchasing 10,000,000 shares at $.05 when trades on the open market were crossing well above $.08

1. Yes I participated.  That is public record.  I called them, asked about it, met management and then decided to participate.  It wasn't an insider deal.  The offering was under subscribed despite the discount.  I have not heard of anyone not being allowed to participate.  I recognize that it is harder for non-accredited investors. 
2. They do still have real estate.
3. How many 10Q's and 8-K's have you been responsible for?  They don't happen automatically.  You would be surprised at the amount of time that takes.    Let alone employment issues, contracts, day to day management, strategy, board meeting preparation, budgeting, etc.     
4. The market price for common stock was $0.08 when I participated and the market knew they were doing an offering of restricted stock.  Restricted stock is different.  It is not worth the same as long as the restrictions are in place.  If you have ever talked to someone who needs to sell restricted stock you would know they are in quite a difficult situation. 

I wish you the best if you still hold or have moved on to something else.  I have been on your side where I am convinced I and shareholders were wronged.  It is frustrating.
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on January 30, 2017, 05:25:44 PM
I beg to differ that he is getting paid twice to manage the same money.  They are two separate issues it is just that the same person is doing both.  He is getting paid as a fund manager to allocate capital.  He is also getting paid as the CEO which entails a whole lot more than managing the company's capital.  Being in that situation as a part time CEO I can attest to the different use of time.  It is not an overlap.  I suspect you would have no problem if a hired CEO got paid that amount.  To expect him to work for nothing when you would happily pay someone else shows the rationale of your argument is flawed. 

     
The company has one operating business- the ISP. The employee in charge of the ISP makes around $35,000, if I recall correctly. The vast majority of the firm's capital is now tied up in various investment partnerships- HVAC, Alluvial, and now Huckleberry. For all practical purposes, this is a Fund of Funds. His salary as CEO is primarily tied to his capital allocation.

I think it would also be relevant to disclose that you were one of the select few who was allowed to participate in the second below market private placement, purchasing 10,000,000 shares at $.05 when trades on the open market were crossing well above $.08

Yes, it has one business now, but he's getting paid to grow and add businesses, correct? 

When I took over PDH, it only had one operating business (China) and the Burnaby clinic was shut down.  Now China (I will discuss in the letter, but obvious) is the more troubled business, the Burnaby clinic is operating great and growing, and we have two other businesses...Sequant Re, GOeVisit.com, an investment portfolio (Russell Breweries and other holdings) and real estate development (Kingswood).  And there were probably discussions with four other businesses we didn't close, but were in negotiations with.  So all of that takes a considerable amount of work.

If all Kiel is going to do is manage the one existing ISP, then you might be able to make a case.  If he is being paid to grow and add businesses, then he has to receive some sort of compensation.

I do think you have a real case with the share discount though.  Doesn't matter if intrinsic value was lower.  If there were bids at around $0.08, you can't issue a nearly 40% discount...it's just not right...even if volume is thin.  Cheers!
So far, he has added 3 investments. All of them are partnerships managed by others where Sitestar seems to be merely a provider of capital.
I don't disagree that he ought to get some compensation. But the structure ought to be approved by independent Directors, and there really are not any.
Title: Re: SYTE - Sitestar
Post by: maybe4less on January 30, 2017, 05:28:57 PM
1. Yes I participated.  That is public record.  I called them, asked about it, met management and then decided to participate.  It wasn't an insider deal.  The offering was under subscribed despite the discount.  I have not heard of anyone not being allowed to participate.  I recognize that it is harder for non-accredited investors. 

My understanding is that anyone who met the legal requirement (i.e., was an accredited investor) was allowed to invest, not just management's "buddies." It's a bummer that non-accredited investors could not participate, but you can blame congress for that. A rights offering would have been too expensive for a raise of this size.

2. They do still have real estate.

The HVAC business is structured as a "fund," but is very much an operating business too.



Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on January 30, 2017, 05:50:35 PM
1. Yes I participated.  That is public record.  I called them, asked about it, met management and then decided to participate.  It wasn't an insider deal.  The offering was under subscribed despite the discount.  I have not heard of anyone not being allowed to participate.  I recognize that it is harder for non-accredited investors. 
2. They do still have real estate.
3. How many 10Q's and 8-K's have you been responsible for?  They don't happen automatically.  You would be surprised at the amount of time that takes.    Let alone employment issues, contracts, day to day management, strategy, board meeting preparation, budgeting, etc.     
4. The market price for common stock was $0.08 when I participated and the market knew they were doing an offering of restricted stock.  Restricted stock is different.  It is not worth the same as long as the restrictions are in place.  If you have ever talked to someone who needs to sell restricted stock you would know they are in quite a difficult situation. 

I wish you the best if you still hold or have moved on to something else.  I have been on your side where I am convinced I and shareholders were wronged.  It is frustrating.

Tim-
  Thank you for your thoughtful response.
1. I think there is a distinction between the first and second offering. The first granted Mr. Kiel complete control and was entirely unexpected, at least by me. It included no outsiders, to my knowledge. The second was a bit different. Mr. Kiel already controlled over 50% of shares, and had committed more capital than the company had to various funds. That said, I had various discussions with Mr. Kiel and Mr. Moore prior to the second offering and it was never even suggested to me that I might have the opportunity to participate.
2. True, they do still have some real estate, though the vast majority has been sold.
3. I have not, but I understand thy take work. If that's a concern, buy out outside shareholders and go private.
4. I have had and continue to have restricted stock in various concerns. In an illiquid stock like this, the distinction between restricted and unrestricted stock is lessened. I am not technically restricted from selling my shares, but I cannot do so in a short amount of time w/o moving the price drastically. Again, I would also make a distinction between the first and second offering. The first gave Mr. Kiel control, and that should come with a premium.

I still have a bit more than half of my initial position, and I will continue to sell opportunistically. I will not hold a fire sale(and I am not the 500K shares that have been sitting on the ask for weeks). I appreciate your well-wishes. I truly hope that the stock goes up here. I don't disagree with most of the investment decisions Mr. Kiel has made. I just don't think that the ends justify the means.
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on January 30, 2017, 05:54:33 PM
1. Yes I participated.  That is public record.  I called them, asked about it, met management and then decided to participate.  It wasn't an insider deal.  The offering was under subscribed despite the discount.  I have not heard of anyone not being allowed to participate.  I recognize that it is harder for non-accredited investors. 

My understanding is that anyone who met the legal requirement (i.e., was an accredited investor) was allowed to invest, not just management's "buddies." It's a bummer that non-accredited investors could not participate, but you can blame congress for that. A rights offering would have been too expensive for a raise of this size.


I do not believe this was true of the first offering. In any case, they could have reached out to larger shareholders and gauged interest. I can't say they didn't reach out to anyone, but the never reached out to me, and I was over 2% of outstanding shares pre-offering(which they knew).
Title: Re: SYTE - Sitestar
Post by: Parsad on January 30, 2017, 11:10:50 PM
One thing I will say.  It's fair to comment on issues when they don't look quite right, but it's also not particularly fair on this type of forum to become accusatory.  The reason being is we are dealing with a public company, and the CEO is somewhat restricted from what he can say, so we may not have all of the facts and circumstances.  He can't just go on Twitter and say whatever the hell he wants...only the President gets to do that!   :P

Cheers!
Title: Re: SYTE - Sitestar
Post by: Sunrider on January 30, 2017, 11:28:11 PM
Tim he is being paid twice. Whether that's good/bad is a different question. Problem with your argument is that he's being paid to allocate investors' capital as a full time job by his investors and he's getting paid by shareholders to be a full time CEO --- in a business where the capital is now being disbursed and actual 'operations' are in run-down. I don't like that because there's no way he works 2x 100% that he's getting paid for. Looking at it another way, both roles could be seen as capital allocation roles that can be done in 1x100% but then I think it would be fairer to pay him no base for Syte and only a carry on the increase in BV, sustained over, say 3 years (i.e. 3 - 5 year average increase in BV).

On the fligpside, the .048 offer was open to all qualified investors if I recall correctly.
C.


I beg to differ that he is getting paid twice to manage the same money.  They are two separate issues it is just that the same person is doing both.  He is getting paid as a fund manager to allocate capital.  He is also getting paid as the CEO which entails a whole lot more than managing the company's capital.  Being in that situation as a part time CEO I can attest to the different use of time.  It is not an overlap.  I suspect you would have no problem if a hired CEO got paid that amount.  To expect him to work for nothing when you would happily pay someone else shows the rationale of your argument is flawed. 

     
Title: Re: SYTE - Sitestar
Post by: ScottHall on January 30, 2017, 11:57:02 PM

I don't feel comfortable saying more, except that the reason I found it interesting had nothing to do with location necessarily.

Cryptic.

Sorry, don't want to dish on other people's deals with potentially outdated info. Just thought people would benefit from some knowledge from someone who has met & briefly worked with Sean Sun, etc.

Sean Sun is a really bright guy. He's a good growth investor but also has a great value skill set. He doesn't (or didn't) shy away from esoteric things; he found the Walker's Manual quite fascinating, for instance. There are smart people on both sides of this deal and if I had to guess, it'll work out very well for all involved.
Understood.

Reading the full filing, this doesn't seem like the deal I heard of previously. So no clue on economics.

Everything I said about Sean Sun stands, though.
Title: Re: SYTE - Sitestar
Post by: Parsad on January 31, 2017, 12:48:37 AM
Tim he is being paid twice. Whether that's good/bad is a different question. Problem with your argument is that he's being paid to allocate investors' capital as a full time job by his investors and he's getting paid by shareholders to be a full time CEO --- in a business where the capital is now being disbursed and actual 'operations' are in run-down. I don't like that because there's no way he works 2x 100% that he's getting paid for. Looking at it another way, both roles could be seen as capital allocation roles that can be done in 1x100% but then I think it would be fairer to pay him no base for Syte and only a carry on the increase in BV, sustained over, say 3 years (i.e. 3 - 5 year average increase in BV).

On the fligpside, the .048 offer was open to all qualified investors if I recall correctly.
C.


I beg to differ that he is getting paid twice to manage the same money.  They are two separate issues it is just that the same person is doing both.  He is getting paid as a fund manager to allocate capital.  He is also getting paid as the CEO which entails a whole lot more than managing the company's capital.  Being in that situation as a part time CEO I can attest to the different use of time.  It is not an overlap.  I suspect you would have no problem if a hired CEO got paid that amount.  To expect him to work for nothing when you would happily pay someone else shows the rationale of your argument is flawed. 

     

Not necessarily true.  I can't speak for what is happening at Sitestar, as I don't know the facts fully, and I'm not there watching operations daily.  But speaking for myself:

- I'm in the office from 10am to 7-8pm most days, unless I have meetings downtown...about 70% of that time is PDH and 30% is CMC. 
- I'm also up around 8am to check emails and quick calls before I head to the office. 
- When I get home usually around 7:30-8:30pm, I have dinner, put on hockey while I read 10-Q's & 10-K's, run screens, look for ideas, etc for CMC, answer emails till 1-2am.   
- Then I'm also usually in the office one day on the weekend for at least 6-8 hours (usually Saturdays) and then I'm working for 3-4 hours on Sunday from my home office on CMC stuff while football is on. 
- I go into the office on holiday Mondays, even when the building is closed to staff.
- I don't really take vacations...usually I add one day here or there on business trips.
- I generally eat a late breakfast at 11am and a late lunch at around 3pm...all on my desk, unless someone wants a lunch meeting...but I prefer coffee meetings so I don't waste much time.

Now that I actually think about what I do, I work pretty f**king hard!  And at times it feels like it.  But most of the time, I feel very fortunate doing what I'm doing and I love it.  That being said, if anyone begrudges me taking a fixed $99,000 salary because I'm CEO, even though I control a lot of the stock, they can bugger off. 

I get some 60-70 emails a day...sit on 4 corporate boards...2 charitable boards...usually 4-8 calls a day...7 full-time staff and another 14 staff through associate investments we are involved with...4 public earnings filings a year, a public company audit, two fund audits, numerous press releases, filings, statements...payroll and payable twice a month...8 corporate tax returns, two fund tax returns, two general partner tax returns, CMC's tax return...contracts, agreements, settlements, other legal documents...audit committee meetings, corporate governance meetings...networking events, annual PDH FFH dinner, company events, Pabrai Funds meeting...meetings with potential investments, business consultants bringing a potential acquisition, meetings with young managers, business people, CoBF readers, etc...the list can go on and on.  Wow!

Cheers!
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on January 31, 2017, 03:18:23 AM
One thing I will say.  It's fair to comment on issues when they don't look quite right, but it's also not particularly fair on this type of forum to become accusatory.  The reason being is we are dealing with a public company, and the CEO is somewhat restricted from what he can say, so we may not have all of the facts and circumstances.  He can't just go on Twitter and say whatever the hell he wants...only the President gets to do that!   :P

Cheers!
I hope I have not crossed the line here. I purposely did not share my thoughts here in the first place, and only responded after others began to discuss what I had said elsewhere. I understand that Steven is somewhat restricted(though he has commented on some of these issues on this thread in the past). Of course, the other side of being a public CEO and having shareholders is that ones actions are open to public discussion and scrutiny. Hiding behind the idea that shareholders do not know all the facts is paternalistic and unfair. We may not know all the facts, but ultimately, we are the owners.
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on January 31, 2017, 03:20:02 AM
On the fligpside, the .048 offer was open to all qualified investors if I recall correctly.
C.

I do not believe this to be the case. Please show me that it is, so that I can correct my public statements, if necessary.
Title: Re: SYTE - Sitestar
Post by: rkbabang on January 31, 2017, 05:19:17 AM
On the fligpside, the .048 offer was open to all qualified investors if I recall correctly.
C.

I do not believe this to be the case. Please show me that it is, so that I can correct my public statements, if necessary.


I don't have the time to read through the filings to find it, but IIRC, there was an SEC filing which basically said that the offer was underfunded and that they were not going to advertise or promote it which was at least implying that accredited investors could contact them for info.  I haven't because I have the same misgivings as you do about the first offering where he took control and I already own almost a million shares.  I'm not sure I want to invest another $25K in this company. If the minimum investment was lower I might have.  I'm holding for now, because I like a lot of what they are doing, and, of course, I can't sell too much without effecting the price.
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on January 31, 2017, 05:37:05 AM
On the fligpside, the .048 offer was open to all qualified investors if I recall correctly.
C.

I do not believe this to be the case. Please show me that it is, so that I can correct my public statements, if necessary.


I don't have the time to read through the filings to find it, but IIRC, there was an SEC filing which basically said that the offer was underfunded and that they were not going to advertise or promote it which was at least implying that accredited investors could contact them for info.  I haven't because I have the same misgivings as you do about the first offering where he took control and I already own almost a million shares.  I'm not sure I want to invest another $25K in this company. If the minimum investment was lower I might have.  I'm holding for now, because I like a lot of what they are doing, and, of course, I can't sell too much without effecting the price.

Thought you meant the first offering. The second was at $.05.
Title: Re: SYTE - Sitestar
Post by: oddballstocks on January 31, 2017, 05:43:07 AM
On the fligpside, the .048 offer was open to all qualified investors if I recall correctly.
C.

I do not believe this to be the case. Please show me that it is, so that I can correct my public statements, if necessary.

It's true, I contacted them and was sent subscription information.  There are rules about companies soliciting for rights offerings.

I'm watching something similar in Aztec Land and Cattle.  They held a rights offering last year, and one this year.  To an outside observer it's just happening.  There are 'special' stockholders who are backstopping it.  But I also know that anyone accredited can subscribe, but you need to call the company and let them know you're interested.  The backstock shareholders were just a few individuals who were in contact with the company and in a position to move on this.

I'll say this on the situation.  I think optics matter, Inelegant from your vantage point you have a lot of well founded points and I understand your perspective.  I've also seen how the sausage is made so to speak and see the other side.

If this was a vanilla company where I didn't know the people involved personally I'd be very worried about perceived red flags.  But after seeing behind the curtain I understand what's going on and I don't have the same view.

I don't want to speak for Steve, but I think they're doing their own filings.  My guess is they're overly conservative in what they're releasing because they don't want to find themselves in a legal nightmare regarding disclosure.

In the end everyone needs to make their own decisions.  I agree with Sanjeev that most outside investors underestimate the amount of work anyone running a company has to do.  It's easy to pick apart what a company is doing from afar, but when actually in the weeds it's difficult to keep all the balls in motion.
Title: Re: SYTE - Sitestar
Post by: rkbabang on January 31, 2017, 05:47:15 AM
On the fligpside, the .048 offer was open to all qualified investors if I recall correctly.
C.

I do not believe this to be the case. Please show me that it is, so that I can correct my public statements, if necessary.


I don't have the time to read through the filings to find it, but IIRC, there was an SEC filing which basically said that the offer was underfunded and that they were not going to advertise or promote it which was at least implying that accredited investors could contact them for info.  I haven't because I have the same misgivings as you do about the first offering where he took control and I already own almost a million shares.  I'm not sure I want to invest another $25K in this company. If the minimum investment was lower I might have.  I'm holding for now, because I like a lot of what they are doing, and, of course, I can't sell too much without effecting the price.

Thought you meant the first offering. The second was at $.05.

Yes, you are correct I didn't think the first offering was open to anyone, just the second. And it was at $0.05, still way under market.
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on January 31, 2017, 06:26:38 AM
On the fligpside, the .048 offer was open to all qualified investors if I recall correctly.
C.

I do not believe this to be the case. Please show me that it is, so that I can correct my public statements, if necessary.

It's true, I contacted them and was sent subscription information.  There are rules about companies soliciting for rights offerings.

I'm watching something similar in Aztec Land and Cattle.  They held a rights offering last year, and one this year.  To an outside observer it's just happening.  There are 'special' stockholders who are backstopping it.  But I also know that anyone accredited can subscribe, but you need to call the company and let them know you're interested.  The backstock shareholders were just a few individuals who were in contact with the company and in a position to move on this.

I'll say this on the situation.  I think optics matter, Inelegant from your vantage point you have a lot of well founded points and I understand your perspective.  I've also seen how the sausage is made so to speak and see the other side.

If this was a vanilla company where I didn't know the people involved personally I'd be very worried about perceived red flags.  But after seeing behind the curtain I understand what's going on and I don't have the same view.

I don't want to speak for Steve, but I think they're doing their own filings.  My guess is they're overly conservative in what they're releasing because they don't want to find themselves in a legal nightmare regarding disclosure.

In the end everyone needs to make their own decisions.  I agree with Sanjeev that most outside investors underestimate the amount of work anyone running a company has to do.  It's easy to pick apart what a company is doing from afar, but when actually in the weeds it's difficult to keep all the balls in motion.
Just to clarify, are you saying you received subscription information for the first offering or the second?
In the Aztec situation, they proactively reached out to shareholders to see who might be interested in participating. Even shareholders with very small stakes. I appreciate your understanding. The real tragedy is how unnecessary this was. They could have accomplished exactly the same things while being respectful of all shareholders. That they chose not to is, in my mind, quite telling.
Title: Re: SYTE - Sitestar
Post by: DooDiligence on January 31, 2017, 06:40:37 AM
Tim he is being paid twice. Whether that's good/bad is a different question. Problem with your argument is that he's being paid to allocate investors' capital as a full time job by his investors and he's getting paid by shareholders to be a full time CEO --- in a business where the capital is now being disbursed and actual 'operations' are in run-down. I don't like that because there's no way he works 2x 100% that he's getting paid for. Looking at it another way, both roles could be seen as capital allocation roles that can be done in 1x100% but then I think it would be fairer to pay him no base for Syte and only a carry on the increase in BV, sustained over, say 3 years (i.e. 3 - 5 year average increase in BV).

On the fligpside, the .048 offer was open to all qualified investors if I recall correctly.
C.


I beg to differ that he is getting paid twice to manage the same money.  They are two separate issues it is just that the same person is doing both.  He is getting paid as a fund manager to allocate capital.  He is also getting paid as the CEO which entails a whole lot more than managing the company's capital.  Being in that situation as a part time CEO I can attest to the different use of time.  It is not an overlap.  I suspect you would have no problem if a hired CEO got paid that amount.  To expect him to work for nothing when you would happily pay someone else shows the rationale of your argument is flawed. 

     

Not necessarily true.  I can't speak for what is happening at Sitestar, as I don't know the facts fully, and I'm not there watching operations daily.  But speaking for myself:

- I'm in the office from 10am to 7-8pm most days, unless I have meetings downtown...about 70% of that time is PDH and 30% is CMC. 
- I'm also up around 8am to check emails and quick calls before I head to the office. 
- When I get home usually around 7:30-8:30pm, I have dinner, put on hockey while I read 10-Q's & 10-K's, run screens, look for ideas, etc for CMC, answer emails till 1-2am.   
- Then I'm also usually in the office one day on the weekend for at least 6-8 hours (usually Saturdays) and then I'm working for 3-4 hours on Sunday from my home office on CMC stuff while football is on. 
- I go into the office on holiday Mondays, even when the building is closed to staff.
- I don't really take vacations...usually I add one day here or there on business trips.
- I generally eat a late breakfast at 11am and a late lunch at around 3pm...all on my desk, unless someone wants a lunch meeting...but I prefer coffee meetings so I don't waste much time.

Now that I actually think about what I do, I work pretty f**king hard!  And at times it feels like it.  But most of the time, I feel very fortunate doing what I'm doing and I love it.  That being said, if anyone begrudges me taking a fixed $99,000 salary because I'm CEO, even though I control a lot of the stock, they can bugger off. 

I get some 60-70 emails a day...sit on 4 corporate boards...2 charitable boards...usually 4-8 calls a day...7 full-time staff and another 14 staff through associate investments we are involved with...4 public earnings filings a year, a public company audit, two fund audits, numerous press releases, filings, statements...payroll and payable twice a month...8 corporate tax returns, two fund tax returns, two general partner tax returns, CMC's tax return...contracts, agreements, settlements, other legal documents...audit committee meetings, corporate governance meetings...networking events, annual PDH FFH dinner, company events, Pabrai Funds meeting...meetings with potential investments, business consultants bringing a potential acquisition, meetings with young managers, business people, CoBF readers, etc...the list can go on and on.  Wow!

Cheers!

You have an AWESOME job!
Title: Re: SYTE - Sitestar
Post by: oddballstocks on January 31, 2017, 06:43:30 AM
On the fligpside, the .048 offer was open to all qualified investors if I recall correctly.
C.

I do not believe this to be the case. Please show me that it is, so that I can correct my public statements, if necessary.

It's true, I contacted them and was sent subscription information.  There are rules about companies soliciting for rights offerings.

I'm watching something similar in Aztec Land and Cattle.  They held a rights offering last year, and one this year.  To an outside observer it's just happening.  There are 'special' stockholders who are backstopping it.  But I also know that anyone accredited can subscribe, but you need to call the company and let them know you're interested.  The backstock shareholders were just a few individuals who were in contact with the company and in a position to move on this.

I'll say this on the situation.  I think optics matter, Inelegant from your vantage point you have a lot of well founded points and I understand your perspective.  I've also seen how the sausage is made so to speak and see the other side.

If this was a vanilla company where I didn't know the people involved personally I'd be very worried about perceived red flags.  But after seeing behind the curtain I understand what's going on and I don't have the same view.

I don't want to speak for Steve, but I think they're doing their own filings.  My guess is they're overly conservative in what they're releasing because they don't want to find themselves in a legal nightmare regarding disclosure.

In the end everyone needs to make their own decisions.  I agree with Sanjeev that most outside investors underestimate the amount of work anyone running a company has to do.  It's easy to pick apart what a company is doing from afar, but when actually in the weeds it's difficult to keep all the balls in motion.
Just to clarify, are you saying you received subscription information for the first offering or the second?
In the Aztec situation, they proactively reached out to shareholders to see who might be interested in participating. Even shareholders with very small stakes. I appreciate your understanding. The real tragedy is how unnecessary this was. They could have accomplished exactly the same things while being respectful of all shareholders. That they chose not to is, in my mind, quite telling.

I don't remember which, probably the second offering.
Title: Re: SYTE - Sitestar
Post by: DooDiligence on January 31, 2017, 06:43:52 AM
Between reading "Dear Chairman" & this & Sitestar's threads I now have way more understanding of the inner workings of publicly traded companies (gotta apply this understanding to scaled up models now...)

Thank you all!!!
Title: Re: SYTE - Sitestar
Post by: premfan on January 31, 2017, 06:56:06 AM
Synopsis from reading thread:

- Some investors in the micro cap network had more access to deal flow than Joe the plumber. The micro cap network is a growing phenomena since 2010.

- It seems that getting a salary to manage funds is a rigged game. results brother results! Pay to play.  You get free monies so you can play if you exexcuate. Stop hiding in the veil of buffet illusion

- CEO of  a startup should get minimal to no salary until traction.  Results!

Peter thiel doesn't  allow a salary above 150k for any of his young startups. I don't in what context young means. Probably at least series b or so 50 million or less.
Title: Re: SYTE - Sitestar
Post by: premfan on January 31, 2017, 06:58:32 AM
On the fligpside, the .048 offer was open to all qualified investors if I recall correctly.
C.

I do not believe this to be the case. Please show me that it is, so that I can correct my public statements, if necessary.

It's true, I contacted them and was sent subscription information.  There are rules about companies soliciting for rights offerings.

I'm watching something similar in Aztec Land and Cattle.  They held a rights offering last year, and one this year.  To an outside observer it's just happening.  There are 'special' stockholders who are backstopping it.  But I also know that anyone accredited can subscribe, but you need to call the company and let them know you're interested.  The backstock shareholders were just a few individuals who were in contact with the company and in a position to move on this.

I'll say this on the situation.  I think optics matter, Inelegant from your vantage point you have a lot of well founded points and I understand your perspective.  I've also seen how the sausage is made so to speak and see the other side.

If this was a vanilla company where I didn't know the people involved personally I'd be very worried about perceived red flags.  But after seeing behind the curtain I understand what's going on and I don't have the same view.

I don't want to speak for Steve, but I think they're doing their own filings.  My guess is they're overly conservative in what they're releasing because they don't want to find themselves in a legal nightmare regarding disclosure.

In the end everyone needs to make their own decisions.  I agree with Sanjeev that most outside investors underestimate the amount of work anyone running a company has to do.  It's easy to pick apart what a company is doing from afar, but when actually in the weeds it's difficult to keep all the balls in motion.
Just to clarify, are you saying you received subscription information for the first offering or the second?
In the Aztec situation, they proactively reached out to shareholders to see who might be interested in participating. Even shareholders with very small stakes. I appreciate your understanding. The real tragedy is how unnecessary this was. They could have accomplished exactly the same things while being respectful of all shareholders. That they chose not to is, in my mind, quite telling.

I don't remember which, probably the second offering.

Friends of friends seed investing. well played sir
Title: Re: SYTE - Sitestar
Post by: ScottHall on January 31, 2017, 09:38:36 AM
On the fligpside, the .048 offer was open to all qualified investors if I recall correctly.
C.

I do not believe this to be the case. Please show me that it is, so that I can correct my public statements, if necessary.

It's true, I contacted them and was sent subscription information.  There are rules about companies soliciting for rights offerings.

I'm watching something similar in Aztec Land and Cattle.  They held a rights offering last year, and one this year.  To an outside observer it's just happening.  There are 'special' stockholders who are backstopping it.  But I also know that anyone accredited can subscribe, but you need to call the company and let them know you're interested.  The backstock shareholders were just a few individuals who were in contact with the company and in a position to move on this.

I'll say this on the situation.  I think optics matter, Inelegant from your vantage point you have a lot of well founded points and I understand your perspective.  I've also seen how the sausage is made so to speak and see the other side.

If this was a vanilla company where I didn't know the people involved personally I'd be very worried about perceived red flags.  But after seeing behind the curtain I understand what's going on and I don't have the same view.

I don't want to speak for Steve, but I think they're doing their own filings.  My guess is they're overly conservative in what they're releasing because they don't want to find themselves in a legal nightmare regarding disclosure.

In the end everyone needs to make their own decisions.  I agree with Sanjeev that most outside investors underestimate the amount of work anyone running a company has to do.  It's easy to pick apart what a company is doing from afar, but when actually in the weeds it's difficult to keep all the balls in motion.
Just to clarify, are you saying you received subscription information for the first offering or the second?
In the Aztec situation, they proactively reached out to shareholders to see who might be interested in participating. Even shareholders with very small stakes. I appreciate your understanding. The real tragedy is how unnecessary this was. They could have accomplished exactly the same things while being respectful of all shareholders. That they chose not to is, in my mind, quite telling.

I don't remember which, probably the second offering.

Friends of friends seed investing. well played sir

Nate and Jeff at the very least are very honorable men from all of my interactions with them. I don't think the implication that there are special favors going on is fair to them, or to Kiel himself.
Title: Re: SYTE - Sitestar
Post by: premfan on January 31, 2017, 10:08:31 AM
On the fligpside, the .048 offer was open to all qualified investors if I recall correctly.
C.

I do not believe this to be the case. Please show me that it is, so that I can correct my public statements, if necessary.

It's true, I contacted them and was sent subscription information.  There are rules about companies soliciting for rights offerings.

I'm watching something similar in Aztec Land and Cattle.  They held a rights offering last year, and one this year.  To an outside observer it's just happening.  There are 'special' stockholders who are backstopping it.  But I also know that anyone accredited can subscribe, but you need to call the company and let them know you're interested.  The backstock shareholders were just a few individuals who were in contact with the company and in a position to move on this.

I'll say this on the situation.  I think optics matter, Inelegant from your vantage point you have a lot of well founded points and I understand your perspective.  I've also seen how the sausage is made so to speak and see the other side.

If this was a vanilla company where I didn't know the people involved personally I'd be very worried about perceived red flags.  But after seeing behind the curtain I understand what's going on and I don't have the same view.

I don't want to speak for Steve, but I think they're doing their own filings.  My guess is they're overly conservative in what they're releasing because they don't want to find themselves in a legal nightmare regarding disclosure.

In the end everyone needs to make their own decisions.  I agree with Sanjeev that most outside investors underestimate the amount of work anyone running a company has to do.  It's easy to pick apart what a company is doing from afar, but when actually in the weeds it's difficult to keep all the balls in motion.
Just to clarify, are you saying you received subscription information for the first offering or the second?
In the Aztec situation, they proactively reached out to shareholders to see who might be interested in participating. Even shareholders with very small stakes. I appreciate your understanding. The real tragedy is how unnecessary this was. They could have accomplished exactly the same things while being respectful of all shareholders. That they chose not to is, in my mind, quite telling.

I don't remember which, probably the second offering.

Friends of friends seed investing. well played sir

Nate and Jeff at the very least are very honorable men from all of my interactions with them. I don't think the implication that there are special favors going on is fair to them, or to Kiel himself.

Subjective
Title: Re: SYTE - Sitestar
Post by: oddballstocks on January 31, 2017, 10:45:05 AM
On the fligpside, the .048 offer was open to all qualified investors if I recall correctly.
C.

I do not believe this to be the case. Please show me that it is, so that I can correct my public statements, if necessary.

It's true, I contacted them and was sent subscription information.  There are rules about companies soliciting for rights offerings.

I'm watching something similar in Aztec Land and Cattle.  They held a rights offering last year, and one this year.  To an outside observer it's just happening.  There are 'special' stockholders who are backstopping it.  But I also know that anyone accredited can subscribe, but you need to call the company and let them know you're interested.  The backstock shareholders were just a few individuals who were in contact with the company and in a position to move on this.

I'll say this on the situation.  I think optics matter, Inelegant from your vantage point you have a lot of well founded points and I understand your perspective.  I've also seen how the sausage is made so to speak and see the other side.

If this was a vanilla company where I didn't know the people involved personally I'd be very worried about perceived red flags.  But after seeing behind the curtain I understand what's going on and I don't have the same view.

I don't want to speak for Steve, but I think they're doing their own filings.  My guess is they're overly conservative in what they're releasing because they don't want to find themselves in a legal nightmare regarding disclosure.

In the end everyone needs to make their own decisions.  I agree with Sanjeev that most outside investors underestimate the amount of work anyone running a company has to do.  It's easy to pick apart what a company is doing from afar, but when actually in the weeds it's difficult to keep all the balls in motion.
Just to clarify, are you saying you received subscription information for the first offering or the second?
In the Aztec situation, they proactively reached out to shareholders to see who might be interested in participating. Even shareholders with very small stakes. I appreciate your understanding. The real tragedy is how unnecessary this was. They could have accomplished exactly the same things while being respectful of all shareholders. That they chose not to is, in my mind, quite telling.

I don't remember which, probably the second offering.

Friends of friends seed investing. well played sir

Nate and Jeff at the very least are very honorable men from all of my interactions with them. I don't think the implication that there are special favors going on is fair to them, or to Kiel himself.

Subjective

I never purchased any shares, I just inquired and was sent material.

Scott, appreciate the kind words. 

Premfan, sorry to see you have such a poor opinion of me based on your own alternative facts.
Title: Re: SYTE - Sitestar
Post by: premfan on January 31, 2017, 11:25:07 AM
On the fligpside, the .048 offer was open to all qualified investors if I recall correctly.
C.

I do not believe this to be the case. Please show me that it is, so that I can correct my public statements, if necessary.

It's true, I contacted them and was sent subscription information.  There are rules about companies soliciting for rights offerings.

I'm watching something similar in Aztec Land and Cattle.  They held a rights offering last year, and one this year.  To an outside observer it's just happening.  There are 'special' stockholders who are backstopping it.  But I also know that anyone accredited can subscribe, but you need to call the company and let them know you're interested.  The backstock shareholders were just a few individuals who were in contact with the company and in a position to move on this.

I'll say this on the situation.  I think optics matter, Inelegant from your vantage point you have a lot of well founded points and I understand your perspective.  I've also seen how the sausage is made so to speak and see the other side.

If this was a vanilla company where I didn't know the people involved personally I'd be very worried about perceived red flags.  But after seeing behind the curtain I understand what's going on and I don't have the same view.

I don't want to speak for Steve, but I think they're doing their own filings.  My guess is they're overly conservative in what they're releasing because they don't want to find themselves in a legal nightmare regarding disclosure.

In the end everyone needs to make their own decisions.  I agree with Sanjeev that most outside investors underestimate the amount of work anyone running a company has to do.  It's easy to pick apart what a company is doing from afar, but when actually in the weeds it's difficult to keep all the balls in motion.
Just to clarify, are you saying you received subscription information for the first offering or the second?
In the Aztec situation, they proactively reached out to shareholders to see who might be interested in participating. Even shareholders with very small stakes. I appreciate your understanding. The real tragedy is how unnecessary this was. They could have accomplished exactly the same things while being respectful of all shareholders. That they chose not to is, in my mind, quite telling.

I don't remember which, probably the second offering.

Friends of friends seed investing. well played sir

Nate and Jeff at the very least are very honorable men from all of my interactions with them. I don't think the implication that there are special favors going on is fair to them, or to Kiel himself.

Subjective

I never purchased any shares, I just inquired and was sent material.

Scott, appreciate the kind words. 

Premfan, sorry to see you have such a poor opinion of me based on your own alternative facts.

Oh no judgement on you. I followed you since the beginning of the micro cap network phenomena. You are a great story teller and marketer.
 
Title: Re: SYTE - Sitestar
Post by: Sunrider on January 31, 2017, 11:39:28 AM

To clarify, I did indeed mean the second 0.05 offering, not the first one done to take over the company from the original CEO.

On the fligpside, the .048 offer was open to all qualified investors if I recall correctly.
C.

I do not believe this to be the case. Please show me that it is, so that I can correct my public statements, if necessary.

It's true, I contacted them and was sent subscription information.  There are rules about companies soliciting for rights offerings.

I'm watching something similar in Aztec Land and Cattle.  They held a rights offering last year, and one this year.  To an outside observer it's just happening.  There are 'special' stockholders who are backstopping it.  But I also know that anyone accredited can subscribe, but you need to call the company and let them know you're interested.  The backstock shareholders were just a few individuals who were in contact with the company and in a position to move on this.

I'll say this on the situation.  I think optics matter, Inelegant from your vantage point you have a lot of well founded points and I understand your perspective.  I've also seen how the sausage is made so to speak and see the other side.

If this was a vanilla company where I didn't know the people involved personally I'd be very worried about perceived red flags.  But after seeing behind the curtain I understand what's going on and I don't have the same view.

I don't want to speak for Steve, but I think they're doing their own filings.  My guess is they're overly conservative in what they're releasing because they don't want to find themselves in a legal nightmare regarding disclosure.

In the end everyone needs to make their own decisions.  I agree with Sanjeev that most outside investors underestimate the amount of work anyone running a company has to do.  It's easy to pick apart what a company is doing from afar, but when actually in the weeds it's difficult to keep all the balls in motion.
Just to clarify, are you saying you received subscription information for the first offering or the second?
In the Aztec situation, they proactively reached out to shareholders to see who might be interested in participating. Even shareholders with very small stakes. I appreciate your understanding. The real tragedy is how unnecessary this was. They could have accomplished exactly the same things while being respectful of all shareholders. That they chose not to is, in my mind, quite telling.
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on January 31, 2017, 11:43:48 AM

To clarify, I did indeed mean the second 0.05 offering, not the first one done to take over the company from the original CEO.

To clarify, they had already taken over prior to the first offering. The offering doubled the shares outstanding and gave Mr. Kiel more than a majority.
Title: Re: SYTE - Sitestar
Post by: oddballstocks on January 31, 2017, 12:48:18 PM
On the fligpside, the .048 offer was open to all qualified investors if I recall correctly.
C.

I do not believe this to be the case. Please show me that it is, so that I can correct my public statements, if necessary.

It's true, I contacted them and was sent subscription information.  There are rules about companies soliciting for rights offerings.

I'm watching something similar in Aztec Land and Cattle.  They held a rights offering last year, and one this year.  To an outside observer it's just happening.  There are 'special' stockholders who are backstopping it.  But I also know that anyone accredited can subscribe, but you need to call the company and let them know you're interested.  The backstock shareholders were just a few individuals who were in contact with the company and in a position to move on this.

I'll say this on the situation.  I think optics matter, Inelegant from your vantage point you have a lot of well founded points and I understand your perspective.  I've also seen how the sausage is made so to speak and see the other side.

If this was a vanilla company where I didn't know the people involved personally I'd be very worried about perceived red flags.  But after seeing behind the curtain I understand what's going on and I don't have the same view.

I don't want to speak for Steve, but I think they're doing their own filings.  My guess is they're overly conservative in what they're releasing because they don't want to find themselves in a legal nightmare regarding disclosure.

In the end everyone needs to make their own decisions.  I agree with Sanjeev that most outside investors underestimate the amount of work anyone running a company has to do.  It's easy to pick apart what a company is doing from afar, but when actually in the weeds it's difficult to keep all the balls in motion.
Just to clarify, are you saying you received subscription information for the first offering or the second?
In the Aztec situation, they proactively reached out to shareholders to see who might be interested in participating. Even shareholders with very small stakes. I appreciate your understanding. The real tragedy is how unnecessary this was. They could have accomplished exactly the same things while being respectful of all shareholders. That they chose not to is, in my mind, quite telling.

I don't remember which, probably the second offering.

Friends of friends seed investing. well played sir

Nate and Jeff at the very least are very honorable men from all of my interactions with them. I don't think the implication that there are special favors going on is fair to them, or to Kiel himself.

Subjective

I never purchased any shares, I just inquired and was sent material.

Scott, appreciate the kind words. 

Premfan, sorry to see you have such a poor opinion of me based on your own alternative facts.

Oh no judgement on you. I followed you since the beginning of the micro cap network phenomena. You are a great story teller and marketer.

Ah, sorry, I misunderstood.  Classic mistake from just reading vs speaking etc. 
Title: Re: SYTE - Sitestar
Post by: rkbabang on February 02, 2017, 11:32:50 AM
Two more form 4's today: http://www.otcmarkets.com/stock/SYTE/filings

Arquitos Capital Partners, LP acquires 60,000,000 shares @ $0.05

Jeffery Moore acquires 1.5M shares directly and 3M indirectly @ $0.05

So it looks like with these transactions the company raised another $3.225M in cash and issued another 64.5M shares.
Title: Re: SYTE - Sitestar
Post by: globalfinancepartners on February 06, 2017, 06:24:24 AM
A bit more than that -
https://www.sec.gov/Archives/edgar/data/1096934/000072174817000058/0000721748-17-000058-index.htm

Two more form 4's today: http://www.otcmarkets.com/stock/SYTE/filings

Arquitos Capital Partners, LP acquires 60,000,000 shares @ $0.05

Jeffery Moore acquires 1.5M shares directly and 3M indirectly @ $0.05

So it looks like with these transactions the company raised another $3.225M in cash and issued another 64.5M shares.
Title: Re: SYTE - Sitestar
Post by: LowIQinvestor on February 06, 2017, 12:52:27 PM
slight tangent but thought people here might know the answer:

What does it cost annually to maintain an OTC public listing?

Trying to figure out at what market cap does it simply become uneconomical to maintain.

Thanks!
Title: Re: SYTE - Sitestar
Post by: andgroup on February 27, 2017, 01:15:08 PM
Inelegant!  I am sure you are a very nice person and congrats on the baby.  But seriously man, do we have to hear you squeal like a stuck pig, every single time something happens at Sitestar?  For once it would be nice to do a search to read up on the company and not have to read everything about you and your entitlement issues.  We get it, you're mad.  You feel as though you have been morally wronged.  We've seen you on your soapbox and endured your platitudes.  Now, do we all have to keep hearing about it?  Talk about beating a dead horse.  I personally think that given the issues with the old CEO and the amount of skin that Steven had in the game already.  That his doubling of the shares, putting his money where his mouth was and taking control over the company was a pretty damn genius move.  Judging from the stock price, I cannot see how you have been anything but helped by his presence there.  If this investment operation had not moved forward, you'd still be sitting on a 3 cent stock.  If this is how petty you are about things, it does nothing but improve my confidence level in Mr. Kiel, that he had the foresight to sidestep you, and leave you out of the loop, although I seriously doubt that was his motive, but if it was that's even better.



To clarify, I did indeed mean the second 0.05 offering, not the first one done to take over the company from the original CEO.

To clarify, they had already taken over prior to the first offering. The offering doubled the shares outstanding and gave Mr. Kiel more than a majority.
Title: Re: SYTE - Sitestar
Post by: LC on February 27, 2017, 01:53:57 PM
As someone on the outside looking in, I appreciate seeing both sides to the story.
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on February 27, 2017, 02:22:30 PM
Inelegant!  I am sure you are a very nice person and congrats on the baby.  But seriously man, do we have to hear you squeal like a stuck pig, every single time something happens at Sitestar?  For once it would be nice to do a search to read up on the company and not have to read everything about you and your entitlement issues.  We get it, you're mad.  You feel as though you have been morally wronged.  We've seen you on your soapbox and endured your platitudes.  Now, do we all have to keep hearing about it?  Talk about beating a dead horse.  I personally think that given the issues with the old CEO and the amount of skin that Steven had in the game already.  That his doubling of the shares, putting his money where his mouth was and taking control over the company was a pretty damn genius move.  Judging from the stock price, I cannot see how you have been anything but helped by his presence there.  If this investment operation had not moved forward, you'd still be sitting on a 3 cent stock.  If this is how petty you are about things, it does nothing but improve my confidence level in Mr. Kiel, that he had the foresight to sidestep you, and leave you out of the loop, although I seriously doubt that was his motive, but if it was that's even better.



To clarify, I did indeed mean the second 0.05 offering, not the first one done to take over the company from the original CEO.

To clarify, they had already taken over prior to the first offering. The offering doubled the shares outstanding and gave Mr. Kiel more than a majority.

Not sure what baby you are talking about. Perhaps you are confusing me with Irrelevant Investor?

As for your argument, I am sorry that bothers you to see my thoughts on this stock. Not that I have shared any in a month. It would be more convincing, however, if you attempted to refute any of my claims or concerns rather than sidestep them, but that's just me. What it comes down to is that I believe strongly that integrity counts. This is the same reason I have repeatedly spoken out against Sardar Biglari. Ends do not justify means.
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on February 27, 2017, 02:23:34 PM
As someone on the outside looking in, I appreciate seeing both sides to the story.
Thank you. I acknowledge that there are two sides, and I believe that mine has some merit.
Title: Re: SYTE - Sitestar
Post by: writser on February 27, 2017, 03:08:00 PM
Ignore the troll. Criticism is always appreciated.
Title: Re: SYTE - Sitestar
Post by: Travis Wiedower on February 27, 2017, 03:13:55 PM
As someone on the outside looking in, I appreciate seeing both sides to the story.

+1. Most investment threads could use more comments on the bear case. Most threads are a bunch of bulls confirmation biasing themselves into oblivion.
Title: Re: SYTE - Sitestar
Post by: andgroup on February 27, 2017, 03:37:09 PM
Inelegant.

Sorry about the mixup with Irrelevant Investor.

That said, I am not sidestepping any issue with you. I as a fellow shareholder of Sitestar and citizen of a capitalist society do not see where Steven Kiel owes you any explanation of his investment operations nor do I acknowledge that he must seek your moral guidance before he is allowed to act. 

Nor do I see where him managing money for anyone else is any of your damn business. That's between him and his investors. Who are quite happy with him.
 
And yet, knowing all of this, the man did try to explain to you what he did and why he did it, which was a good enough reason for me. I do not think he was trying to do any harm to anyone. I think our investment is in very good hands.

Yes it is true that the shares were offered at 4.8 cents and the market was at 7-8 cents. But there was absolutely no liquidity at that valuation level, not enough to raise the kind of money he needed too to get to a size where numbers started to make sense. So he did a private placement at book for a company that had no established earning power. Perfectly reasonable. Now he is investing those funds to build up the earnings power, which will accrue to your benefit as long as you are a shareholder. I think he is doing a good job here.

Furthermore, I do not believe that just because you hold certain strong convictions about a particular issue means that you are correct in your logic or that everyone else agrees with you in your fundamental arguments.  Although some may.

After all means and ends are all relative. Every party has them including you. What ends are you after here? Because it sure seems to me that the means you are using could be called badgering, once it goes beyond a certain point.

I respect that others want to hear both sides but you've already made this point over and over again. I'm just tired of hearing it.

So you were not invited into the first round, did you participate in the second?  You probably could have purchased all the shares you wanted.

So if you'd just stop it already then maybe we could hear other things you have to say which maybe of some value. Something constructive.

Not that you shouldn't be heard. You should. But we've already heard you.
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on February 27, 2017, 05:09:33 PM
I respect that others want to hear both sides but you've already made this point over and over again. I'm just tired of hearing it.

So you were not invited into the first round, did you participate in the second?  You probably could have purchased all the shares you wanted.

So if you'd just stop it already then maybe we could hear other things you have to say which maybe of some value. Something constructive.

Not that you shouldn't be heard. You should. But we've already heard you.
It's strange. I've been quiet. I have not said anything for a month. You chose to revisit this issue suddenly today.

That said, I am not sidestepping any issue with you. I as a fellow shareholder of Sitestar and citizen of a capitalist society do not see where Steven Kiel owes you any explanation of his investment operations nor do I acknowledge that he must seek your moral guidance before he is allowed to act. 

Nor do I see where him managing money for anyone else is any of your damn business. That's between him and his investors. Who are quite happy with him.
 
What does being "a citizen of a capitalist society" have to do with anything? Are you implying that morality is socialist?
Mr. Kiel is the CEO of the company. He is in the employ of the shareholders. He has a fiduciary responsibility to act in the interest of shareholders, not himself. This is a public company, and the same demands he made of Mr. Erhatric should apply to him.


 Yes it is true that the shares were offered at 4.8 cents and the market was at 7-8 cents. But there was absolutely no liquidity at that valuation level, not enough to raise the kind of money he needed too to get to a size where numbers started to make sense. So he did a private placement at book for a company that had no established earning power. Perfectly reasonable. Now he is investing those funds to build up the earnings power, which will accrue to your benefit as long as you are a shareholder. I think he is doing a good job here.

The need for additional capital was Mr. Kiel's, not the company's.

As I said, I was really done debating this. However, as you've brought it up, I feel I need to respond.
Title: Re: SYTE - Sitestar
Post by: andgroup on February 27, 2017, 06:30:39 PM
Inelegant,

I was out of town on other business for a few weeks and I come home to see what is happening with Sitestar. Then I find myself just swimming thru all this bs again. Honestly, I'd like a chance to hear from you more. You're obviously a smart guy but we seriously disagree here.

The reason I mentioned living in a capitalist society is because capitalism is based on rational self interest which is what I assume we are all doing here, investing in order to make a return for ourselves and families. Steve Kiel has a right to do the same thing and so I hope he does.  He also has a responsibility to other people besides "just you and your wishes." 

I'm not implying that morality is socialism but I am implying that your platitudes about "ends don't justify the means" repeated over and over sort of assumes that everyone here accepts "your morality" as their own, and therefore this puts you in the right. I am challenging the whole premise that anything you are saying is right.

You are not a moral dictator here sir, and nobody here is "required" to accept "your definition" of what is moral or what isn't.

If Steven Kiel is acting as an investor himself, a fiduciary for his own investors, as well as an unpaid CEO with far more skin in the game than you and if he decides that this business could be worth far far more money in the long run as a going concern rather than a liquidation play which is obviously what you wanted. I can only say one thing. I, for one, am glad that other shareholders can vote you down because I'm in agreement with them and with my shares I will join them in doing just that.

What on earth makes you think that in the event of a disagreement about the future direction of this company that you have a lock on what is right or moral?  You don't.  Or that he is not acting as a proper fiduciary?  I disagree with you. I think that is exactly what he is doing.

So the main problem is that you are not some defender of morality as you imagine yourself to be, these are just your opinions masquerading behind a kind of moral grandstanding because you are angry that other people with far more on the line decided that this enterprise would be more valuable as a going concern. You do not have any moral high ground here.

I want Steven Kiel and the board of directors to take this company and make it as valuable as they can for as long as they can and ignore people like you.  As far as I am concerned that is the proper end goal and I have no problems with the means they are exercising to get there.

I am finished with this argument as well and I hope this puts an end to it. Everyone knows you're upset you don't have to say it again.

Now let's move on to more friendly conversations.

Respectfully.
Title: Re: SYTE - Sitestar
Post by: Sunrider on February 27, 2017, 11:22:07 PM
group,

As someone who (marginally) participated in this debate - I really don't understand why you're going after this person with a long post. I for one certainly didn't take away from his writing what you allege, such as that he requires everyone to agree with his logic or assessment of the morality of actions. He expressed his view, others did the same. (Admittedly, that was a month ago and perhaps my memory fails me but I don't recall having that reaction/take-away.)

We all read, think, debate, disagree and sometimes are swayed; sometimes we aren't.

That is what makes great debate and, ultimately, a great society. We have too much 'the other side is evil' in discourse these days. Society is about getting along, forging compromise and enabling everyone to live within a reliable system of guaranteed basic rights (including having an opinion) that is universally respected. Sadly, in many parts of the world that basic shared understanding is under attack these days ("alt facts" anyone --- try "lie" to replace the euphemism).

Coming back to the stock at hand: I happen to be an investor in Sytestar but I share some of the concerns voiced here. I simply decided to see what Kiel does going forward. If this act turns out to have been the Canary in the proverbial then that's my misassessment, if not then great. No need to go after someone accusing her/him of something that others didn't seem to get from what was written (in my view). In many ways, that seems to be doing exactly what you allege was done to you in a gut reaction against a view you disagree with - or at least that's what it seems like reading it. Your actual motivations might be different.

Cheers!
C.



Inelegant,

I was out of town on other business for a few weeks and I come home to see what is happening with Sitestar. Then I find myself just swimming thru all this bs again. Honestly, I'd like a chance to hear from you more. You're obviously a smart guy but we seriously disagree here.

The reason I mentioned living in a capitalist society is because capitalism is based on rational self interest which is what I assume we are all doing here, investing in order to make a return for ourselves and families. Steve Kiel has a right to do the same thing and so I hope he does.  He also has a responsibility to other people besides "just you and your wishes." 

I'm not implying that morality is socialism but I am implying that your platitudes about "ends don't justify the means" repeated over and over sort of assumes that everyone here accepts "your morality" as their own, and therefore this puts you in the right. I am challenging the whole premise that anything you are saying is right.

You are not a moral dictator here sir, and nobody here is "required" to accept "your definition" of what is moral or what isn't.

If Steven Kiel is acting as an investor himself, a fiduciary for his own investors, as well as an unpaid CEO with far more skin in the game than you and if he decides that this business could be worth far far more money in the long run as a going concern rather than a liquidation play which is obviously what you wanted. I can only say one thing. I, for one, am glad that other shareholders can vote you down because I'm in agreement with them and with my shares I will join them in doing just that.

What on earth makes you think that in the event of a disagreement about the future direction of this company that you have a lock on what is right or moral?  You don't.  Or that he is not acting as a proper fiduciary?  I disagree with you. I think that is exactly what he is doing.

So the main problem is that you are not some defender of morality as you imagine yourself to be, these are just your opinions masquerading behind a kind of moral grandstanding because you are angry that other people with far more on the line decided that this enterprise would be more valuable as a going concern. You do not have any moral high ground here.

I want Steven Kiel and the board of directors to take this company and make it as valuable as they can for as long as they can and ignore people like you.  As far as I am concerned that is the proper end goal and I have no problems with the means they are exercising to get there.

I am finished with this argument as well and I hope this puts an end to it. Everyone knows you're upset you don't have to say it again.

Now let's move on to more friendly conversations.

Respectfully.
Title: Re: SYTE - Sitestar
Post by: Travis Wiedower on February 28, 2017, 04:37:57 AM
andgroup,

Many of the things you are accusing Inelegant of:

1. He is not guilty of.

2. You are guilty of.
Title: Re: SYTE - Sitestar
Post by: rkbabang on February 28, 2017, 06:32:46 AM
group,

As someone who (marginally) participated in this debate - I really don't understand why you're going after this person with a long post. I for one certainly didn't take away from his writing what you allege, such as that he requires everyone to agree with his logic or assessment of the morality of actions. He expressed his view, others did the same. (Admittedly, that was a month ago and perhaps my memory fails me but I don't recall having that reaction/take-away.)

We all read, think, debate, disagree and sometimes are swayed; sometimes we aren't.

That is what makes great debate and, ultimately, a great society. We have too much 'the other side is evil' in discourse these days. Society is about getting along, forging compromise and enabling everyone to live within a reliable system of guaranteed basic rights (including having an opinion) that is universally respected. Sadly, in many parts of the world that basic shared understanding is under attack these days ("alt facts" anyone --- try "lie" to replace the euphemism).

Coming back to the stock at hand: I happen to be an investor in Sytestar but I share some of the concerns voiced here. I simply decided to see what Kiel does going forward. If this act turns out to have been the Canary in the proverbial then that's my misassessment, if not then great. No need to go after someone accusing her/him of something that others didn't seem to get from what was written (in my view). In many ways, that seems to be doing exactly what you allege was done to you in a gut reaction against a view you disagree with - or at least that's what it seems like reading it. Your actual motivations might be different.

Cheers!
C.

+1.  I am also a SYTE investor and am grateful for Inelegant's posts.  I also have some misgivings about the first capital raise, but have decided to stay invested.   There is never harm in hearing both all sides.  And I don't think he has posted too much on this issue, I certainly haven't been sick of reading his views.  Maybe because I tend to agree with them, but still, I think the recent posts pleading with someone to be quiet about what they think are not useful.
Title: Re: SYTE - Sitestar
Post by: andgroup on February 28, 2017, 06:36:31 AM
I made the point that I wanted to make.

It is simply this.

I am looking to make investments that will do well over time.

On the one hand you have a company along with its stock that was totally destroyed from what? 1999-2015. So for at least 16 years, you had value being consistently destroyed.

Some investors on this board along with Steven Kiel come into the company and literally within a year, old diminishing assets are sold, accounting controls were put into place, problems with the SEC were cleaned up, the balance sheet is extremely strong now, you have a small brain trust being built out, and many opportunities for future prosperity are now a real possibility.

So that from 2015-2016 you now have a solid company that is poised for growth.

The stock price has continued to climb.

Then one investor who is obviously upset because he wasn't allowed to control the future direction of the company turns all of these developments into a negative?

Step back and take a look. You have witnessed more value being created inside this stock in 1 year than in the previous 16 years.

It makes zero sense to me. I mean if what is happening does not look positive to you then I'd hate to see the situations that you believe are really bad.

So from what I'm looking at I think the people who are disparaging this man are total fools. But to each his own.

I'm just saying I'm glad the future of this company is in the hands of the people who are now in control. They will have my support as long as they continue to create value which I suspect has a very very long runway.

I have zero problems with Mr Kiel taking control, I think we are all better off for it, and I also have no problems with him being compensated or sharing in the wealth he is busy creating for himself and all of us.

I just wanted it on the record that not everyone agrees with Inelegant. I am one of them.
Title: Re: SYTE - Sitestar
Post by: rkbabang on February 28, 2017, 06:41:40 AM
I made the point that I wanted to make.

It is simply this.

I am looking to make investments that will do well over time.

On the one hand you have a company along with its stock that was totally destroyed from what? 1999-2015. So for at least 16 years, you had value being consistently destroyed.

Some investors on this board along with Steven Kiel come into the company and literally within a year, old diminishing assets are sold, accounting controls were put into place, problems with the SEC were cleaned up, the balance sheet is extremely strong now, you have a small brain trust being built out, and many opportunities for future prosperity are now a real possibility.

So that from 2015-2016 you now have a solid company that is poised for growth.

The stock price has continued to climb.

Then one investor who is obviously upset because he wasn't allowed to control the future direction of the company turns all of these developments into a negative?

Step back and take a look. You have witnessed more value being created inside this stock in 1 year then in the previous 16 years.

It makes zero sense to me. I mean if what is happening does not look positive to you then I'd hate to see the situations that you believe are really bad.

So from what I'm looking at I think the people who are disparaging this man are total fools. But to each his own.

I'm just saying I'm glad the future of this company is in the hands of the people who are now in control. They will have my support as long as they continue to create value which I suspect has a very very long runway.

I have zero problems with Mr Kiel taking control, I think we are all better off for it, and I also have no problems with him being compensated or sharing in then wealth he is busy creating.

I just wanted it on the record that not everyone agrees with Inelegant. I am one of them.



It isn't black and white.  I agree with a lot of what you say, which is why I still hold my shares, but that doesn't mean I don't also agree with InelegantInvestor's analysis of the first capital raise.   CEO's aren't all either angels or devils, there is a lot of grey area inbetween.  Don't turn someone into a hero in your mind, be wary and critical of every CEO in every company you own.  They are only human after all.
 
Title: Re: SYTE - Sitestar
Post by: andgroup on February 28, 2017, 06:57:50 AM
rkbabang,

You and I agree totally. I'm all for critical thinking.

I also agree that CEOs are human, so you'll forgive me when I see an investor who has been extremely successful, who is putting skin in the game, laying out a lot of his own reputational and financial capital to help clean up a mess.

Not being crazy about the idea of leaving the largest decisions in the company up to a 2% owner, who wants it liquidated.

Steven Kiel should not be expected to instantly know who his friends are in the hostile kind of environment that preceded his arrival. Nor does it mean he is crooked because he wanted as few variables and potential surprises as possible.

That is why I have zero problems with the first capital raise. His commitment to do the right things for all of us investors could not be more heavily demonstrated in actions not words, by the fact that he has more to lose than anyone if it goes bad. That should speak volumes.
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on February 28, 2017, 07:14:34 AM
rkbabang,


Not being crazy about the idea of leaving the largest decisions in the company up to a 2% owner.


Just to be clear, I never made the claim that the largest decisions in the company should be made by a 2% owner. I merely said that the fundamental direction of the company and the makeup of its Board should be subject to a vote of shareholders. It never was, until Mr. Kiel had sold himself a majority stake. If you're going to attack my claim, please attack the one that I actually made.

Title: Re: SYTE - Sitestar
Post by: andgroup on February 28, 2017, 07:50:21 AM
Inelegant,

You wrote an entire article which was very derogatory towards Steven Kiel and the board, essentially acting as if their ownership was meaningless in terms of determining the future direction of the company, when they had more invested than anyone.

You pointed out that Mr Erhartic's shares "did not vote", which one can easily assume that he would have if he would have had a realistic chance to remove the people who just removed him from more than a decade long massacre of the company and stock.

Then you went on about the remaining 9 million "independent" shares (out of 95 million) and how a significant (not a majority) percentage of that minority withheld.

The old regime who had been extremely destructive of shareholder values would not have their grip on power broken so easily.

I'm glad it was.

And while you are now saying the 2% shouldn't be making all the decisions, at the very least your articles strongly imply that less than half of the "independent" shares should have been allowed to select the board members and that would have charted the companies future.

If that ain't the tail wagging the dog then I don't know what is. I'm glad we didn't go your route.
Title: Re: SYTE - Sitestar
Post by: Ballinvarosig Investors on February 28, 2017, 07:58:13 AM
Step back and take a look. You have witnessed more value being created inside this stock in 1 year than in the previous 16 years.
...
So from what I'm looking at I think the people who are disparaging this man are total fools. But to each his own.
Now I am out, I swore I wouldn't reply anymore in this thread, but you really should take a look at yourself. Calling someone a fool for disagreeing with your opinion isn't going to get you very far in life.

Secondly, from a book value per share metric, I would argue that we haven't seen very much value creation at all.
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on February 28, 2017, 08:00:35 AM
Inelegant,

You wrote an entire article which was very derogatory towards Steven Kiel and the board, essentially acting as if their ownership was meaningless in terms of determining the future direction of the company, when they had more invested than anyone.

You pointed out that Mr Erhartic's shares "did not vote", which one can easily assume that he would have if he would have had a realistic chance to remove the people who just removed him from more than a decade long massacre of the company and stock.

Then you went on about the remaining 9 million "independent" shares (out of 95 million) and how a significant (not a majority) percentage of that minority withheld.

The old regime who had been extremely destructive of shareholder values would not have their grip on power broken so easily.

I'm glad it was.

And while you are now saying the 2% shouldn't be making all the decisions, at the very least your articles strongly imply that less than half of the "independent" shares should have been allowed to select the board members and that would have charted the companies future.

If that ain't the tail wagging the dog then I don't know what is. I'm glad we didn't go your route.

The shares that should have not counted that I referred to were the ones that Kiel sold himself and other Board members prior to the vote that guaranteed him a majority.

It seems that you agree with me that a minority of shareholders should not decide the direction of the company. Prior to the offering, the Board controlled less than a quarter of the company. Kiel himself controlled far less. How can you argue that they are the only minority holders who should have had a say?

You can read what I'm actually saying, or you can keep reading into it what you wish to. I would really prefer that you choose the former.

Title: Re: SYTE - Sitestar
Post by: andgroup on February 28, 2017, 08:19:12 AM
Inelegant,

Not exactly. I do not think a minority or a corrupt majority who is raping the company and its shareholders should be allowed to determine the future of the company. Would be a better way to put it.

So this is where you and I just have to agree to disagree. You think the ends do not justify the means.

However, given the track record of value destruction and abuses of Mr Erhartic over the previous decade I simply disagree with you.

I think the actions taken by the board to break his strangle hold on the company were justified.

I don't think the issue was the minority shareholders. The issue was with the ousted, corrupted majority shareholder.

There is no doubt it was a hostile situation but I'm glad it turned out the way it did.
Title: Re: SYTE - Sitestar
Post by: andgroup on February 28, 2017, 08:31:59 AM
Now I am out, I swore I wouldn't reply anymore in this thread, but you really should take a look at yourself. Calling someone a fool for disagreeing with your opinion isn't going to get you very far in life.

That is my opinion and I'm entitled to it.

Quote
Secondly, from a book value per share metric, I would argue that we haven't seen very much value creation at all.

Rome wasn't built in a day. It's coming.
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on March 24, 2017, 02:37:52 PM
Posting, without comment, Mr. Kiel's letter to shareholders:

https://www.sec.gov/Archives/edgar/data/1096934/000072174817000184/site8k032317ex99_1.htm

Title: Re: SYTE - Sitestar
Post by: ScottHall on March 24, 2017, 03:47:19 PM
Posting, without comment, Mr. Kiel's letter to shareholders:

https://www.sec.gov/Archives/edgar/data/1096934/000072174817000184/site8k032317ex99_1.htm

Alex Pape and Sean Sun are great guys; if they're involved I suspect this real estate investment will work out well. Very clear thinkers.
Title: Re: SYTE - Sitestar
Post by: Spekulatius on March 25, 2017, 08:07:08 AM
Posting, without comment, Mr. Kiel's letter to shareholders:

https://www.sec.gov/Archives/edgar/data/1096934/000072174817000184/site8k032317ex99_1.htm

800k in annual corporate expenses is about 8% of the asset base right now. That's a very high burden.
Title: Re: SYTE - Sitestar
Post by: NBL0303 on March 25, 2017, 09:59:32 AM

800k in annual corporate expenses is about 8% of the asset base right now. That's a very high burden.

This is in no way a defense of the management or any of their actions, but on this particular point - I wouldn't say that their expenses over the last year are "annual" in the sense of recurring or of having any amount of stability.  On this point alone, I think management has done reasonably well to get the company near-current with their SEC filings/auditors/bylaws/etc.  I'm actually amazed it was not more.  They must have negotiated well with the corporate lawyers and auditors - because generally having to restate financials, not only get audited by audit earlier audits, and clean up a company like this - would typically cost millions regardless of the asset size of the underlying company.
Title: Re: SYTE - Sitestar
Post by: stahleyp on March 25, 2017, 06:03:05 PM
Packer is going to run a fund? Nice! Good for him. :)
Title: Re: SYTE - Sitestar
Post by: Phaceliacapital on March 27, 2017, 12:57:48 AM
Well given the talks I had with him during FFH dinner events I think he'll do really well (also he has this little track record that says the same thing ...).

Congrats!
Title: Re: SYTE - Sitestar
Post by: roark33 on March 27, 2017, 11:32:57 AM
I have a question from the peanut gallery. 

One thing I never understood about this situation is the corporate structure.  Why would you want to do all these investments in a corporate structure?  The tax disadvantages of these investments (assuming they work and the corporate parent will eventually pay taxes) seem so unfavorable that it makes no sense to do it in this form. 

Take the Alluvial Fund investmet, no one would set up a corporate structure to invest in a management company of an investment form. 

Maybe I am missing something here?
Title: Re: SYTE - Sitestar
Post by: stahleyp on March 27, 2017, 02:52:33 PM
Does anyone know how Alluvial's performed since inception? last information I have is from April 2016.
Title: Re: SYTE - Sitestar
Post by: roark33 on March 27, 2017, 03:28:02 PM
https://gallery.mailchimp.com/b5aa12c5c889b46c0f8288f6d/files/Alluvial_Capital_Management_Q4_2016_Client_Letter_1.20.2017.pdf

Title: Re: SYTE - Sitestar
Post by: Radio Free Cash Flow on March 27, 2017, 06:38:48 PM
Alluvial here. Happy to report that as of today, we have returned 17.1% annualized since 3/31/2014 compared to 6.2% for the Russell 2000 and 3.8% for the Russell MicroCap Index.
Title: Re: SYTE - Sitestar
Post by: stahleyp on March 27, 2017, 07:41:30 PM
thanks guys. appreciate it!
Title: Re: SYTE - Sitestar
Post by: slkiel on March 27, 2017, 09:31:48 PM
We have set the date and time of the annual shareholder meeting and invite everyone from the board to attend. We had a great group last year and had a lot of fun. The shareholder meeting is the primary way that we communicate with shareholders in order to remain focused on operations throughout the rest of the year. Because of that, we're happy to address all questions asked at the meeting. We are all looking forward to giving an update on the company. Keith and Dave will also be available to take questions in addition to the rest of the directors and subsidiary managers.

If you are not a shareholder, you are still welcome to attend. Just let us know in advance (info@sitestarcorp.com) so we can add your name to the list so the front desk doesn't turn you away. If you do own shares, please look out for the proxy statement next month.

Monday, May 22, 2017 at 10:00am ET

Offices of Alston & Bird
101 S Tryon St #4000
Charlotte, NC 28280

http://sitestarcorp.com/annual-meeting
Title: Re: SYTE - Sitestar
Post by: rkbabang on March 28, 2017, 05:24:13 AM
We have set the date and time of the annual shareholder meeting and invite everyone from the board to attend. We had a great group last year and had a lot of fun. The shareholder meeting is the primary way that we communicate with shareholders in order to remain focused on operations throughout the rest of the year. Because of that, we're happy to address all questions asked at the meeting. We are all looking forward to giving an update on the company. Keith and Dave will also be available to take questions in addition to the rest of the directors and subsidiary managers.

If you are not a shareholder, you are still welcome to attend. Just let us know in advance (info@sitestarcorp.com) so we can add your name to the list so the front desk doesn't turn you away. If you do own shares, please look out for the proxy statement next month.

Monday, May 22, 2017 at 10:00am ET

Offices of Alston & Bird
101 S Tryon St #4000
Charlotte, NC 28280

http://sitestarcorp.com/annual-meeting


Will there be video, audio, or at least a transcript of the meeting (or at least the question and answer portion) made available afterwards for shareholders who are unable to attend?

Title: Re: SYTE - Sitestar
Post by: slkiel on March 28, 2017, 10:06:23 AM
Will there be video, audio, or at least a transcript of the meeting (or at least the question and answer portion) made available afterwards for shareholders who are unable to attend?

Hi rkbabang. No audio/video but an attendee or two may type up some notes and share like last year.

On a somewhat-related note, there is real value to attending these things live due to the community aspect and to have real interaction with the company and its representatives. I may be a bit old school on the subject, but I think it would be better if there were more speed bumps in place to encourage investors to be more serious in their decisionmaking (such as if trade commissions were higher). Investors should consider attending shareholder meetings for all companies they own. Doing things like that helps to build commitment to the investment decision and, in Sitestar's case, encourages a shareholder base that is more long-term focused. Plus, we would like to meet our shareholders in person.   
Title: Re: SYTE - Sitestar
Post by: gg on March 28, 2017, 10:39:49 AM
No offense, but that's a pretty unsatisfactory answer. If you do this for a living, by managing a fund, then you certainly may have an obligation to know what's happening at the meeting, may have the funding to do so, and certainly have the time to do so. Other passive investors, who might have 10,000 invested in this company can't justify the expense of 500-1000 of doing that trip, or may not have the time. With current technology, it's very cost efficient to webcast this sort of thing, and it should absolutely be offered by all companies whose shareholders can't all attend.
Title: Re: SYTE - Sitestar
Post by: slkiel on March 28, 2017, 01:32:10 PM
No offense, but that's a pretty unsatisfactory answer. If you do this for a living, by managing a fund, then you certainly may have an obligation to know what's happening at the meeting, may have the funding to do so, and certainly have the time to do so. Other passive investors, who might have 10,000 invested in this company can't justify the expense of 500-1000 of doing that trip, or may not have the time. With current technology, it's very cost efficient to webcast this sort of thing, and it should absolutely be offered by all companies whose shareholders can't all attend.

gg- We are a small company and see value in meeting our partners in person.
Title: Re: SYTE - Sitestar
Post by: gg on March 28, 2017, 01:46:05 PM
Of course that's the ideal, but you can be sure that not all of your partners can make it there.
Title: Re: SYTE - Sitestar
Post by: stahleyp on March 28, 2017, 02:07:29 PM
Berkshire just started doing webcasts like a year ago. I don't think there was an official transcript or audio either. they have a few more dollars and still didn't have those things.
Title: Re: SYTE - Sitestar
Post by: ragnarisapirate on March 28, 2017, 03:07:34 PM
I had started to type a response that had the jist of what Steve wrote (separately); he much more eloquently states things. :)

To the point of holding a small position in a company and still attending meetings: when I attended the WEST meetings, I didn't hold a single share. And at no point, have I run a fund- it was soley to meet new people, network, and learn. As it turns out, I met some pretty cool people- coincidentally, 2 of them, Steve and I are fortunate enough to serve on the board of SYTE with- Keith Smith (Packer) and Chris Payne. They had independently met Steve in person as well, and it made sense. A lot of other investors I know have met a great network from the annual meetings of these small companies and having an in person experience is a solid way of building a network and trust. All ships rise from this.

Even when going to the SNS meetings, I didn't hold much in terms of a dollar amount of stock- can't remember the total amount, but do remember literally putting the last $500 I had into it when SNS was trading at ~3.15/share- so the expense of attending the meetings was not insignificant. Connected with some good people there as well. The write-ups that I did on both those companies' meetings are a lot of what got there to be a small readership base for Ragnar Is A Pirate. Steve has said that my writing(s) on SYTE was what got him involved, and as such, probably started the series of events to that happened make the company a real and legitimate company, because of the actions he has taken in the past 15.5 months as CEO. Can you believe the transformation of the business!?

Even if you just walk away from an annual meeting (any of them, not even SYTE's) with a single stock idea that you didn't have before, from getting lunch with new people, it's prolly worth the money- not to mention a trip that you can probably figure out some way to write off. They are a very cheap call option. Time will tell, but you never know what you might happen to luck into.

EDIT: So for those of you who do come, please do a write up for those that can't make it. ;)
Title: Re: SYTE - Sitestar
Post by: rkbabang on March 28, 2017, 06:06:01 PM
It was just a question I didn't mean to start a huge debate.  It costs almost nothing to put a video camera on a tripod and post it to YouTube, so I was wondering if you planned to do it.  I agree that ideally attending the meeting in person would be best. But I don't do this for a living and I'm not going to use my vacation time to go to annual meetings all over the country for the companies I own.  I've never even made it out to the one in Omaha.   

I do greatly appreciate those who take notes and share them here or on a blog.
Title: Re: SYTE - Sitestar
Post by: oddballstocks on March 28, 2017, 06:47:13 PM
I've gone to a number of meetings in person.  Leading up to the events I have often second guessed "is it worth it?"

The answer is this.  There hasn't been a single annual meeting that I've attended that I've regretted attending.

As for the value of the information.  You can learn about 1/10th of a company from their SEC filings (this is generous), and somewhere between 3/10 and 1/4th from talking to people at the company.  My experience has been phone conversations are a lot less productive compared to an annual meeting.  With a phone call you're interrupting their day.  At the annual meeting they have carved out time to stand around and talk, exactly what you need.

There are usually a lot of employees at these things too.  For those of you into scuttlebutt this is a gold mine.  Where else can you go and just stand around drinking free crappy coffee, eating giant cookies and asking people "why do you manufacture the way you do? What other approaches have you explored? How do your competitors do it?" and have employees answer candidly and constructively.

There has been more than one occasion where my pre-conceived notion of a company from their financials was shattered with a short conversation with management.  Once they let me in on the secret I realized that it would be almost impossible to triangulate their business just from reports.

Oh and lastly the networking.  These things are great for networking.  I should state my biases here too.  I'm an extremely extroverted person, I love to talk and love meeting people.  You need to go up to people and start conversations for there to be value.  You can't stand around and wait for the party to happen to you, you need to make it happen.  But if you enjoy that stuff, and can get a conversation rolling then you'll do fine.
Title: Re: SYTE - Sitestar
Post by: LC on March 28, 2017, 06:49:41 PM
I always find it funny when communications companies or integrated tech companies (think Cisco, oracle. Etc) have investor relations resources stuck in the 1980s
Title: Re: SYTE - Sitestar
Post by: Green King on March 28, 2017, 07:22:42 PM
I have a question from the peanut gallery. 

One thing I never understood about this situation is the corporate structure.  Why would you want to do all these investments in a corporate structure?  The tax disadvantages of these investments (assuming they work and the corporate parent will eventually pay taxes) seem so unfavorable that it makes no sense to do it in this form. 

Take the Alluvial Fund investmet, no one would set up a corporate structure to invest in a management company of an investment form. 

Maybe I am missing something here?

Why make this so hard? This is a judgment call. Can you judge the company's future based on what has been done?
Title: Re: SYTE - Sitestar
Post by: bci23 on March 29, 2017, 08:10:08 AM
No offense, but that's a pretty unsatisfactory answer. If you do this for a living, by managing a fund, then you certainly may have an obligation to know what's happening at the meeting, may have the funding to do so, and certainly have the time to do so. Other passive investors, who might have 10,000 invested in this company can't justify the expense of 500-1000 of doing that trip, or may not have the time. With current technology, it's very cost efficient to webcast this sort of thing, and it should absolutely be offered by all companies whose shareholders can't all attend.

Why are you holding SYTE to a different standard when literally 99.99% of companies don't webcast the annual meeting?
Title: Re: SYTE - Sitestar
Post by: rkbabang on March 29, 2017, 08:16:16 AM
No offense, but that's a pretty unsatisfactory answer. If you do this for a living, by managing a fund, then you certainly may have an obligation to know what's happening at the meeting, may have the funding to do so, and certainly have the time to do so. Other passive investors, who might have 10,000 invested in this company can't justify the expense of 500-1000 of doing that trip, or may not have the time. With current technology, it's very cost efficient to webcast this sort of thing, and it should absolutely be offered by all companies whose shareholders can't all attend.

Why are you holding SYTE to a different standard when literally 99.99% of companies don't webcast the annual meeting?

I agree. That is why I asked the question, but didn't criticize the answer. The vast majority of companies don't do this. I wish they did though. It is almost a zero cost to do this in 2017.
Title: Re: SYTE - Sitestar
Post by: mrholty on March 29, 2017, 11:08:13 AM
I've gone to a number of meetings in person.  Leading up to the events I have often second guessed "is it worth it?"

The answer is this.  There hasn't been a single annual meeting that I've attended that I've regretted attending.

As for the value of the information.  You can learn about 1/10th of a company from their SEC filings (this is generous), and somewhere between 3/10 and 1/4th from talking to people at the company.  My experience has been phone conversations are a lot less productive compared to an annual meeting.  With a phone call you're interrupting their day.  At the annual meeting they have carved out time to stand around and talk, exactly what you need.

There are usually a lot of employees at these things too.  For those of you into scuttlebutt this is a gold mine.  Where else can you go and just stand around drinking free crappy coffee, eating giant cookies and asking people "why do you manufacture the way you do? What other approaches have you explored? How do your competitors do it?" and have employees answer candidly and constructively.

There has been more than one occasion where my pre-conceived notion of a company from their financials was shattered with a short conversation with management.  Once they let me in on the secret I realized that it would be almost impossible to triangulate their business just from reports.

Oh and lastly the networking.  These things are great for networking.  I should state my biases here too.  I'm an extremely extroverted person, I love to talk and love meeting people.  You need to go up to people and start conversations for there to be value.  You can't stand around and wait for the party to happen to you, you need to make it happen.  But if you enjoy that stuff, and can get a conversation rolling then you'll do fine.

I'm mostly a lurker nowadays.  But I have to agree with this 100%.  I have been to 3 shareholder meetings in my life.  I've posted how I let greed on 1 investment kill me and then 2 subsequent investments cause me chase and double down on bad investments.  One of those I went to the Shareholder meeting, met with a bunch of small investors like myself and had a great time and discussions.  Mgmt of this small cap knew that they were going to get a group of small investors so really put on a good show.  Some of us were extremely impressed - I was not.  I saw a factory floor that looked out of date and no production.  The Q&A with management was odd too.  I didn't like the story as it didn't match with what I saw and the staff body language didn't quite hold.  On my flight home my gut told me to get out and I sold 30% the following week.  Then I listened to kool-aid and got sucked back into the story.  The only thing that had kept me in the stock was a discussion with an engineer who had left a year before.  He told me at the shareholder meeting that the technology worked but that he left because he didn't like the CEO but he still held his options.  Over the next few years I learned that he was right but that the engineering team after he left somehow made the final product worse than when he was there.  A complete shit show.  If you are ever on the fence, go.
Title: Re: SYTE - Sitestar
Post by: TBW on April 05, 2017, 05:28:21 AM
Last year there was a meet-up for all shareholders and non-shareholders the night before the SYTE shareholder meeting in Charlotte.  A great group of people gathered and we had a lot of fun.

A fellow shareholder and I want to organize something similar this year on Sunday May 21st.  We are hoping to make this dinner an annual event.  Please note, this is an unofficial event and not organized or affiliated with SYTE.

If you are interested, please fill out your details here http://sytedinner.com/.  Once we get a sense of numbers, we will pick a suitable spot, and email everyone the details.

Hope you can join us.  If you have any additional questions please PM me.
Title: Re: SYTE - Sitestar
Post by: rkbabang on April 26, 2017, 05:02:46 PM
The SYTE Sweatshirt
https://www.rageon.com/products/syte-sweatshirt

And this: https://www.rageon.com/a/users/sytecorps
Title: Re: SYTE - Sitestar
Post by: globalfinancepartners on April 28, 2017, 08:44:08 AM
Regulatory trading halt at the moment it seems.  News pending?
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on April 28, 2017, 09:20:10 AM
On the OTC markets site...
Notice:
Due to a Market Data Feed Issue, FINRA has halted 271 Securities. Trade and quote data is not being updated on www.otcmarkets.com for these securities.
We will provide an update when this issue has been resolved.
Title: Re: SYTE - Sitestar
Post by: TBW on May 10, 2017, 08:01:45 AM
Just a reminder to those attending the SYTE annual meeting there will be a dinner/meetup the night before.  There have been a decent amount of people who have signed up.  If you want to join us please let us know here http://sytedinner.com/ so we have a sense of numbers and can book an appropriate spot.

Hope to see you all in Charlotte
Title: Re: SYTE - Sitestar
Post by: rkbabang on May 16, 2017, 06:09:03 AM
1Q earnings are out.  At a quick glance it looks like all segments except real estate were profitable.  Earned $0.00067 per share.

https://www.otcmarkets.com/stock/SYTE/filings
Title: Re: SYTE - Sitestar
Post by: Read the Footnotes on May 16, 2017, 07:54:46 AM
Just a reminder to those attending the SYTE annual meeting there will be a dinner/meetup the night before.  There have been a decent amount of people who have signed up.  If you want to join us please let us know here http://sytedinner.com/ so we have a sense of numbers and can book an appropriate spot.

Hope to see you all in Charlotte

Thank you, TBW, for the excellent organization of this event.
Title: Re: SYTE - Sitestar
Post by: rkbabang on May 18, 2017, 10:45:14 AM
Anyone know what "fund advisory services" entails?

Sitestar's Asset Management Subsidiary Partners with Bridge Reid (http://www.crossroadstoday.com/story/35460229/sitestars-asset-management-subsidiary-partners-with-bridge-reid)

"Sitestar Corporation (OTCQB: SYTE) today announced an agreement between Sitestar's Asset Management subsidiary, Willow Oak Asset Management, LLC, and the General Partner of Bridge Reid Fund I, LP to provide Bridge Reid with fund advisory services. Bridge Reid will continue to be managed by its General Partner members, Michael Bridge and Nathan Reid."
Title: Re: SYTE - Sitestar
Post by: Gamecock-YT on May 20, 2017, 08:19:24 PM
Looking forward to seeing everyone tomorrow night!
Title: Re: SYTE - Sitestar
Post by: willward1 on May 24, 2017, 08:20:49 AM
SO... how did the meeting go down?
Title: Re: SYTE - Sitestar
Post by: nomeansum on May 26, 2017, 10:58:48 AM
I would very much appreciate it if anyone could link to meeting notes or commentaries etc. I was out of the country and could not attend  :(


Thanks!
Title: Re: SYTE - Sitestar
Post by: gurpaul88 on May 26, 2017, 12:54:16 PM
I'd be curious to know more about the fund Kieth will be running, if he would care to chime in!  :D TIA.
Title: Re: SYTE - Sitestar
Post by: Packer16 on May 26, 2017, 06:34:02 PM
PM me if you are interested in the fund & I can provide you info & discuss.  Thanks.

Packer
Title: Re: SYTE - Sitestar
Post by: globalfinancepartners on June 03, 2017, 03:28:38 PM
It appears that first.com was sold to a Chinese company.  Did I miss an announcement of that or is this a new development?
Title: Re: SYTE - Sitestar
Post by: TBW on June 03, 2017, 05:44:03 PM
That is news to me. Where did you see that? Any mention of how much it was sold for?
Title: Re: SYTE - Sitestar
Post by: globalfinancepartners on June 04, 2017, 05:09:40 AM
I saw it by typing in first.com into an internet browser.

edit: the site appears to be a go daddy type domain name registration company if I am understanding it correctly

That is news to me. Where did you see that? Any mention of how much it was sold for?
Title: Re: SYTE - Sitestar
Post by: rkbabang on July 13, 2017, 11:04:51 AM
Keith Smith and Willow Oak Asset Management Announce the Launch of the Bonhoeffer Fund (http://www.prnewswire.com/news-releases/keith-smith-and-willow-oak-asset-management-announce-the-launch-of-the-bonhoeffer-fund-300487909.html)


Also if anyone has any info, notes, or anything they'd like to share about the shareholders meeting back in May I'd appreciate reading about it.  Thanks.
Title: Re: SYTE - Sitestar
Post by: NoCalledStrikes on July 13, 2017, 11:41:10 AM
Registrar   HICHINA ZHICHENG TECHNOLOGY LTD.
First.com DNS record updated: Updated Date   2017-04-21T15:13:09Z
Title: Re: SYTE - Sitestar
Post by: globalfinancepartners on August 07, 2017, 05:03:36 PM
Results out.  First.com sold for $200k net of commission vs $200k cost basis. 

https://www.sec.gov/Archives/edgar/data/1096934/000156459017016023/syte-10q_20170630.htm
https://www.sec.gov/Archives/edgar/data/1096934/000156459017016024/syte-ex991_6.htm

I saw it by typing in first.com into an internet browser.

edit: the site appears to be a go daddy type domain name registration company if I am understanding it correctly

That is news to me. Where did you see that? Any mention of how much it was sold for?
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on August 08, 2017, 09:17:18 AM
"The HVAC Operations team continues to harmonize the acquisition entities"

New A Capella business line?
Title: Re: SYTE - Sitestar
Post by: rkbabang on August 08, 2017, 09:37:35 AM
"The HVAC Operations team continues to harmonize the acquisition entities"

New A Capella business line?

There is nothing worse than unmellifluous HVAC acquisition entities.
Title: Re: SYTE - Sitestar
Post by: LightWhale on August 28, 2017, 10:47:18 AM
Any reason why the stock is up 22% today?
Title: Re: SYTE - Sitestar
Post by: rkbabang on August 28, 2017, 10:50:58 AM
Any reason why the stock is up 22% today?

Pretty low volume.  I don't think there is any specific reason other than lack of sellers.
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on August 28, 2017, 03:32:30 PM
Bid/Ask spread has been quite wide the past few days. Much of the time there has been no ask volume below .1895. This is small float and the big seller who was selling over the past few months appears to be done. Unless someone comes in with some volume to sell, any buy demand will push the price up.
Title: Re: SYTE - Sitestar
Post by: LightWhale on August 28, 2017, 09:13:38 PM
Thanks
Title: Re: SYTE - Sitestar
Post by: rkbabang on November 09, 2017, 05:46:03 PM
3Q17 Earnings https://www.otcmarkets.com/stock/SYTE/news/Sitestar-Corporation-Announces-Third-Quarter-2017-Financial-Results?id=174834&b=y

"Comprehensive income attributable to Sitestar Corporation Stockholders for the third quarter and nine months ending September 30, 2017, was $817,224 and $1,386,777, respectively. Book value per share was 5.4 cents at quarter end compared to 5.1 cents from the previous quarter end."

10-Q: https://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=12372198
Title: Re: SYTE - Sitestar
Post by: slkiel on December 11, 2017, 03:51:10 PM
As described in the announcement below and the two shareholder letters, Sitestar is welcoming Jeff Moore (ragnarisapirate) as an operating partner within the company and reorganizing his existing business into a wholly owned subsidiary of Sitestar.

http://www.otcmarkets.com/ajax/showNewsReleaseDocumentById.pdf?id=28702

http://sitestarcorp.com/wp-content/uploads/2017/12/Sitestar-Shareholder-Letter-from-CEO-Steven-Kiel.pdf

http://sitestarcorp.com/wp-content/uploads/2017/12/Sitestar-Shareholder-Letter-from-Chairman-Jeffrey-Moore.pdf
Title: Re: SYTE - Sitestar
Post by: premfan on December 26, 2017, 11:45:28 AM
I like what these guys are building here. That said, everyone else does too with i believe 2x BV.  A couple notes after a deeper look:

1.) There core business's are extremely scaleable. 

2.) I underestimated there access to deals.  Good vehicle for private to public arb. These guys know a lot of people. Part of the micro cap revolution. 

3.) As of now there dilution has been a value add. Using SE/ Rev growth metrics.

Things to look for:
- Mixture of GM with core business's. 
- Dilution doesn't become a value add
- how the managers deal with a recession.  The track record of the main players (public) were created  during one of the greatest bull markets ever. 

premfan



Title: Re: SYTE - Sitestar
Post by: Foreign Tuffett on January 11, 2018, 02:30:02 PM
Sitestar on the first tranche of Mt Melrose houses today. Looks like the purchase price for the entire portfolio is going to be somewhat higher than initially estimated:

original estimate vs. new estimate:

122 total houses vs 125 total houses

$8.4 million gross purchase price ($68,852 per house) vs. $9.3 million gross ($74,000 per house)

$3.5 million net purchase price vs. $3.9 million net
Title: Re: SYTE - Sitestar
Post by: slkiel on January 17, 2018, 10:01:39 AM
The 2018 Sitestar Shareholder meeting will be held on May 19, 2018 in Phoenix, AZ. We'll also be hosting an investor day that weekend for Alluvial Fund, Bonhoeffer Fund, and Bridge Reid Funds to make presentations on their funds.

We'll answer all of your questions at the meeting. We had a great crowd last year and look forward to seeing old and new faces this year!

I will post the proxy statement that will have additional information when it becomes available.
Title: Re: SYTE - Sitestar
Post by: TBW on March 09, 2018, 04:16:25 AM
Like last year, myself and others want to set up a dinner for shareholders and people in town for the meeting to gather.

All are welcome.  Please see the link below and sign up so we get an idea of numbers, then we can choose a suitable place.

http://sytedinner.com/

Was a great time last year and I expect it to be the same this year.
Title: Re: SYTE - Sitestar
Post by: Broeb22 on March 09, 2018, 06:15:58 AM
I'm having a difficult time registering. It says ticket sales are closed. Am I missing something?
Title: Re: SYTE - Sitestar
Post by: TBW on March 09, 2018, 10:13:15 AM
Oops.  It is working now.  Sorry about that.  Thanks for letting me know.
Title: Re: SYTE - Sitestar
Post by: LR1400 on March 09, 2018, 10:53:46 AM
As described in the announcement below and the two shareholder letters, Sitestar is welcoming Jeff Moore (ragnarisapirate) as an operating partner within the company and reorganizing his existing business into a wholly owned subsidiary of Sitestar.

http://www.otcmarkets.com/ajax/showNewsReleaseDocumentById.pdf?id=28702

http://sitestarcorp.com/wp-content/uploads/2017/12/Sitestar-Shareholder-Letter-from-CEO-Steven-Kiel.pdf

http://sitestarcorp.com/wp-content/uploads/2017/12/Sitestar-Shareholder-Letter-from-Chairman-Jeffrey-Moore.pdf


I don't agree that apartments are any worse or better of an investment than single family homes. People will rent both.

I own both, but I just got into apartments and plan to continue down the apartment path right now. The apartments get much better leverage terms and are easier to raise capital for. Apartments are also valued differently, despite them both being rent-able.

I've made close to 100% return on equity in a short amount of time with houses by small sums. And it required an appreciating market and it's obviously small sums.
Title: Re: SYTE - Sitestar
Post by: slkiel on March 30, 2018, 01:58:07 PM
Please find Sitestar's 10-K and shareholder letter below:

10-K: https://goo.gl/QxTpsF
Shareholder Letter: https://goo.gl/Z2gLSM

Keith Smith, Mike Bridge, Nathan Reid, and I will be at Fairfax and at Sanjeev's Premier/Fairfax dinner. We look forward to seeing everyone there!
Title: Re: SYTE - Sitestar
Post by: CorpRaider on March 30, 2018, 02:31:23 PM
Will read.  Thx for sharing.
Title: Re: SYTE - Sitestar
Post by: Drokos on March 30, 2018, 03:50:45 PM
Thanks for the update. I continue to have interest in the story but a few concerns make it uninvestable to me, even if shares were to trade down to a more reasonable 1-1.5x book value. Admittedly, I haven’t reviewed the 10-K or the exhibits yet, but I was a little disappointed with the letter. Heavy on the folksy fluff, light on the substance or long-term plan:

1) The business is essentially a $15m investment fund/conglomerate with >$2m in operating expenses (~13% annual management fee). I don’t see how we can expect any net outperformance with that kind of drag. If assets grew to $100m, this wouldn’t be as big of a drag, but how do we get there? Even growing assets at a 20-25% will take a decade or two to get there. Would be nice to see management at least acknowledge they understand it is an issue.

2) I assume management is not willing to disclose the terms of their arrangements with the hedge funds, which unfortunately makes it impossible to understand what the upside is in that business segment. The profit share could be 1% of the performance fees or 50%. I would have also expected to see the AUM of each fund disclosed annually.

3) HVAC business – would like to hear more about what was the cause of the disappointing results. This business seemed questionable from the start. It was pitched as a high ROI lay-up type business opportunity, and now it is losing money? That’s a huge swing, and would seem to warrant a more substantial explanation.

I wish Mt Melrose was spun off as a REIT or MLP and I could directly invest in Jeff.
Title: Re: SYTE - Sitestar
Post by: racemize on March 30, 2018, 04:37:30 PM

1) The business is essentially a $15m investment fund/conglomerate with >$2m in operating expenses (~13% annual management fee). I don’t see how we can expect any net outperformance with that kind of drag. If assets grew to $100m, this wouldn’t be as big of a drag, but how do we get there? Even growing assets at a 20-25% will take a decade or two to get there. Would be nice to see management at least acknowledge they understand it is an issue.

I'm a little confused by this statement--they showed an ROE of 13.5% this year.  That seems decent to me for a conglomerate.  Are you expecting google-like operating margins?  If 13.5% is repeatable (and it appears to include a fair amount of growth investment in costs), then I imagine that will result in long-term outperformance of the S&P.

There's also a fair amount of operating segments (HVAC/Internet and operating the real estate sections), so I don't think its appropriate to compare it to a pure investment fund.
Title: Re: SYTE - Sitestar
Post by: Spekulatius on March 30, 2018, 07:06:23 PM
Thanks for the update. I continue to have interest in the story but a few concerns make it uninvestable to me, even if shares were to trade down to a more reasonable 1-1.5x book value. Admittedly, I haven’t reviewed the 10-K or the exhibits yet, but I was a little disappointed with the letter. Heavy on the folksy fluff, light on the substance or long-term plan:

1) The business is essentially a $15m investment fund/conglomerate with >$2m in operating expenses (~13% annual management fee). I don’t see how we can expect any net outperformance with that kind of drag. If assets grew to $100m, this wouldn’t be as big of a drag, but how do we get there? Even growing assets at a 20-25% will take a decade or two to get there. Would be nice to see management at least acknowledge they understand it is an issue.

Their corporate expenses are about 660k. Essentially, the slowly dying internet business is paying for it. The earnings come mostly from gains from their investment in Alluvial, which had a pretty good year. This is not  a conglomerate, it’s my more like a venture capital fund with a couple of totally unrelated startups.

2) I assume management is not willing to disclose the terms of their arrangements with the hedge funds, which unfortunately makes it impossible to understand what the upside is in that business segment. The profit share could be 1% of the performance fees or 50%. I would have also expected to see the AUM of each fund disclosed annually.

3) HVAC business – would like to hear more about what was the cause of the disappointing results. This business seemed questionable from the start. It was pitched as a high ROI lay-up type business opportunity, and now it is losing money? That’s a huge swing, and would seem to warrant a more substantial explanation.

I wish Mt Melrose was spun off as a REIT or MLP and I could directly invest in Jeff.

Edit - not sure where my list went the first time.

Corporate expenses are $660k , not $2M, still high, but the slowly dying Internet business covers most of them. The earnings  came $2M+ appreciation  their Alluvial investment, which had a great year in 2017. I think the biggest headache seems to be the HVAC roll up business (HVAC value fund is a terrrible name for it, IMO) with its operating losses. ok, they hired a new GM, so we will see how this does this year. I don’t really understand all these fee sharing deals, it sound like Alluvial helps other asset management business to get off the ground


This is not a conglomerate, it’s more like a venture capital fund housing several upstarts, thwt really don’t have anything to do with each other. It will be interesting to see, how capital allocation decisions will be done in the future , because I am fairly sure, not all of them will work out and when to pull the plug is important.
Title: Re: SYTE - Sitestar
Post by: Morgan on March 30, 2018, 08:20:06 PM
I own both, but I just got into apartments and plan to continue down the apartment path right now. The apartments get much better leverage terms and are easier to raise capital for. Apartments are also valued differently, despite them both being rent-able.

I've made close to 100% return on equity in a short amount of time with houses by small sums. And it required an appreciating market and it's obviously small sums.

Not to derail the thread any, but I disagree that houses are the same as apartment buildings. In my market (and yours may be different), houses get the same rent, but are 3-4x as big and thus have way more maintenance costs. They also cost more to buy per unit (50-100% in my market), and seeing as they are single family homes you only get one unit per costly closing.

ROI does however depend on how you structure the deal. Sometimes buying a house can generate a great ROI, but tend to prefer multi unit buildings even if they are less commonly for sale.
Title: Re: SYTE - Sitestar
Post by: LR1400 on March 30, 2018, 09:02:43 PM
I own both, but I just got into apartments and plan to continue down the apartment path right now. The apartments get much better leverage terms and are easier to raise capital for. Apartments are also valued differently, despite them both being rent-able.

I've made close to 100% return on equity in a short amount of time with houses by small sums. And it required an appreciating market and it's obviously small sums.

Not to derail the thread any, but I disagree that houses are the same as apartment buildings. In my market (and yours may be different), houses get the same rent, but are 3-4x as big and thus have way more maintenance costs. They also cost more to buy per unit (50-100% in my market), and seeing as they are single family homes you only get one unit per costly closing.

ROI does however depend on how you structure the deal. Sometimes buying a house can generate a great ROI, but tend to prefer multi unit buildings even if they are less commonly for sale.


Didn’t say they were the same. They both are viable is what I said.

But....to your point I prefer Multifamily for the same reasons you describe plus the better leverage.
Title: Re: SYTE - Sitestar
Post by: Morgan on March 30, 2018, 09:13:23 PM
I own both, but I just got into apartments and plan to continue down the apartment path right now. The apartments get much better leverage terms and are easier to raise capital for. Apartments are also valued differently, despite them both being rent-able.

I've made close to 100% return on equity in a short amount of time with houses by small sums. And it required an appreciating market and it's obviously small sums.

Not to derail the thread any, but I disagree that houses are the same as apartment buildings. In my market (and yours may be different), houses get the same rent, but are 3-4x as big and thus have way more maintenance costs. They also cost more to buy per unit (50-100% in my market), and seeing as they are single family homes you only get one unit per costly closing.

ROI does however depend on how you structure the deal. Sometimes buying a house can generate a great ROI, but tend to prefer multi unit buildings even if they are less commonly for sale.


Didn’t say they were the same. They both are viable is what I said.

But....to your point I prefer Multifamily for the same reasons you describe plus the better leverage.

Touché
Title: Re: SYTE - Sitestar
Post by: LC on March 31, 2018, 07:40:38 AM
Anyone think that everyone and their mother is trying to buy multi-family units to leverage the upkeep and such?

I would think this would create some room in the single family units for a smart operator who can standardize the types of repairs/maintenance that push people away from these units. Would be interested to hear your thoughts as I feel you guys are closer to this market than I am (as a lowly homeowner).
Title: Re: SYTE - Sitestar
Post by: LR1400 on March 31, 2018, 10:20:59 AM
Single family is a niche but as the poster above stated, you typically pay more per bed/unit, they don’t have the scale benefits....
Most people I’ve know who start in single family move toward Multifamily Ns other real estate.

The benefits to single family:
1. many don’t want to live in an apartment complex, they are valued different, so in an appreciating market you can get a run up on the value of the home. But in those markets Multifamily is also typically increasing in value.
2. When you sell, you usually aren’t selling to other investors.

I will keep most of my single families but I am moving toward apartments in areas where population is growing and the new inventory is stagnant.
Title: Re: SYTE - Sitestar
Post by: globalfinancepartners on March 31, 2018, 10:28:18 AM
This is probably the wrong thread for this, but the other big benefit of multi-family is that I use a much smaller percentage in my spreadsheet projections for vacancy - it is very unlikely that a big portion of the units will ever be vacant at the same time.  If it takes a month or more to find the right tenant for a single family house, you are at 100% vacancy for that time.  We just had 15 days of vacancy for an apartment turnover and it was barely a blip in cash flow.

But it is true - people don't like living in multi family nearly as much, and the price per square foot is lower if you decide to sell the property.

As for Sitestar, I thought the letter was really good. 
Title: Re: SYTE - Sitestar
Post by: DTEJD1997 on March 31, 2018, 11:49:47 AM
Hey all:

It is going to be interesting to see SYTE progress in the future.

The property acquisition should be cash flowing right from day one.  The cash flows should be steady & growing over time.  Jeff is a good operator and should grow this division nicely.

The internet division is doing pretty good, but it is slowly shrinking.

I'm surprised the HVAC division has plumbing attached to it now.  When this division was started/acquired it was billed as a no-brainer, easy $$$.   It appears that not to be the case, with no earnings as of yet.

Obviously, no earnings is a problem. 

The real problem as I see it is that every division of SYTE needs to be successful in the beginning for SYTE to really grow.  If the HVAC division continues to disappoint, it is gobbling up capital & management's attention that is better spent on other things.

The other problem is that at this point, SYTE's earnings are heavily dependent on the gains from the asset managers that they've partnered with.  If there is a big market downturn, it is highly likely these earnings will not be there.  Of course, if the managers can anticipate the downturn and profit off it, SYTE will be off to the races.

Finally, what will internet earnings be in 2-3 years?  Certainly lower than what they are today.

So the only division that has a steady/reliable earnings stream (at this point) is the property division.

In order for SYTE to really take off, I think they need to do the following:

1). Get the HVAC division fixed PRONTO.

2). Get more assets under management.  Expenses are simply too high for what they currently have.  If they can grow quickly, this problem will dissipate.  Maybe expand real estate to other cities/regions?

3). They've got to put together some good years, back to back to back in terms of book value growth.  The first full year was no good.  The second year was OK, but not great.  You could even make an argument that they did OK (+16.7%), but didn't hit the ball out of the park,  IF you ONLY measure growth in book value.

If they can do those things, SYTE will be well positioned for the future.





 
Title: Re: SYTE - Sitestar
Post by: Spekulatius on March 31, 2018, 02:21:04 PM
A lot of the it book value growth came from issuing stock above book value.
Title: Re: SYTE - Sitestar
Post by: Value^2 on March 31, 2018, 08:17:20 PM
.......

Just for the record, i think andgroup's arguments are very weak where he tries to sugarcoat Kiel's self-dealing. In my books, Kiel is similar charlatan like $hitlari.

......
but with InelegantInvestor i agreed wholeheartedly! 
Title: Re: SYTE - Sitestar
Post by: Tim Eriksen on March 31, 2018, 09:46:56 PM
A lot of the it book value growth came from issuing stock above book value.

Your comment is very misleading.  On a dollar basis yes, but the letter was clearly noting a per share basis.  Only a small amount came from issuing stock at .05 when book value at year end was .0482.   It amounts to about $166,000 of the $2.3 million increase.
Title: Re: SYTE - Sitestar
Post by: Spekulatius on April 02, 2018, 07:34:17 PM
A lot of the it book value growth came from issuing stock above book value.

Your comment is very misleading.  On a dollar basis yes, but the letter was clearly noting a per share basis.  Only a small amount came from issuing stock at .05 when book value at year end was .0482.   It amounts to about $166,000 of the $2.3 million increase.

Yes, you are correct, the secondary was only slightly above book at that time.
Title: Re: SYTE - Sitestar
Post by: globalfinancepartners on April 09, 2018, 07:22:43 AM
I noticed this morning the proxy was released, I guess last week.  New name for the company is "Enterprise Diversified."

https://www.sec.gov/Archives/edgar/data/1096934/000156459018007801/syte-pre14a_20180406.htm
Title: Re: SYTE - Sitestar
Post by: Value^2 on April 10, 2018, 09:17:41 AM
I noticed this morning the proxy was released, I guess last week.  New name for the company is "Enterprise Diversified."

https://www.sec.gov/Archives/edgar/data/1096934/000156459018007801/syte-pre14a_20180406.htm

They should adopt new corporate slogan:
Enterprise Diversified
"Fees never sleeps!"
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on April 10, 2018, 09:19:20 AM
I noticed this morning the proxy was released, I guess last week.  New name for the company is "Enterprise Diversified."

https://www.sec.gov/Archives/edgar/data/1096934/000156459018007801/syte-pre14a_20180406.htm

They should adopt new corporate slogan:
Enterprise Diversified
"Fees never sleeps!"


Steven Kiel got a lovely bonus this year.
Title: Re: SYTE - Sitestar
Post by: frog03 on April 10, 2018, 10:09:33 AM
Steven Kiel talks like Buffett but there are definitely some not so Buffett-like behaviors:
1) Large management compensation (especially relative to the small size of the company and the fact is he doubly collecting with his hedge fund fees...)
2) Change in name


Title: Re: SYTE - Sitestar
Post by: Tim Eriksen on April 10, 2018, 10:33:29 AM
Steven Kiel talks like Buffett but there are definitely some not so Buffett-like behaviors:
1) Large management compensation (especially relative to the small size of the company and the fact is he doubly collecting with his hedge fund fees...)
2) Change in name

Seriously.  Name change concerns you as non-Buffett like.   A 120k bonus?  That is 2% of the market value increase for the year (excluding the portion due to increased share count).  For the 2 years and a half month SYTE had a 215% return.  Kiel received 300k total for that.  Great deal for shareholders.  I guess some people just need to bitch about something.     
Title: Re: SYTE - Sitestar
Post by: CorpRaider on April 10, 2018, 10:51:59 AM
It's 20% of increase in book value in excess of a 5% hurdle, computed annually, right? 
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on April 10, 2018, 10:52:25 AM
Steven Kiel talks like Buffett but there are definitely some not so Buffett-like behaviors:
1) Large management compensation (especially relative to the small size of the company and the fact is he doubly collecting with his hedge fund fees...)
2) Change in name

Seriously.  Name change concerns you as non-Buffett like.   A 120k bonus?  That is 2% of the market value increase for the year (excluding the portion due to increased share count).  For the 2 years and a half month SYTE had a 215% return.  Kiel received 300k total for that.  Great deal for shareholders.  I guess some people just need to bitch about something.     

Gosh, I really didn't want to dredge this argument back up, but, here we are.
I don't care at all about the name change, as long as he's not changing it to Kiel Holdings.

The compensation question? That's real.
Steven gets paid by his fund to invest in SYTE and he gets paid by SYTE. He's double dipping. The biggest gain he got for his fund was by buying millions of shares at well below market value.

HVAC has been disappointing at best. There is and was a reason that these businesses sell at such low multiples. Asset management has been better, but results cover a period of the market moving straight up. Q1 will likely be less pretty. Legacy real estate is gone, basically, and internet is a slightly improved downward trajectory.  Just about the entire 215% return(im market value, not book value) came prior to the dilutive offering and all of these investments. Oh, and now you have Jeff's business too, which is probably the best asset in there.

You can argue and justify everything, but, ultimately, the optics are terrible. And my experience tells me that when the optics are bad and you need to start explaining why reality differs... well, it doesn't.

We've made different bets here. I respect your opinion, but I think you're missing the point. Integrity matters and the behavior here has been worrisome for some time. You are a frog that is slowly being boiled, and more and more of your profits will go to Kiel, et. al.

Steven talks about trust in his letters but almost every action he has taken has suggested to shareholders that they should not trust him to have their interests at heart.

I hope I'm wrong. I have sold some shares over time, but still hold a fair amount, that I continue to sell as the opportunity presents itself.
Title: Re: SYTE - Sitestar
Post by: TBW on April 10, 2018, 11:46:07 AM
I agree with Tim.  Kiel's comp is a silly issue here.  A point that is missed, his bonus is a multiple of 100k, so if assets were to go up 20x, his bonus as it is written now, would still only be a multiple of 100k.  Huge operating leverage for shareholders and I think a great deal for shareholders.

You could have bought shares at $0.05 if you wanted to, just had to pick up the phone, they didn't sell all they wanted to.  If you aren't accredited, that rule is unfair imo, then yes you can complain there but that isn't SYTE's fault.

The optics of certain things does look poor, but having had many conversations with these guys they all clear up once you understand the restrictions they were under.  That is my opinion, you are certainly welcome to yours and I suppose time will tell.
Title: Re: SYTE - Sitestar
Post by: rkbabang on April 10, 2018, 12:01:37 PM
My only problem with the name is that it is so generic sounding.  "Enterprise Diversified"  Enterprise is such a generic word, its like calling it Company, Inc.

Why not Sitestar Diversified or something else memorable, Melrose Diversified?

Oh well, I guess it doesn't really matter.

Title: Re: SYTE - Sitestar
Post by: John Hjorth on April 10, 2018, 12:56:21 PM
I agree with Tim.  Kiel's comp is a silly issue here.  A point that is missed, his bonus is a multiple of 100k, so if assets were to go up 20x, his bonus as it is written now, would still only be a multiple of 100k.  Huge operating leverage for shareholders and I think a great deal for shareholders.

You could have bought shares at $0.05 if you wanted to, just had to pick up the phone, they didn't sell all they wanted to.  If you aren't accredited, that rule is unfair imo, then yes you can complain there but that isn't SYTE's fault.

The optics of certain things does look poor, but having had many conversations with these guys they all clear up once you understand the restrictions they were under.  That is my opinion, you are certainly welcome to yours and I suppose time will tell.

That is always true, Tim. [ : - )  ]

Disclaimer: No skin in the game here. My showstopper for even diving just a bit deep into this investment is: The plumming businessess, serial aquired. I might be wrong about theese kind of businesses in the US, but I have my own personal operational experience here in Northern Europe with having such colleagues. I ended up very angry, my subordinates scared out of their minds - they,  still continuing stealing from warehouse stocks - while security tightned and tightned - thinking: "What?! - Aren't we allowed to steal from our employer anymore?"
Title: Re: SYTE - Sitestar
Post by: NBL0303 on April 10, 2018, 01:11:09 PM

You could have bought shares at $0.05 if you wanted to, just had to pick up the phone, they didn't sell all they wanted to.  If you aren't accredited, that rule is unfair imo, then yes you can complain there but that isn't SYTE's fault.


Thank you for your insights.  I have a question about this that maybe you or someone else who is familiar with Sitestar and their private offering could help with: For the shareholders who purchased those 5 cent shares in private transactions - were they/are they restricted from selling them for a certain amount of time?  I realize they were probably restricted with stock legend issues/etc. but if a shareholder participated in the private offering, could they go about the process of getting them registered, the legend removed, whatever - and sell them on the open market - or was that restricted for a certain amount of time?
Title: Re: SYTE - Sitestar
Post by: LR1400 on April 10, 2018, 01:21:07 PM
I agree with Tim.  Kiel's comp is a silly issue here.  A point that is missed, his bonus is a multiple of 100k, so if assets were to go up 20x, his bonus as it is written now, would still only be a multiple of 100k.  Huge operating leverage for shareholders and I think a great deal for shareholders.

You could have bought shares at $0.05 if you wanted to, just had to pick up the phone, they didn't sell all they wanted to.  If you aren't accredited, that rule is unfair imo, then yes you can complain there but that isn't SYTE's fault.

The optics of certain things does look poor, but having had many conversations with these guys they all clear up once you understand the restrictions they were under.  That is my opinion, you are certainly welcome to yours and I suppose time will tell.

That is always true, Tim. [ : - )  ]

Disclaimer: No skin in the game here. My showstopper for even diving just a bit deep into this investment is: The plumming businessess, serial aquired. I might be wrong about theese kind of businesses in the US, but I have my own personal operational experience here in Northern Europe with having such colleagues. I ended up very angry, my subordinates scared out of their minds - they,  still continuing stealing from warehouse stocks - while security tightned and tightned - thinking: "What?! - Aren't we allowed to steal from our employer anymore?"

With you. Though I have a friend who does ok in HVAC, I don't think it is a business I want to own. I can't see the ability to scale beyond local. I'm sure others can.
Title: Re: SYTE - Sitestar
Post by: Tim Eriksen on April 10, 2018, 02:21:53 PM

You could have bought shares at $0.05 if you wanted to, just had to pick up the phone, they didn't sell all they wanted to.  If you aren't accredited, that rule is unfair imo, then yes you can complain there but that isn't SYTE's fault.


Thank you for your insights.  I have a question about this that maybe you or someone else who is familiar with Sitestar and their private offering could help with: For the shareholders who purchased those 5 cent shares in private transactions - were they/are they restricted from selling them for a certain amount of time?  I realize they were probably restricted with stock legend issues/etc. but if a shareholder participated in the private offering, could they go about the process of getting them registered, the legend removed, whatever - and sell them on the open market - or was that restricted for a certain amount of time?

Yes they were fully restricted until Sitestar completed the legal work necessary.  In the end I think it took around 12-13 months to get removed.   
Title: Re: SYTE - Sitestar
Post by: NBL0303 on April 10, 2018, 03:07:01 PM

You could have bought shares at $0.05 if you wanted to, just had to pick up the phone, they didn't sell all they wanted to.  If you aren't accredited, that rule is unfair imo, then yes you can complain there but that isn't SYTE's fault.


Thank you for your insights.  I have a question about this that maybe you or someone else who is familiar with Sitestar and their private offering could help with: For the shareholders who purchased those 5 cent shares in private transactions - were they/are they restricted from selling them for a certain amount of time?  I realize they were probably restricted with stock legend issues/etc. but if a shareholder participated in the private offering, could they go about the process of getting them registered, the legend removed, whatever - and sell them on the open market - or was that restricted for a certain amount of time?

Yes they were fully restricted until Sitestar completed the legal work necessary.  In the end I think it took around 12-13 months to get removed.   

Thank you, Tim!  So any purchasers of those shares are now free to sell them?  I don't have a problem with that or anything I'm just curious.
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on April 10, 2018, 03:16:56 PM

You could have bought shares at $0.05 if you wanted to, just had to pick up the phone, they didn't sell all they wanted to.  If you aren't accredited, that rule is unfair imo, then yes you can complain there but that isn't SYTE's fault.


Thank you for your insights.  I have a question about this that maybe you or someone else who is familiar with Sitestar and their private offering could help with: For the shareholders who purchased those 5 cent shares in private transactions - were they/are they restricted from selling them for a certain amount of time?  I realize they were probably restricted with stock legend issues/etc. but if a shareholder participated in the private offering, could they go about the process of getting them registered, the legend removed, whatever - and sell them on the open market - or was that restricted for a certain amount of time?

Yes they were fully restricted until Sitestar completed the legal work necessary.  In the end I think it took around 12-13 months to get removed.   
It's interesting. One of the big reasons given for the huge discount was that the shares were restricted. If they were indeed only restricted for one year, does not seem to at all justify the 50% discount.
Title: Re: SYTE - Sitestar
Post by: Tim Eriksen on April 10, 2018, 06:43:43 PM
Buyers are free to sell as far as I know.  As I recall the discount was closer to 35 to 40% (.05 vs. market of .08).  Not trying to nitpick.  At the time I had no way of knowing how long the restriction would last.  If purchasers might have to pay some of the cost.  What the opportunity cost in holding would be.  How well the company would perform. etc.

I bought in my fund, but I chose not to present it to Solitron's board at the time thinking it would be a tough sell as the first purchase.  Oops. 
Title: Re: SYTE - Sitestar
Post by: DTEJD1997 on April 10, 2018, 10:01:27 PM
My only problem with the name is that it is so generic sounding.  "Enterprise Diversified"  Enterprise is such a generic word, its like calling it Company, Inc.

Why not Sitestar Diversified or something else memorable, Melrose Diversified?

Oh well, I guess it doesn't really matter.
There is a problem with this name change.  I do not know if it is intentional or not.

The problem is that it is so generic, it is going to play havoc with search engines.  That is, a prospective investor, OR anybody else wishing to research the company will type in "enterprise diversified" and it will come back with false positive hits.

Obviously, somebody who has good "Google-Fu" can work around this...but it will require more time & energy & will also require knowledge of how to search.

I often wonder if some companies do this on purpose to fly under the radar or hideout from prying eyes?
Title: Re: SYTE - Sitestar
Post by: CorpRaider on April 11, 2018, 05:04:10 AM
What's the problem with the HVAC bidness?  Employees take the lion's share/are hard to retain?  Seems like lots of guys start up their own shop, with like one helper, in that industry.
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on April 11, 2018, 05:31:26 AM
What's the problem with the HVAC bidness?  Employees take the lion's share/are hard to retain?  Seems like lots of guys start up their own shop, with like one helper, in that industry.
HVAC contractors are asset-lite(maybe they own a truck). Only proprietary value is customer list and relationships. It's generally a relationship business. How long does that value last once old owner moves on?

So you're not buying reproducible revenues and profits, necessarily.

Title: Re: SYTE - Sitestar
Post by: valuedontlie on April 11, 2018, 05:40:47 AM
There are no public residential HVAC operators... And the public HVAC companies on the commercial side are mostly in design/build as opposed to maintenance/repair...

Similar attributes would be the plumbing industry and I would look at Chemed (CHE) which owns Roto Rooter. It is mostly plumbing and drain cleaning. Consistent revenue growth, 20% EBITDA margins, hardly any capex, and buying up smaller operators at 4-5x EBITDA.

Presentations site:
http://ir.chemed.com/events-and-presentations/upcoming-events
Title: Re: SYTE - Sitestar
Post by: globalfinancepartners on April 11, 2018, 06:18:07 AM
Last time I was shooting the shit with our HVAC man (an owner operator) he spent an hour talking about all the non-compete agreements his friends and colleagues have subverted over the years. 
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on April 11, 2018, 07:57:39 AM
Last time I was shooting the shit with our HVAC man (an owner operator) he spent an hour talking about all the non-compete agreements his friends and colleagues have subverted over the years. 

It turns out these assets are cheap for a reason.
Title: Re: SYTE - Sitestar
Post by: CorpRaider on April 11, 2018, 08:02:07 AM
Interesting stuff.  Thanks.
Title: Re: SYTE - Sitestar
Post by: Jurgis on April 11, 2018, 08:35:10 AM
Last time I was shooting the shit with our HVAC man (an owner operator) he spent an hour talking about all the non-compete agreements his friends and colleagues have subverted over the years.

So basically owner could sell his business and then start a new one and pretty much go to his former clients while the buyer is left with not much?

Not saying this happened to SYTE. Just clarifying.
Title: Re: SYTE - Sitestar
Post by: oddballstocks on April 11, 2018, 08:58:18 AM
Last time I was shooting the shit with our HVAC man (an owner operator) he spent an hour talking about all the non-compete agreements his friends and colleagues have subverted over the years.

So basically owner could sell his business and then start a new one and pretty much go to his former clients while the buyer is left with not much?

Not saying this happened to SYTE. Just clarifying.

When I was in high school my dad considered buying an HVAC dealer.  He worked in sales at a distributor and knew one of his best clients was considering selling.  He went fairly far with the transaction, audited the books, made some offers, hired an accountant to advise on M&A.  The thing stopped dead in its tracks for a single reason.  The seller had accumulated $50k of old inventory that they wanted sticker price for, while my dad recognized it was worthless.  They were $50k off on the price and they couldn't make a deal.  The seller wanted $300k, my dad would pay $250k.

I mention this because it's common.  You have someone who isn't a business person running a business.  They over spend on inventory, or trucks, or tools, or whatever and they want to "get their money out."  It isn't a bad thing, it's the nature of the business, and it's common.

I've talked to my dad about this extensively.  He was going to buy in not because it was a good deal, but because he was familiar with the industry.  He said this company had about a 5% net margin, and he felt he could double it by changing how they approached their selling, how they managed inventory, and how they scheduled repairs.  There are a lot of costs for HVAC repair.  This is off the top of my head, but I believe to get a person to your house costs about $150.  That's the truck, the tools, the labor, the benefits, and the time to drive.  If they can't make $150 right away they're losing money on the visit.  That's why a lot of places have a $70 service charge, they're trying to recoup half of that cost before they arrive.

My dad went into training HVAC techs.  He was a teacher before sales and recognized he loved to teach.  The biggest issue is there are not enough HVAC techs, or people who want to do this.  He said companies are struggling to hire, and they're willing to pay for classroom training to bring them up to speed.  Some of these classes are $15-20k.  But a good tech can make upwards of $40/hr.

The problem with HVAC is two fold.  The first is EVERYTHING is depreciating, the equipment, the tools, even the skills as new models are replaced.  The second is as your labor becomes more skilled there is incentive for them to go off on their own.

My dad said the most common situation was a guy is making $35/hr and sees that his company bills him at $150/hr.  He thinks "geez, I have a truck, I have these tools, why don't I go off on my own?"  And they do, and they charge $125/hr for labor, their wife does the books and the phone and they do ok.  Sometimes they recognize that it's better to be an employee, but some make it.  But it's REALLY hard to scale that thing. 
Title: Re: SYTE - Sitestar
Post by: Spekulatius on April 11, 2018, 10:01:49 AM
What's the problem with the HVAC bidness?  Employees take the lion's share/are hard to retain?  Seems like lots of guys start up their own shop, with like one helper, in that industry.
HVAC contractors are asset-lite(maybe they own a truck). Only proprietary value is customer list and relationships. It's generally a relationship business. How long does that value last once old owner moves on?

So you're not buying reproducible revenues and profits, necessarily.

It’s price competitive, since the service is fairly standardized . Most of the work falls within just a few month, so they work long hours in peak time. Price and lead time are the primary factors. The long hours favor owner operators over those that just have employees, imo.
Title: Re: SYTE - Sitestar
Post by: LowIQinvestor on April 11, 2018, 10:05:37 AM
Can anyone explain Kiel's job at Santa Monica Partners? thx!

"Includes 85,413,593 shares owned by Arquitos Capital Partners, LP. Arquitos Capital Management LLC acts as the General Partner to Arquitos Capital Partners, LP. Steven L. Kiel is the Managing Member of Arquitos Capital Management LLC and is deemed to have beneficial ownership over the Common Stock owned. Also includes 41,666,667 shares owned by Santa Monica Partners, L.P. SMP Asset Management, LLC is the general partner of Santa Monica Partners, L.P. and Steven L. Kiel is an advisor of SMP Asset Management, LLC and is deemed to have beneficial ownership over the Issuer's Common Stock owned by Santa Monica Partners, L.P. "
Title: Re: SYTE - Sitestar
Post by: oddballstocks on April 11, 2018, 11:03:02 AM
Can anyone explain Kiel's job at Santa Monica Partners? thx!

"Includes 85,413,593 shares owned by Arquitos Capital Partners, LP. Arquitos Capital Management LLC acts as the General Partner to Arquitos Capital Partners, LP. Steven L. Kiel is the Managing Member of Arquitos Capital Management LLC and is deemed to have beneficial ownership over the Common Stock owned. Also includes 41,666,667 shares owned by Santa Monica Partners, L.P. SMP Asset Management, LLC is the general partner of Santa Monica Partners, L.P. and Steven L. Kiel is an advisor of SMP Asset Management, LLC and is deemed to have beneficial ownership over the Issuer's Common Stock owned by Santa Monica Partners, L.P. "

Yes...nothing nefarious there.  But why not just email him and ask.
Title: Re: SYTE - Sitestar
Post by: LowIQinvestor on April 11, 2018, 11:30:19 AM
Can anyone explain Kiel's job at Santa Monica Partners? thx!

"Includes 85,413,593 shares owned by Arquitos Capital Partners, LP. Arquitos Capital Management LLC acts as the General Partner to Arquitos Capital Partners, LP. Steven L. Kiel is the Managing Member of Arquitos Capital Management LLC and is deemed to have beneficial ownership over the Common Stock owned. Also includes 41,666,667 shares owned by Santa Monica Partners, L.P. SMP Asset Management, LLC is the general partner of Santa Monica Partners, L.P. and Steven L. Kiel is an advisor of SMP Asset Management, LLC and is deemed to have beneficial ownership over the Issuer's Common Stock owned by Santa Monica Partners, L.P. "

Yes...nothing nefarious there.  But why not just email him and ask.


Was not implying anything nefarious. I just didn't know about this other job and what it entails exactly...
Title: Re: SYTE - Sitestar
Post by: slkiel on April 12, 2018, 06:45:39 AM
Hey guys- some answers to a few of your questions. We always go more in-depth at our shareholder meeting as well. I invite you attend (even if you are not currently a shareholder). Details are here: http://sitestarcorp.com/annual-meeting/

Name change: We have always wanted the subsidiaries to be the stars. The corporate office primarily does capital allocation, so the brands should be at the subsidiary level. Any investor who wants to know about Enterprise Diversified (ENDI) should follow our SEC filings. We will likely refer to the company as ENDI. If they want to learn about our subsidiaries they should keep an alert for Willow Oak, Mt Melrose, etc.

Santa Monica Partners reference: I was an advisor for the fund for a several years and they are a significant investor in the company. That entailed suggesting stock ideas and reviewing the holdings in their portfolio. I am no longer an advisor, but was for most of last year. The language in the proxy probably should have said that I was an advisor at the time of the issuance as opposed to the insinuation that I am currently an advisor.

Management compensation: The short answer here is that shareholders get an excellent deal. We have a COO, a chief of staff, a general counsel, a controller, and a back office admin at the corporate level in addition to me. Each of them deserves much, much higher pay. They put in far more work than peers at other companies and do a hyper-efficient job. They work for us because they enjoy the culture, autonomy, and opportunity to be involved in creating a special company. I recommend coming to the annual meeting and talking to them. They would be happy to share their opinions. As for my pay and the idea of double-dipping. I don't fully understand this argument. Our COO and general counsel also own a significant amount of shares in the company. Should they not also get a salary? I urge you to read my employment agreement (and Jeff's and Tabitha's) to see how we think about things. Objectively my salary and bonus are significantly less than the value I provide to the company and significantly less than anyone else would accept to run the company. We have set this up as fair as possible, and I would urge other companies to follow our compensation model.

The capital raise: I have written about this several times (including on this thread) and we talked extensively about it at the annual meeting. You can get additional background in last year's shareholder letter below. To be clear, we could not do a rights offering due to issues with the SEC and DTCC. It took several years to clear that up. However, anyone who had interest in participating was aware of the private placement. One of the reasons we did it in several phases was to make sure everyone knew about it. Even with that, we were unable to get it fully subscribed.

As for the price, 8 cents was not market value and I am not sure why that keeps being referenced. Something like $20,000 dollars of shares traded hands at that price. We were trying to raise more than $10 million to recapitalize the company. Even so, there was not nearly enough interest at 5 cents. I ended up having to backstop it at a far higher level than I wanted to.

The 5 cent price was set at book value. The company had not traded above book value for something like five years before. It often traded for less than half of book value even after our proxy group announced our intention to attempt to get board seats. There were restrictions with the private placement, but that was not the primary reason for the 5 cent price. The price was set internally when shares traded near book value.

If you are not experienced in the nano-cap world, you may not fully appreciate that the last trading price in an illiquid penny stock is not true value. If we could have raised money at 8 cents or 7 cents or 6 cents, we would have. We would have loved for the company to have another $6m in cash!

http://sitestarcorp.com/wp-content/uploads/2017/03/032417-Shareholder-Letter-1.pdf

I understand that Neal feels wronged in some way. I am not sure what we could have done differently to satisfy him. He had the opportunity to participate in the private placement and we would have loved for him to do so. We were talking about a company with about $4 million in book value at the time that files with the SEC. That size makes absolutely no sense to be public. If we did not do the capital raise we would have delisted and the share price would be significantly lower than today. We chose to attempt to grow the company and remain listed. 

I don't want to make it a habit to respond here, but I do want to clear up some of the ongoing misconceptions. We are doing the best we can to build a great company. We have a lot of great people involved. For others who have roles like this, they know it is far from easy. On the whole our results have been astronomically good. Have we been perfect? No chance, but we have always put the shareholders first and have acted ruthlessly on their behalf.

Don't attempt to group us ethically into the company who is named after their CEO (I won't name it here). Our people deserve much, much better than that. If you take the time to meet us, that will be painfully obvious. We would not have attracted the talent that we have if we act like that other company.
 
I hope you take the opportunity to meet us either at our annual meeting or at Berkshire: https://medium.com/@WOAM/investor-day-presentation-may-5-2018-28b71e38ca3a


 

Title: Re: SYTE - Sitestar
Post by: roark33 on April 12, 2018, 07:36:33 AM
One question I have around the discussion of trading price of an illiquid stock.  You seem to indicate that the stock market price is not indicative of the actual value.  I believe you use the stock market value to calculate your Fund's investment results and are compensated on that basis.  Do you think this is the appropriate method? 
Title: Re: SYTE - Sitestar
Post by: slkiel on April 12, 2018, 07:49:32 AM
The SYTE position was marked at an illiquidity discount in my fund. Now that it is more liquid, it is not. The August 31, 2016 mark for the fund, for example, was 5.2 cents. The valuation terms with the hedge fund are governed by its LPA. An individual investor's situation is going to be different. For those who follow my fund, you will see that about half of the gains in 2017 were from the SYTE position. I first owned shares in the company in 2013 and did not have material gains in the position until 2017. 
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on April 12, 2018, 09:55:59 AM

Management compensation: The short answer here is that shareholders get an excellent deal. We have a COO, a chief of staff, a general counsel, a controller, and a back office admin at the corporate level in addition to me. Each of them deserves much, much higher pay. They put in far more work than peers at other companies and do a hyper-efficient job. They work for us because they enjoy the culture, autonomy, and opportunity to be involved in creating a special company. I recommend coming to the annual meeting and talking to them. They would be happy to share their opinions. As for my pay and the idea of double-dipping. I don't fully understand this argument. Our COO and general counsel also own a significant amount of shares in the company. Should they not also get a salary? I urge you to read my employment agreement (and Jeff's and Tabitha's) to see how we think about things. Objectively my salary and bonus are significantly less than the value I provide to the company and significantly less than anyone else would accept to run the company. We have set this up as fair as possible, and I would urge other companies to follow our compensation model.

The capital raise: I have written about this several times (including on this thread) and we talked extensively about it at the annual meeting. You can get additional background in last year's shareholder letter below. To be clear, we could not do a rights offering due to issues with the SEC and DTCC. It took several years to clear that up. However, anyone who had interest in participating was aware of the private placement. One of the reasons we did it in several phases was to make sure everyone knew about it. Even with that, we were unable to get it fully subscribed.

As for the price, 8 cents was not market value and I am not sure why that keeps being referenced. Something like $20,000 dollars of shares traded hands at that price. We were trying to raise more than $10 million to recapitalize the company. Even so, there was not nearly enough interest at 5 cents. I ended up having to backstop it at a far higher level than I wanted to.

The 5 cent price was set at book value. The company had not traded above book value for something like five years before. It often traded for less than half of book value even after our proxy group announced our intention to attempt to get board seats. There were restrictions with the private placement, but that was not the primary reason for the 5 cent price. The price was set internally when shares traded near book value.

If you are not experienced in the nano-cap world, you may not fully appreciate that the last trading price in an illiquid penny stock is not true value. If we could have raised money at 8 cents or 7 cents or 6 cents, we would have. We would have loved for the company to have another $6m in cash!

http://sitestarcorp.com/wp-content/uploads/2017/03/032417-Shareholder-Letter-1.pdf

I understand that Neal feels wronged in some way. I am not sure what we could have done differently to satisfy him. He had the opportunity to participate in the private placement and we would have loved for him to do so. We were talking about a company with about $4 million in book value at the time that files with the SEC. That size makes absolutely no sense to be public. If we did not do the capital raise we would have delisted and the share price would be significantly lower than today. We chose to attempt to grow the company and remain listed. 

I don't want to make it a habit to respond here, but I do want to clear up some of the ongoing misconceptions. We are doing the best we can to build a great company. We have a lot of great people involved. For others who have roles like this, they know it is far from easy. On the whole our results have been astronomically good. Have we been perfect? No chance, but we have always put the shareholders first and have acted ruthlessly on their behalf.

Don't attempt to group us ethically into the company who is named after their CEO (I won't name it here). Our people deserve much, much better than that. If you take the time to meet us, that will be painfully obvious. We would not have attracted the talent that we have if we act like that other company.
 
I hope you take the opportunity to meet us either at our annual meeting or at Berkshire: https://medium.com/@WOAM/investor-day-presentation-may-5-2018-28b71e38ca3a

Again, I really don't want to get into a back and forth, but I feel I need to respond to what you have said. I do appreciate your making the effort to comment, even though we disagree markedly on a number of points.

First, regarding double dipping. You are paid, I presume, by your fund, to manage assets, and on the performance of those assets. You have invested a significant amount of your fund in Sitestar. You are paid by Sitestar a second time to manage those same assets, and are again compensated on their performance. Aside from that, there is a conflict in deciding whether to make investments at your fund or in this captive vehicle.

Contrary to your claim, I was not aware of the first private placement prior to its execution, nor do I think many were. That placement gave you majority control of the company without paying a control premium and without ever facing a shareholder vote(your prior claim that the support you received in the settlement from the prior CEO constituted a shareholder vote notwithstanding). I held >2% of outstanding shares prior to the dilution. You and other directors were well aware of this. At no time was I made aware of an opportunity to participate in a private placement by any of you.

I would agree that a company with $4 million in book value should have not have been public. Of course, the company had been public at that size for years. You created a false sense of urgency that demanded an immediate infusion of capital that allowed you to take control without a shareholder vote. I would have happily taken the time to meet you, as you suggest, prior to you embarking on this path. However at the time you asked that you not be contacted(in your initial letter) and you ignored or rejected multiple attempts to meet or talk. The first opportunity to meet came at the shareholder meeting after you had already given yourself a majority stake and my voice no longer had any weight to it.

Your argument about price and book value holds little weight as well. Yes, market price in an illiquid security has low correlation to value(which is one reason we all like to work in this space). Yet you trumpet the share price increase in your recent letter, and even in this comment when you refer  to your results as "astronomically good". As the main purchaser of the private placements, you could have chosen to pay a higher price- as the BOMN guys just did in their recent placement at well above book, but you did not. It is hard to maintain that market forces were at work when it was your own agency- on both sides of the transaction- that set the price.

The jury is out on your operating results. I think you would agree that HVAC is looking like a poor investment at present. Willow Oak looks better, but I don't know how it looks in a down market.  I think you are a smart guy and a reasonably talented investor, but your overconfidence has led you to be blind to how your actions appear to other shareholders. I was specifically not comparing you to Biglari, for example, who I think is pure malevolence.

I am unable to attend your annual meeting, but would be willing to meet with you or speak with you in another venue, should you desire.

Title: Re: SYTE - Sitestar
Post by: Tim Eriksen on April 12, 2018, 10:41:15 AM

First, regarding double dipping. You are paid, I presume, by your fund, to manage assets, and on the performance of those assets. You have invested a significant amount of your fund in Sitestar. You are paid by Sitestar a second time to manage those same assets, and are again compensated on their performance. Aside from that, there is a conflict in deciding whether to make investments at your fund or in this captive vehicle.


I am not trying to wade into your discussion with Steve, or defend him.  I may have a blind spot to this since I am in a similar situation, but I don't agree with the premise that he is managing the same assets and that it is therefore double dipping.  Clearly there is an overlap.  My fund owns 7% of Solitron. Steve's fund owns I believe 27% of Sitestar.  A company needs a CEO.  Should the fund manager do the work for nothing?  It is work, and it is additional work that someone else would likely charge more for.  In the end, the company is saving money and thus it is a benefit to both shareholders and fund investors.  I don't get why shareholders who are not fund investors should get a CEO for free.  They don't really seem to have legitimate argument that they are being taken advantage of.   

I know some managers choose to credit CEO and even Board fees back to their funds, and some don't.  There is no legal or moral obligation to do so.  Regulators I interact with care that whatever is chosen is fully disclosed along with any potential conflicts of interest.  They also care if it takes too much time away from managing one's fund.
Title: Re: SYTE - Sitestar
Post by: CorpRaider on April 12, 2018, 10:48:33 AM
Seems reasonable.  Speaking generally, if the shares of the related entity were a large enough percentage of the fund maybe the LPs would have a beef, but I don't see how the shareholders of the public entity have reason to complain simply because of the structure.
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on April 12, 2018, 10:56:11 AM
Seems reasonable.  Speaking generally, if the shares of the related entity were a large enough percentage of the fund maybe the LPs would have a beef, but I don't see how the shareholders of the public entity have reason to complain simply because of the structure.
When an investment idea comes to a manager with two roles(fund manager and CEO) how does he decide whether to do it in his fund or do it in the corporation?
OTOH, if he does it in the corporation, he gets paid twice for performance. OTOH, if he does it in the fund, he has a potential problem in his role as fiduciary of the corporation. It's an untenable situation, and getting paid in both for being a capital allocator exacerbates it.  It makes me incredibly uncomfortable to pay a CEO whose primary interest in a deal may not be for the company.

Title: Re: SYTE - Sitestar
Post by: CorpRaider on April 12, 2018, 11:07:44 AM
Yeah, it seems there are potential conflicts to be navigated (as there are with the BOMN guys, and others).  My response was just addressing the "double compensation" issue as discussed in the post prior to mine. 

Also, post more on your blog.   ;D

Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on April 12, 2018, 11:16:03 AM
Yeah, it seems there are potential conflicts to be navigated (as there are with the BOMN guys, and others).  My response was just addressing the "double compensation" issue as discussed in the post prior to mine. 



Right, I've raised that. It is certainly more of an issue for the LPs in the fund, but even for investors in the company, it is distasteful that he is paid twice. Particularly the bonus. If the intention of bonus is to incentivize performance does getting paid for the same performance twice add enough additional incentive to overcome any performance drag. And when you can do things like sell yourself cheap stock to boost performance... It's just a conflict that probably is insoluble.
Title: Re: SYTE - Sitestar
Post by: Tim Eriksen on April 12, 2018, 11:36:40 AM
Yeah, it seems there are potential conflicts to be navigated (as there are with the BOMN guys, and others).  My response was just addressing the "double compensation" issue as discussed in the post prior to mine. 



Right, I've raised that. It is certainly more of an issue for the LPs in the fund, but even for investors in the company, it is distasteful that he is paid twice. Particularly the bonus. If the intention of bonus is to incentivize performance does getting paid for the same performance twice add enough additional incentive to overcome any performance drag. And when you can do things like sell yourself cheap stock to boost performance... It's just a conflict that probably is insoluble.

But he is not really paid twice.  If they had hired someone at a higher rate it probably wouldn't bother you.  It is not the same performance.  It is two different jobs each with their own respective compensation.  The confusion is that the same person is fulfilling both roles.  There is no performance drag.  It is a benefit for shareholders in SYTE and his fund to have a cheaper CEO who is more tied into the overall results.  Spending time on SYTE probably takes time away from analyzing other potential investments but so far that has not hurt his LPs, it has been a benefit. 

I guess we will continue to see it differently.  It is not surprising that we haven't arrived at the same conclusion when we can't agree on the facts.  Respectful disagreement.           
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on April 12, 2018, 11:42:31 AM
Yeah, it seems there are potential conflicts to be navigated (as there are with the BOMN guys, and others).  My response was just addressing the "double compensation" issue as discussed in the post prior to mine. 



Right, I've raised that. It is certainly more of an issue for the LPs in the fund, but even for investors in the company, it is distasteful that he is paid twice. Particularly the bonus. If the intention of bonus is to incentivize performance does getting paid for the same performance twice add enough additional incentive to overcome any performance drag. And when you can do things like sell yourself cheap stock to boost performance... It's just a conflict that probably is insoluble.

But he is not really paid twice.  If they had hired someone at a higher rate it probably wouldn't bother you.  It is not the same performance.  It is two different jobs each with their own respective compensation.  The confusion is that the same person is fulfilling both roles.  There is no performance drag.  It is a benefit for shareholders in SYTE and his fund to have a cheaper CEO who is more tied into the overall results.  Spending time on SYTE probably takes time away from analyzing other potential investments but so far that has not hurt his LPs, it has been a benefit. 

I guess we will continue to see it differently.  It is not surprising that we haven't arrived at the same conclusion when we can't agree on the facts.  Respectful disagreement.         

Agreed. It is certainly not at the level of He who must not be named, where he then had the company invest in his fund. I hope we never see that here. 

I think it's important to conduct oneself in such a way that nobody can harbor suspicions of you. The setup here is just not conducive to that.
Title: Re: SYTE - Sitestar
Post by: slkiel on April 12, 2018, 12:33:42 PM
With regards to the ADV filing, I lived in Virginia when I started the fund and then California and had to register as an RIA in each state when I lived there. I then moved the office to New York and New York does not require (or allow) me to be registered, so I'm not. I won't be registered with the SEC until the fund gets to $150m.

Neal- to your comments, there are quite a few facts in which we disagree. I am not sure how we bridge that gap. The suspicions have primarily come from you on items that are not based on the facts of the situation. We have an independent board, corporate staff, and subsidiary managers who all are comfortable with our decisions and absolutely comfortable with our ethical behavior.  Do you really think someone like Keith Smith, who is the most ethical person in the world, would have not raised an objection if we were anywhere close to the line? What I would ask is that you be  a bit more humble towards the judgements of people like Keith, Jeff, and others who know all of the facts and pressures we were under.

Also, to be clear, my reference to the results being good were about the operations, not the share price.
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on April 12, 2018, 01:44:54 PM


Neal- to your comments, there are quite a few facts in which we disagree. I am not sure how we bridge that gap. The suspicions have primarily come from you on items that are not based on the facts of the situation. We have an independent board, corporate staff, and subsidiary managers who all are comfortable with our decisions and absolutely comfortable with our ethical behavior.  Do you really think someone like Keith Smith, who is the most ethical person in the world, would have not raised an objection if we were anywhere close to the line? What I would ask is that you be  a bit more humble towards the judgements of people like Keith, Jeff, and others who know all of the facts and pressures we were under.

Also, to be clear, my reference to the results being good were about the operations, not the share price.

No doubt, we disagree. I have no interest in rehashing all of this. I am considerably more humble than you might think. In particularly, my humility leads me to be exceedingly cautious when something does not smell right rather than believe that I can figure it out. Fact is, that there are a series of behaviors on your part, that just don't smell right. You might be the best investor and operator in the world, but if you're not paying attention to the optics of what you do, that's a red flag. Likewise, I don't really know Keith. I'm sure is he ethical and all, but I don't see how pulling him into this sheds any light on the key questions.

There are certain facts that are not open to dispute, nor judgement.
1) By the time the first meeting of shareholders was held, you had already sold yourself a controlling interest in the company, making any shareholder vote pointless.
2) You never offered to me the opportunity, or indicated to me in any way that it was possible, to participate in any private placement.

As for the operations being "astronomically good", I guess I'm just not seeing it. HVAC is, charitably, a wash, and, less charitably, in trouble. Asset management- you'd know better than me as I have not seen Q1 numbers, but it remains to be seen how it performs in down quarters. It was an easy business to make money in last year...

I sincerely hope my fears are unfounded and that the company performs well. I do still have a significant position.
I keep speaking for two reasons:
1) I think it is important for other investors to have the full picture
2) I hope that you will have the humility to ponder whether there is any truth to what I'm saying, examine your behavior, and use my feedback to improve the performance of the company going forward.

As I said, I'm happy to discuss with you at any point. In fact, I would prefer to do so privately. You know how to reach me should you so wish.
Title: Re: SYTE - Sitestar
Post by: Tim Eriksen on April 12, 2018, 03:07:51 PM
Some of those certain facts sure seem in dispute.  Maybe you didn't get a personal phone call inviting you to participate, but neither did I, or most people.  The fact of the matter is they made it clear they were doing a private placement (PP) for the Alluvial investment.  Even if you missed that one, the November 8, 2016 press release made it clear that the PP was open and anyone could get the same price. 

Because the original funding goal was not met, Sitestar will open the capital raise a final time on February 1, 2017. Members of the Board of Directors have agreed to backstop the February 1, 2017 capital raise with at least $1.8 million in additional funding.

Further to say that you "don't see how pulling (Keith an independent director) into this sheds any light" shows that you don't realize that when you impugn Steve's character related to the PPs you are impugning the Board's as well.  Independent directors had to approve the PPs. 

I know you hope Steve will ponder if there is any truth to what you are saying, and that is fair.   i don't recall if there was any heads up to the first PP.   I hope you ponder whether frustration or something else is clouding your objectivity regarding the facts and whether your comments fairly attack the character of others.  I don't say that as someone who knows everything or is immune from blind spots.  Evaluating ourselves can be one of the most difficult things there is to do.  We can see the speck in someone else's eye but not the log in our own.   I can be unfairly critical of others.

One thing we all agree on is that we hope Sitestar and its shareholders do well.  With that I will end my participation in this sub topic.  Well at least try to.
Title: Re: SYTE - Sitestar
Post by: slkiel on April 12, 2018, 03:48:54 PM
We had to do the first capital raise in order to have a quorum at the shareholder meeting. I have previously discussed this, I believe in this thread. The former CEO indicated that he would not vote. We could not otherwise hold a shareholder meeting. We had no other options. We did not do it to "take over" the company. We were already in control of the company. We did it to hit the quorum so we could hold the shareholder meeting and get on with running the company.

With regards to specifically offering you an opportunity, Neal, we are not allowed to "solicit." What we did was try to make people aware of the offering so they could reach out to us. We accepted everyone who then contacted us. We would have loved to have you participate.

The reason why I am engaging on this platform is because, as Tim referenced, you are attacking the character of the people involved with the company along with me. It is not fair to them, and it is not accurate. And, I will add, no one who has taken the time to come to our meeting and meet the people involved with the company feel as you do. They all understand why we took the actions we did. If you come to the meeting and ask your questions, you will come away feeling as they do.

At this point all of us have said how we feel. Readers can use their own judgment from here.
Title: Re: SYTE - Sitestar
Post by: Spekulatius on April 12, 2018, 03:52:56 PM
It’s seems to me that investors in SYT get a fair disclosure and as of now a fair price for their equity $0.11) if they chose to exit. That’s better than most Microcaps for sure

I don’t like SYTE and how it is structured due to the high cost burden (600k annually) and a high likelihood that the HVAC business will turn out to be a failure. I also don’t see, why owning a fund or several funds within a C-Corp is a good idea, it certainly isn’t tax efficient.

In my opinion, the smart play from a risk reward perspective would be just to invest in Alluvial as a LP and be done with it.
Title: Re: SYTE - Sitestar
Post by: LC on April 12, 2018, 04:18:38 PM
I think the governance issue is well covered thus far.

I agree with Spekulatius. I don't think the underlying businesses are that exciting. But there are many ways to skin a cat, and I hope everyone here makes a lot of $$ :)
Title: Re: SYTE - Sitestar
Post by: Parsad on April 12, 2018, 05:29:28 PM
Let me offer my two cents, as someone in a very similar position to Steve:

In terms of compensation - Our fund owns 42% of PDH...I receive a salary from PDH as CEO and I receive only incentive fees I earn from our fund.  PDH makes up about 15% of the fund. 

Now some people would argue I'm double-dipping, since I receive my fees from the fund and I receive a salary as CEO of PDH.  That would be true if PDH was a passive investment like Bank of America, Macy's or some other stock we own in the fund...where I have no direction over, nor any day to day responsibilities.  And believe me, the day to day duties are extensive...especially in the beginning when we got involved and I was working 14 hour days six days a week for the first 2 years trying to turn it around.  Or it could be perceived as double-dipping if we received a management fee from the fund...but we don't...totally incentive-based.

Also, my CEO salary is on par or less than what anyone else would have gotten for that position...depending on the fluctuating market cap and book value over the years...you could argue either way, and because of that I won't try and debate it.  It will either look cheap or look expensive 5-10 years out.  But I capped it from day one...I will never get a raise!  How many CEO's would do that?

Whether we should or should not have gotten involved with PDH can be debated either way.  But it is what it is, and we are intent on growing it over time and making it into something special.  I have a very direct influence over the success or failure of PDH...not like passive investments in our fund.  It consumes an enormous amount of time, work, energy and even costs you mentally (stress).  So while I'm sure some would like to continue arguing that it is double-dipping, it certainly isn't in our case.  And from what I've seen, Steve's circumstance is very similar.  Cheers!
Title: Re: SYTE - Sitestar
Post by: LC on April 12, 2018, 06:57:05 PM
Sanjeev,

I'm curious, how do you think about your situation in regards to your investors at your fund?

They don't own PDH directly, and PDH only makes up 15% of their holdings with you.
However you are (or were) essentially spending 100% of your time working on PDH.

So my question is, the incentive fee you charge is for 100% of your fund asset's performance, but your time is only being spent on 15% of the fund's assets.

Now I'm sure given your reputation that your investors didn't even bat an eyelash at the situation, but from the outside looking in, do you think one could raise this argument?
Title: Re: SYTE - Sitestar
Post by: Parsad on April 12, 2018, 07:46:15 PM
Sanjeev,

I'm curious, how do you think about your situation in regards to your investors at your fund?

They don't own PDH directly, and PDH only makes up 15% of their holdings with you.
However you are (or were) essentially spending 100% of your time working on PDH.

So my question is, the incentive fee you charge is for 100% of your fund asset's performance, but your time is only being spent on 15% of the fund's assets.

Now I'm sure given your reputation that your investors didn't even bat an eyelash at the situation, but from the outside looking in, do you think one could raise this argument?

The incentive fee is based solely on performance.  So if I don't perform, and our partners can argue I haven't over the last 2-3 years...then I don't get paid and it costs them nothing other than lost opportunity.  They may not be happy, but at least my interests and their interests are aligned. 

Let me ask you a question now:  If I had been correct on Sequant Re, and that investment had worked out perfectly and now PDH was making $1-1.5M a year in fees from Sequant Re (let's not even include the 17% annualized return on Russell Breweries, 13% annualized return on Kingswood's 1st real estate project, increase in PDC's revenue from essentiallly zero (but we'll call it $900K in 2015) to $1.5M in 2018, and the 19% annualized return I did in 2016/2017 on the investment portfolio)...all these things came to fruition except the biggest investment...Sequant Re.  If I had been right, and PDH stock was now at 25 cents...would my partners have minded my interest and time spent on PDH?  No, of course not. 

In this business, you are only as good as your last game.  Value investors, while they think they are different, are as equally short-term focused as the average investor.  How many value investors have held Fairfax shares steadily from when they bought them and not wavered?  Of those that bought at the lows in 2003, and there were hundreds, I would say you could probably count those still holding those shares on one hand.  That percentage might be a bit better for Berkshire shareholders, but I would bet that it isn't statistically much different for those that bought Berkshire shares back in 1999/2000.  Managers don't get into the business to be wrong...every decision, good or bad, we try and make the best evaluated decision we can with the information we have on hand at the time.

The lesson is that managers may not always make the best/correct decision, and their partners may not always be happy about that, but the goal is to make sure incentives and behaviors are in line with partner/shareholder interests.  That is the only thing anyone can guarantee...whether they are a hedge fund manager or the CEO of a corporation.  If you have the working fundamentals right, at least incentives are fully aligned...since performance is never guaranteed on any investment.  We live for and absolutely try to do that!

As mentioned previously on another thread, we recently closed our Canadian Fund.  Our performance was underwhelming, and operating costs in Canada for such a small fund was part of the reason...so we felt that the fund was not adding value to investors and made the decision to close.  The vast majority (about 80%) of our partners did ok or well while in the fund, but there were four more recent partners who had lost some of their capital...from 1% to about 10%.  Alnesh and I felt compelled to make them whole from our own money and we did.  While we underperformed, and of course the partners would have preferred us to have killed the indices, there are no guarantees on investment return.  But our incentives, behavior and culture was 100% aligned with partner interests...that's the only thing we can 100% guarantee.  Name me a fund manager who has made their partners whole without it being in the LP agreement?  Cheers!

   
Title: Re: SYTE - Sitestar
Post by: Jurgis on April 13, 2018, 07:32:57 AM

Alnesh and I felt compelled to make them whole from our own money and we did.  While we underperformed, and of course the partners would have preferred us to have killed the indices, there are no guarantees on investment return.  But our incentives, behavior and culture was 100% aligned with partner interests...that's the only thing we can 100% guarantee.  Name me a fund manager who has made their partners whole without it being in the LP agreement?


Parsad - that is exceptional of you and I believe exactly the way Charlie Munger would want us to behave.  Good on you.

This is more of an aside, but there is a terrible provision in most US state securities laws, and for federally registered investment advisors, that as it has been explained to a friend of mine by a former SEC lawyer, that in the US it is mostly impossible for investment advisors to do this legally.  It comprises a "guarantee of performance" whichever for whatever reason is not allowed by investment advisors according to securities lawyers.  I know this because I have a very good friend who tried to do something similar as you Parsad - who was convinced by leading hedge fund lawyers that it was against the law - because it would have constituted a "guarantee of performance" which is not allowed. 

Anyway, the technicality of US securities laws aside - I admire you for behaving that way and I hope that I would do the same if I were that situation.

I am not a lawyer, but what Parsad did is likely legal in US. He did not provide a guarantee beforehand, he just made some partners whole. And what he said in post about 100% guarantee is a figure of speech rather than written guarantee that would have legal implications.
I am pretty sure someone in US did this too... Pabrai? Can't remember.

But, yeah, check with lawyers and all that.

To put my $.02 into the topic about managers earning multiple income streams. Somehow people don't rebel when big-name manager X runs a bunch of mutual (hedge) funds, a bunch of separate accounts, goes on lecture circuit, writes books, runs an investment company and gets money for all of these. Or is it OK when you manage billions, but not OK when you manage just couple millions and post on forum?  8)
Title: Re: SYTE - Sitestar
Post by: racemize on April 13, 2018, 07:39:49 AM
From my recollection of the Series 65, there are a couple of things not to do:

1) any type of indication of a guarantee before-hand, as Jurgis mentioned; and
2) for non-qualified (but accredited), having a fee but an arrangement for forgiving the fee based on performance, as this equates to a performance-based fee.

However, that is not to say that you cannot waive fees or elect to take action for individuals/partners yourself.
Title: Re: SYTE - Sitestar
Post by: Jurgis on April 13, 2018, 07:58:56 AM

I am not a lawyer, but what Parsad did is likely legal in US. He did not provide a guarantee beforehand, he just made some partners whole. And what he said in post about 100% guarantee is a figure of speech rather than written guarantee that would have legal implications.
I am pretty sure someone in US did this too... Pabrai? Can't remember.

But, yeah, check with lawyers and all that.


I was curious so I just talked to one of the leading lawyers in the country about this and he said that there have been a couple notable cases in the US where people refunded negative performance and the SEC or whatever regulator found that to be impermissible because even though it wasn't in the documents - it looked like a tacit guarantee of performance.  Like the General Partner had told its investors "if you don't make money we'll refund it" which runs contrary to the risk disclosure basis for private investment funds in the US  (you know all the language about "All investments are risky; you could lose money.")  I guess their concern is people running around raising money saying in their documents "You could lose money" but meanwhile telling their investors "If things don't go well, we'll refund your losses."  Anyway its kind of an interesting legal question, but really a side note to this story.

From what I've been told from this attorney, the issues that people had in the past were that since you can't make a guarantee before-hand - rebating losses after the fact looks to some regulators indistinguishable to guaranteeing it beforehand - so they don't allow it.  Though in a couple of instances - regulators apparently did allow it - but they likely had a slightly different structure.

I should note - there is a way to set-up a fund so you can do this legally in the US and in every state - but the "loss rebate" requires that the fund be structured a little bit differently.  I'm not an expert on this - but you said it up more like a PE fund so the first portion of what is left belongs to the limited partners and then over certain benchmarks the general partner starts to get more ownership of it.  You can set the benchmarks such so that it effectively means the general partner gives up any ownership below the loss threshold. 

In reality, this is not an issue hardly ever, because very few funds and people would do this when they shut down a fund with losses.  We need more terrific people like Parsad.

OK, thanks for elaboration. I guess whoever else did it in US might have flown under the radar... Also with what racemize said, not sure how Chou's fee forgiveness works... (edit: Chou fee forgiveness might work under mutual fund rules... I'm really out of depth there). But yeah, we should not discourage people like that.  8)
Title: Re: SYTE - Sitestar
Post by: drzola on April 13, 2018, 08:18:19 AM
I just want to thank Sanjeev and Alnesh on behalf of two of the four.

Sincerely;

SR and SWL
Title: Re: SYTE - Sitestar
Post by: valueseek on April 13, 2018, 11:56:26 AM
Sanjeev,

I'm curious, how do you think about your situation in regards to your investors at your fund?

They don't own PDH directly, and PDH only makes up 15% of their holdings with you.
However you are (or were) essentially spending 100% of your time working on PDH.

So my question is, the incentive fee you charge is for 100% of your fund asset's performance, but your time is only being spent on 15% of the fund's assets.

Now I'm sure given your reputation that your investors didn't even bat an eyelash at the situation, but from the outside looking in, do you think one could raise this argument?

The incentive fee is based solely on performance.  So if I don't perform, and our partners can argue I haven't over the last 2-3 years...then I don't get paid and it costs them nothing other than lost opportunity.  They may not be happy, but at least my interests and their interests are aligned. 

Let me ask you a question now:  If I had been correct on Sequant Re, and that investment had worked out perfectly and now PDH was making $1-1.5M a year in fees from Sequant Re (let's not even include the 17% annualized return on Russell Breweries, 13% annualized return on Kingswood's 1st real estate project, increase in PDC's revenue from essentiallly zero (but we'll call it $900K in 2015) to $1.5M in 2018, and the 19% annualized return I did in 2016/2017 on the investment portfolio)...all these things came to fruition except the biggest investment...Sequant Re.  If I had been right, and PDH stock was now at 25 cents...would my partners have minded my interest and time spent on PDH?  No, of course not. 

In this business, you are only as good as your last game.  Value investors, while they think they are different, are as equally short-term focused as the average investor.  How many value investors have held Fairfax shares steadily from when they bought them and not wavered?  Of those that bought at the lows in 2003, and there were hundreds, I would say you could probably count those still holding those shares on one hand.  That percentage might be a bit better for Berkshire shareholders, but I would bet that it isn't statistically much different for those that bought Berkshire shares back in 1999/2000.  Managers don't get into the business to be wrong...every decision, good or bad, we try and make the best evaluated decision we can with the information we have on hand at the time.

The lesson is that managers may not always make the best/correct decision, and their partners may not always be happy about that, but the goal is to make sure incentives and behaviors are in line with partner/shareholder interests.  That is the only thing anyone can guarantee...whether they are a hedge fund manager or the CEO of a corporation.  If you have the working fundamentals right, at least incentives are fully aligned...since performance is never guaranteed on any investment.  We live for and absolutely try to do that!

As mentioned previously on another thread, we recently closed our Canadian Fund.  Our performance was underwhelming, and operating costs in Canada for such a small fund was part of the reason...so we felt that the fund was not adding value to investors and made the decision to close.  The vast majority (about 80%) of our partners did ok or well while in the fund, but there were four more recent partners who had lost some of their capital...from 1% to about 10%.  Alnesh and I felt compelled to make them whole from our own money and we did.  While we underperformed, and of course the partners would have preferred us to have killed the indices, there are no guarantees on investment return.  But our incentives, behavior and culture was 100% aligned with partner interests...that's the only thing we can 100% guarantee.  Name me a fund manager who has made their partners whole without it being in the LP agreement?  Cheers!

 

Hi Sanjeev... Its unheard of what you mentioned of making whole... Kudos to you...
Title: Re: SYTE - Sitestar
Post by: oddballstocks on April 13, 2018, 12:50:41 PM
I applaud Sanjeev for what he did.  Running a company is very difficult, very difficult.

I wouldn't want to be public, it's a curse.  A bunch of people who made a few clicks online have the ability to make armchair decisions and second guess.  I'd hate if those same clickers take a look at my own business.  I've made excellent decisions and also bad ones.  But to those at home making a bad decision seems to be a fatal flaw, as if they've never done it themselves.

As a public CEO you can either play it safe, or take risks and when you take risks public shareholders will cry and complain.  You cannot please everyone.

I stand by my mantra that EVERY investor should try to go out there and sell something.  Try to sell a "commodity" item.  You'll realize quickly that academic finance and theories don't match the real world.  Just because you're item is similar or a lower price doesn't mean people will buy it. 
Title: Re: SYTE - Sitestar
Post by: ragnarisapirate on April 13, 2018, 02:36:37 PM
I applaud Sanjeev for what he did.  Running a company is very difficult, very difficult.

I wouldn't want to be public, it's a curse.  A bunch of people who made a few clicks online have the ability to make armchair decisions and second guess.  I'd hate if those same clickers take a look at my own business.  I've made excellent decisions and also bad ones.  But to those at home making a bad decision seems to be a fatal flaw, as if they've never done it themselves.

As a public CEO you can either play it safe, or take risks and when you take risks public shareholders will cry and complain.  You cannot please everyone.

I stand by my mantra that EVERY investor should try to go out there and sell something.  Try to sell a "commodity" item.  You'll realize quickly that academic finance and theories don't match the real world.  Just because you're item is similar or a lower price doesn't mean people will buy it.

Very well put, Nate.

On a personal note, this is something that I have been thinking on- both since, and before selling my business to SYTE. I already know that a lot of people won’t understand what’s going on at Mt Melrose, and how we run things. It is also going to be hard for people to understand the intrinsic value of Mt Melrose, based solely on the balance sheet, income statement, and the like. I think that this is also the case for many companies, not just ones that are SYTE related. Certainly, we will do our best to communicate this in the future at the annual meetings (because that is the time efficient and ethical way to do this), but, there are 364 OTHER days in the year that people have to make assumptions about what is going on. Kinda one sided when putting that against arm chair quarter backing.

On that same note, (in general) it is hard for people to understand what goes on inside of a business as an outsider. 2 of our employees were literally working til 4 AM yesterday morning. One was our financial controller working on financials, and the other was our project manager. They are not the only people that work super long hours at Mt Melrose, nor are they the only people that are like this at SYTE and its subs. Everyone at Mt Melrose is all about the business, and does everything in their power to improve it. Many of the employees own stock, and want to build something. Again, this is the same for SYTE and it’s subsidiaries.

When reading things online that are so far off base and half informed, it does damage to that ethic. This also works the other way, if there is too much praise given to an organization- the ramifications can be dire. I have gotten a ton of praise on how great my real estate business is, yet, only a few people have seen it in action how credible does that make any of the claims? I don’t know. I think that we will do well for SYTE/ENDI... AND I think that people should view things objectively. If results of a business seem excellent, maybe ask “why? Are they really that good?” And if they seem terrible, maybe ask “Are they really that bad?” And try to get going with what is actually going on.


Certainly, we all try to sum up thousands (and with a company alike AAPL, MILLIONS if not BILLIONS) of hours of labor and such... all in the 15-60 minutes that we spend reading an annual report and whatever other research we do (even message board posting). I know I often do that. But maybe, just maybe, we should all remember and think about the implicit time leverage that is being employed, while we are making assumptions- it could improve the analytical process.
Title: Re: SYTE - Sitestar
Post by: Jurgis on April 13, 2018, 03:50:06 PM
ragnar and oddball, you definitely have good points.

Although you may feel that you only get second guessing and critique, you are likely also getting support and investments. Though like ragnar said, it's not clear whether even the support is a great thing.

Looking from investor's point of view, you as an investor meet the management, read their stories, hear about guys working until 4am, about efforts put into the business. You might hear from the management on the forum or meet them at a meetup. You see and hear how smart and nice people they are. And that affects your attitude as an investor too. You think "maybe I should cut them some slack, they are really trying, they are good guys, etc.". But is that good from investing point of view? Maybe, maybe not. I guess like ragnar says objectivity would be good. But it's quite hard if not impossible to be objective and even harder the more you know people involved.

In any case, best in your businesses.  8)
Title: Re: SYTE - Sitestar
Post by: Spekulatius on April 14, 2018, 01:34:34 PM
We only know a fraction of what is going on in any company. As an investor, all we can do is put these scraps of information into context and make an decision whether we like it enough to invest or not. SYTE is not different in that regard than any other company.

Investors have no choice to make a judgement based on the incomplete information. It is Managements job in a public company to communicate as clearly as feasible so that investors can make a somewhat informed decision. I also think that if someone does not like, that the public holds their feet to the fire, they should not run a public company, but stay private. Then they can do whatever they want with their company.
Title: Re: SYTE - Sitestar
Post by: Spekulatius on April 14, 2018, 01:49:11 PM
Let me offer my two cents, as someone in a very similar position to Steve:

In terms of compensation - Our fund owns 42% of PDH...I receive a salary from PDH as CEO and I receive only incentive fees I earn from our fund.  PDH makes up about 15% of the fund. 

Now some people would argue I'm double-dipping, since I receive my fees from the fund and I receive a salary as CEO of PDH.  That would be true if PDH was a passive investment like Bank of America, Macy's or some other stock we own in the fund...where I have no direction over, nor any day to day responsibilities.  And believe me, the day to day duties are extensive...especially in the beginning when we got involved and I was working 14 hour days six days a week for the first 2 years trying to turn it around.  Or it could be perceived as double-dipping if we received a management fee from the fund...but we don't...totally incentive-based.

Also, my CEO salary is on par or less than what anyone else would have gotten for that position...depending on the fluctuating market cap and book value over the years...you could argue either way, and because of that I won't try and debate it.  It will either look cheap or look expensive 5-10 years out.  But I capped it from day one...I will never get a raise!  How many CEO's would do that?

Whether we should or should not have gotten involved with PDH can be debated either way.  But it is what it is, and we are intent on growing it over time and making it into something special.  I have a very direct influence over the success or failure of PDH...not like passive investments in our fund.  It consumes an enormous amount of time, work, energy and even costs you mentally (stress).  So while I'm sure some would like to continue arguing that it is double-dipping, it certainly isn't in our case.  And from what I've seen, Steve's circumstance is very similar.  Cheers!

15 % of the fund is probably not enough overlap to justify this calling double dipping, but this would be different, if the majority of the fund’s assets were invested in PDH. Then those entities start to become more like the same legal entities and can you really habe two jobs within one organization?

Then, there is an issue with the control pyramids when you have circular ownership in related companies, which means that with small amount of capital (which isn’t really your own, if you run a fund) you could control a company, similar to what Mir Big does at BH, or the way the conglomerates used to be run in Italy. Those arrangements tend to yield poor results for minority shareholders.
Title: Re: SYTE - Sitestar
Post by: NBL0303 on April 14, 2018, 01:53:18 PM
all in the 15-60 minutes that we spend reading an annual report and whatever other research we do (even message board posting).


I've always like you Ragnar - but now I am bitter and envious.  It takes me hours to read through many annual reports, probably due to my inadequate pace of reading - so anyone that can do it in 15 minutes has my eternal envy.

On a slightly more serious note, I appreciate your post and you thinking through the nuances of reporting and evaluating businesses.  In the previous generation of investing it seemed that we could find and buy more companies based on simple low valuation metrics like P/Es and such.  But now nearly every low P/E type company has earned their low P/E.  I have found that most of the value investments that we make now are more in the camp of "this doesn't exactly look cheap based on the raw numbers, but the numbers are missing the point."  The low P/E companies have mostly been considered by all of us value investors and had their market price driven down to a low P/E because that is the accurate value for the business now.  Anyway, in this new-ish reality for value investors, I find that the questions I am asking myself about our investments and the analysis is more complicated and involves more behavioral elements.  This makes your comments Ragnar very resonant.  When any of us CoBFers and other value investors are looking at a company and are asking hard questions - like "do the current operating numbers really reflect the true long-term value of the business?"  And distinguishing between those companies in which the numbers are not currently great but deep qualitative analysis indicates that the current numbers may undervalue the longer-term prospects of the business and those companies in which the current struggling numbers accurately reflects a business having issues which impair its valuation is one of the main tasks I find I'm having to engage in - at least with the market circumstances such as they are now.
Title: Re: SYTE - Sitestar
Post by: Spekulatius on April 14, 2018, 02:05:45 PM
all in the 15-60 minutes that we spend reading an annual report and whatever other research we do (even message board posting).


I've always like you Ragnar - but now I am bitter and envious.  It takes me hours to read through many annual reports, probably due to my inadequate pace of reading - so anyone that can do it in 15 minutes has my eternal envy.

On a slightly more serious note, I appreciate your post and you thinking through the nuances of reporting and evaluating businesses.  In the previous generation of investing it seemed that we could find and buy more companies based on simple low valuation metrics like P/Es and such.  But now nearly every low P/E type company has earned their low P/E.  I have found that most of the value investments that we make now are more in the camp of "this doesn't exactly look cheap based on the raw numbers, but the numbers are missing the point."  The low P/E companies have mostly been considered by all of us value investors and had their market price driven down to a low P/E because that is the accurate value for the business now.  Anyway, in this new-ish reality for value investors, I find that the questions I am asking myself about our investments and the analysis is more complicated and involves more behavioral elements.  This makes your comments Ragnar very resonant.  When any of us CoBFers and other value investors are looking at a company and are asking hard questions - like "do the current operating numbers really reflect the true long-term value of the business?"  And distinguishing between those companies in which the numbers are not currently great but deep qualitative analysis indicates that the current numbers may undervalue the longer-term prospects of the business and those companies in which the current struggling numbers accurately reflects a business having issues which impair its valuation is one of the main tasks I find I'm having to engage in - at least with the market circumstances such as they are now.

I agree with NBL that it has become more difficult to find truly undervalued businesses and most business that are cheap based on readily available numbers are probably valued correctly. The world has become more “intangibles” in how business is conducted and those intangibles are harder to evaluate than book values, PE ratios and balance sheets. In addition, I believe that the business environment changes faster, probably driven by technology changes, so any valuation projected in the future become uncertain to a larger extend than in the past.
Title: Re: SYTE - Sitestar
Post by: ragnarisapirate on April 14, 2018, 04:46:43 PM
all in the 15-60 minutes that we spend reading an annual report and whatever other research we do (even message board posting).


I've always like you Ragnar - but now I am bitter and envious.  It takes me hours to read through many annual reports, probably due to my inadequate pace of reading - so anyone that can do it in 15 minutes has my eternal envy.

On a slightly more serious note, I appreciate your post and you thinking through the nuances of reporting and evaluating businesses.  In the previous generation of investing it seemed that we could find and buy more companies based on simple low valuation metrics like P/Es and such.  But now nearly every low P/E type company has earned their low P/E.  I have found that most of the value investments that we make now are more in the camp of "this doesn't exactly look cheap based on the raw numbers, but the numbers are missing the point."  The low P/E companies have mostly been considered by all of us value investors and had their market price driven down to a low P/E because that is the accurate value for the business now.  Anyway, in this new-ish reality for value investors, I find that the questions I am asking myself about our investments and the analysis is more complicated and involves more behavioral elements.  This makes your comments Ragnar very resonant.  When any of us CoBFers and other value investors are looking at a company and are asking hard questions - like "do the current operating numbers really reflect the true long-term value of the business?"  And distinguishing between those companies in which the numbers are not currently great but deep qualitative analysis indicates that the current numbers may undervalue the longer-term prospects of the business and those companies in which the current struggling numbers accurately reflects a business having issues which impair its valuation is one of the main tasks I find I'm having to engage in - at least with the market circumstances such as they are now.

Some annual reports don’t even take 15 minutes. ;)

http://www.treeconresources.com/wp-content/uploads/2018/02/09-30-17-Selected-Financial-Information.pdf
Title: Re: SYTE - Sitestar
Post by: stahleyp on April 16, 2018, 10:25:32 AM
what percentage of Arquitos's assets are in SYTE?
Title: Re: SYTE - Sitestar
Post by: roark33 on May 11, 2018, 02:31:59 PM
This seems odd.  Syte committed 10m to Alluvial and then withdrew 3m and Kiel, through his LP replaced 3m.  Is Kiel's fund a fund of fund now?  This stuff just stinks of conflict of interests. 



The Company agreed to make capital contributions to Alluvial Fund in the aggregate amount of $10 million to be provided over four equal tranches on January 1, 2017, April 1, 2017, July 1, 2017, and October 1, 2017. As of September 30, 2017, the Company satisfied its obligation to provide $10 million in accordance with the contribution schedule. On January 1, 2018, pursuant to an amendment to the Alluvial Side Letter Agreement, dated December 15, 2017, Willow Oak Asset Management, LLC withdrew $3,000,000 from its $10,000,000 investment in Alluvial Fund, LP in order to partially fund the first close of the Mt Melrose Transaction. Under the terms of the amendment to the Alluvial Side Letter Agreement, to the extent that funds withdrawn by Willow Oak are replaced coincid entally by funds from a third party, Willow Oak is no longer subject to the former “lockup” restrictions, which formerly conditioned any withdrawals upon Willow Oak having a $50,000,000 capital account balance. Arquitos Capital Partners, LP, which is manag ed by our Chief Executive Officer, Steven L. Kiel, simultaneously invested $3,000,000 in Alluvial, to replace the amount withdrawn by Willow Oak. The Arquitos investment into Alluvial counts toward Willow Oak’s seed investment total for purposes of Willow Oak’s agreement with Alluvial.
Title: Re: SYTE - Sitestar
Post by: slkiel on May 11, 2018, 03:07:11 PM
This seems odd.  Syte committed 10m to Alluvial and then withdrew 3m and Kiel, through his LP replaced 3m.  Is Kiel's fund a fund of fund now?  This stuff just stinks of conflict of interests.

We did it to help Sitestar. Sitestar was in a one year grace period for the 40 Act, so we needed to either withdraw the $3 million (and thus lower the fee share Sitestar earns) or replace it. I volunteered to replace it through Arquitos. The full fee share continues to go to Sitestar. We ended up making the exchange a few months earlier than required to help fund the Mt Melrose acquisition. The Mt Melrose acquisition and the Alluvial exchange will ensure that we will no longer be in violation of the 40 Act going forward

I would be interested to learn why you think this would be a conflict of interest so we can better communicate the reasons for doing this and who benefits. We have crafted the transaction/exchange so it clearly benefits Sitestar and its shareholders (of course it was also reviewed and approved by our audit committee and board). I am always interested in hearing how to make it more clear though if there is some sort of miscommunication.



Title: Re: SYTE - Sitestar
Post by: Broeb22 on May 18, 2018, 02:00:59 PM
Does anyone where the Willow Oak meeting is being held in Phoenix?
Title: Re: SYTE - Sitestar
Post by: Tim Eriksen on May 18, 2018, 02:50:16 PM
Does anyone where the Willow Oak meeting is being held in Phoenix?

The annual meeting is at  Squire Patton Boggs located at 1 E. Washington Street, Suite 2700, Phoenix, Arizona at 10am Saturday.

Apparently I am told the Willow Oak portion is separate and possibly at a different location. 
Title: Re: SYTE - Sitestar
Post by: Sportgamma on June 03, 2018, 05:24:05 PM
I'm trying to get a better understanding of the value proposition that Willow Oak present to the fund managers that they partner with.

From the latest 10Q:
Quote
Willow Oak signed a fee share agreement on June 13, 2017, with Coolidge Capital Management, LLC (“Coolidge”), whose sole member is Keith D. Smith, also a Sitestar director. Under the agreement, Willow Oak and Coolidge are the sole members of Bonhoeffer Capital Management LLC, the general partner to Bonhoeffer Fund, LP, a private investment partnership. Under their agreement, Willow Oak pays all start-up and operating expenses that are not partnership expenses under the limited partnership agreement. Willow Oak receives 50% of all performance and management fees earned by the general partner.

What would be the distinction between a partnership expense and operating expenses?

Is Keith offloading all the administrative work to Willow Oak in exchange for 50% of his fees? Is the idea that Willow Oak will become a promotional/fundraising partner for the fund managers they partner with? Or a bit of both?
Title: Re: SYTE - Sitestar
Post by: globalfinancepartners on June 07, 2018, 08:12:22 PM
Reverse stock split 125:1

https://www.sec.gov/Archives/edgar/data/1096934/000156459018015230/syte-8k_20180601.htm
Title: Re: SYTE - Sitestar
Post by: Tim Eriksen on June 07, 2018, 09:05:36 PM
I'm trying to get a better understanding of the value proposition that Willow Oak present to the fund managers that they partner with.

From the latest 10Q:
Quote
Willow Oak signed a fee share agreement on June 13, 2017, with Coolidge Capital Management, LLC (“Coolidge”), whose sole member is Keith D. Smith, also a Sitestar director. Under the agreement, Willow Oak and Coolidge are the sole members of Bonhoeffer Capital Management LLC, the general partner to Bonhoeffer Fund, LP, a private investment partnership. Under their agreement, Willow Oak pays all start-up and operating expenses that are not partnership expenses under the limited partnership agreement. Willow Oak receives 50% of all performance and management fees earned by the general partner.

What would be the distinction between a partnership expense and operating expenses?

Is Keith offloading all the administrative work to Willow Oak in exchange for 50% of his fees? Is the idea that Willow Oak will become a promotional/fundraising partner for the fund managers they partner with? Or a bit of both?

Presumably a partnership expense would be expenses related to the fund - audit and admin. Those are borne by the fund partners.  Operating expenses presumably are ongoing legal and regulatory related expenses borne by the management company.  It could include accounting for the management company as well.   
Title: Re: SYTE - Sitestar
Post by: Sportgamma on June 08, 2018, 06:46:57 AM
I'm trying to get a better understanding of the value proposition that Willow Oak present to the fund managers that they partner with.

From the latest 10Q:
Quote
Willow Oak signed a fee share agreement on June 13, 2017, with Coolidge Capital Management, LLC (“Coolidge”), whose sole member is Keith D. Smith, also a Sitestar director. Under the agreement, Willow Oak and Coolidge are the sole members of Bonhoeffer Capital Management LLC, the general partner to Bonhoeffer Fund, LP, a private investment partnership. Under their agreement, Willow Oak pays all start-up and operating expenses that are not partnership expenses under the limited partnership agreement. Willow Oak receives 50% of all performance and management fees earned by the general partner.

What would be the distinction between a partnership expense and operating expenses?

Is Keith offloading all the administrative work to Willow Oak in exchange for 50% of his fees? Is the idea that Willow Oak will become a promotional/fundraising partner for the fund managers they partner with? Or a bit of both?

Presumably a partnership expense would be expenses related to the fund - audit and admin. Those are borne by the fund partners.  Operating expenses presumably are ongoing legal and regulatory related expenses borne by the management company.  It could include accounting for the management company as well.   

Great. Thank you for the clarification Tim.
Title: Re: SYTE - Sitestar
Post by: frugalchief on July 20, 2018, 08:24:43 PM
New website is up:  https://www.enterprisediversified.com/
Title: Re: SYTE - Sitestar
Post by: Tim Eriksen on July 23, 2018, 09:40:55 AM
1 for 125 reverse split today.  Currently trading under symbol SYTED
Title: Re: SYTE - Sitestar
Post by: globalfinancepartners on July 23, 2018, 03:28:42 PM
Clicking through to Bonhoeffer Fund, I was surprised to see this bit of text:  "to ensure overall capital gains for our investors"

Careful with that language Keith!  (found under "Long Term")

New website is up:  https://www.enterprisediversified.com/
Title: Re: SYTE - Sitestar
Post by: slkiel on July 23, 2018, 06:13:20 PM
Good catch. We will update it ASAP. Definitely can't say that!
Title: Re: SYTE - Sitestar
Post by: InelegantInvestor on August 10, 2018, 02:24:06 PM
Q2 results are out.
https://www.sec.gov/Archives/edgar/data/1096934/000156459018021273/syte-10q_20180630.htm
Title: Re: SYTE - Sitestar
Post by: Spekulatius on August 12, 2018, 06:19:36 AM
Interesting, They are really ramping up real estate. looks like they acquire properties at a 6% cap rate, based on cost and revenue metrics. Home service business seem to suck, based on capital invested and operating losses. Asset management didn’t have a great quarter like Q1, but volatility is expected here.
Title: Re: SYTE - Sitestar
Post by: Sportgamma on August 12, 2018, 12:08:01 PM
Not really on topic, but I think this is the first time that I come across a filing where a business segment is recording negative revenue. It seems kind of silly that asset managers have to accrue performance fees on the income statement like that.

If an investor would pull out of a fund at a loss, it's not like the asset manager would have to pay the investor the negative performance fee. Here's a question: If an investor pulls out at a loss, does the asset manager record revenues as the negative performance fees are wiped out of the accrual fees?
Title: Re: SYTE - Sitestar
Post by: John Hjorth on August 12, 2018, 12:21:48 PM
Sportgamma,

It's most likely a consequense of a [x + y] fee agreement with the limited partners involved. While using accrual accounting, this may be a logical consequense in a given quarter [it is for 2018Q2 isolated, not for 2018H1 here], related to x, from an accounting perspective.

Interesting question. You're very observant.
Title: Re: SYTE - Sitestar
Post by: Tim Eriksen on August 12, 2018, 01:16:00 PM
The negative revenues is due to the large investment in the Alluvial fund declining during the quarter.  Instead of being reported as other income it is reported under Asset Management segment along with management fees.  While a negative quarter may happen in the future due to inventive accruals, Alluvial had not surpassed the 6% hurdle for this year.
Title: Re: SYTE - Sitestar
Post by: Sportgamma on August 12, 2018, 02:46:55 PM
The negative revenues is due to the large investment in the Alluvial fund declining during the quarter.  Instead of being reported as other income it is reported under Asset Management segment along with management fees.  While a negative quarter may happen in the future due to inventive accruals, Alluvial had not surpassed the 6% hurdle for this year.

Hi Tim,

Interesting. Thank you for the clarification. You would think that even though there is a fee sharing agreement in place, losses and gains from the seed investment itself would be accounted for as comprehensive income. I assume that they will pay capital gains taxes on any realized profits from the seed investment, right? Just thinking aloud here.
Title: Re: SYTE - Sitestar
Post by: Tim Eriksen on August 12, 2018, 09:20:11 PM
The negative revenues is due to the large investment in the Alluvial fund declining during the quarter.  Instead of being reported as other income it is reported under Asset Management segment along with management fees.  While a negative quarter may happen in the future due to inventive accruals, Alluvial had not surpassed the 6% hurdle for this year.

Hi Tim,

Interesting. Thank you for the clarification. You would think that even though there is a fee sharing agreement in place, losses and gains from the seed investment itself would be accounted for as comprehensive income. I assume that they will pay capital gains taxes on any realized profits from the seed investment, right? Just thinking aloud here.

It used to be that way but not now due to the new tax rules.  Pretty sure US companies do not get a lower rate on capital gains than income.   
Title: Re: SYTE - Enterprise Diversified
Post by: globalfinancepartners on August 13, 2018, 05:58:12 AM
Tim is right.  Same change that affected Berkshire's reporting starting in January.  Not sure it had anything to do with the tax bill per se, but was a change announced to GAAP before the tax bill passed.  I think it was telegraphed as early as 2016.

And yes, corporations pay the corporate income tax rate on capital gains.  There are different rates on dividend income depending on what percentage of the investee they own, what type of corporation the owner is (insurance company, etc), and other complications.
Title: Re: SYTE - Enterprise Diversified
Post by: DTEJD1997 on October 07, 2018, 08:42:34 AM
Hey all:

Anybody else see this?

https://gallery.mailchimp.com/2511717cdf1bae9a0638c942a/files/232c9e53-f4b9-4ba3-acbd-c435ac7ec739/100518_Shareholder_Letter_Chairman_CEO.pdf

The letter is kind of vague, but it seems that ENDI is going solely towards asset management:

"Our assets are ideas and the managers with whom we are affiliated.
The business does not have to rely on significant capital expenditures, inventory,
or debt to succeed.  As part of our focus on asset management, we will be restructuring
all of ENDI toward that goal.  This will take some time.  Stay tuned for additional details."

I am going to guess that HVAC will be gone, interweb access & domain names gone, but what happens to the real estate?

Seems kind of odd, a complete change of direction...
Title: Re: SYTE - Enterprise Diversified
Post by: Spekulatius on October 07, 2018, 09:11:30 AM
Hey all:

Anybody else see this?

https://gallery.mailchimp.com/2511717cdf1bae9a0638c942a/files/232c9e53-f4b9-4ba3-acbd-c435ac7ec739/100518_Shareholder_Letter_Chairman_CEO.pdf

The letter is kind of vague, but it seems that ENDI is going solely towards asset management:

"Our assets are ideas and the managers with whom we are affiliated.
The business does not have to rely on significant capital expenditures, inventory,
or debt to succeed.  As part of our focus on asset management, we will be restructuring
all of ENDI toward that goal.  This will take some time.  Stay tuned for additional details."

I am going to guess that HVAC will be gone, interweb access & domain names gone, but what happens to the real estate?

Seems kind of odd, a complete change of direction...

My guess is that real estate will fall under the asset management and SYTE will become a mini version of BAM. I think HVAC and the Internet  operations will be disposed off. I predict that there are significant write offs with HVAC. The internet ops have been shrinking, but they generated nice profits covering a lot of the overhead. it will be interesting how the financials look, after the restructuring is done. I felt that the HVAC in particular looked like a bad investment and didn’t seem to be working as envisioned.
Title: Re: SYTE - Enterprise Diversified
Post by: roark33 on October 07, 2018, 10:23:38 AM
It's sort of funny how the only real "investment" that SYTE management made was the HVAC and that was a horrible one.  But, now the investors who made that investment will be moving on to remake themselves as asset managers.  It really shows how much of a sham asset managers are.  Complete fee-driven business without performance being accurately accounted for.  This case has that written all over it. 
Title: Re: SYTE - Enterprise Diversified
Post by: Tim Eriksen on October 07, 2018, 01:01:43 PM
It's sort of funny how the only real "investment" that SYTE management made was the HVAC and that was a horrible one.  But, now the investors who made that investment will be moving on to remake themselves as asset managers.  It really shows how much of a sham asset managers are.  Complete fee-driven business without performance being accurately accounted for.  This case has that written all over it.

Your comment doesn't make sense.  Yes HVAC has not performed well.  Why is the existing asset management business not an investment?  Why is Mt. Melrose not an investment?  Both are many times larger.  They are not moving to something new.  Maybe you are not familiar with what they have been doing the past year and a half.  Why are asset managers a sham??  They sell a service to clients just like other service businesses do.  Maybe you don't need it but that doesn't mean others don't.
Title: Re: SYTE - Enterprise Diversified
Post by: Gregmal on October 07, 2018, 01:15:34 PM
It's sort of funny how the only real "investment" that SYTE management made was the HVAC and that was a horrible one.  But, now the investors who made that investment will be moving on to remake themselves as asset managers.  It really shows how much of a sham asset managers are.  Complete fee-driven business without performance being accurately accounted for.  This case has that written all over it.

Your comment doesn't make sense.  Yes HVAC has not performed well.  Why is the existing asset management business not an investment?  Why is Mt. Melrose not an investment?  Both are many times larger.  They are not moving to something new.  Maybe you are not familiar with what they have been doing the past year and a half.  Why are asset managers a sham??  They sell a service to clients just like other service businesses do.  Maybe you don't need it but that doesn't mean others don't.

Yea I've never understood this line of logic. In a world were casinos/betting are legit businesses, anonymous source based journalism is considered a legitimate business, and pay day loans are accepted as businesses, how is asset management a sham?
Title: Re: SYTE - Enterprise Diversified
Post by: Foreign Tuffett on October 07, 2018, 02:00:42 PM
It's sort of funny how the only real "investment" that SYTE management made was the HVAC and that was a horrible one.  But, now the investors who made that investment will be moving on to remake themselves as asset managers.  It really shows how much of a sham asset managers are.  Complete fee-driven business without performance being accurately accounted for.  This case has that written all over it.

Your comment doesn't make sense.  Yes HVAC has not performed well.  Why is the existing asset management business not an investment?  Why is Mt. Melrose not an investment?  Both are many times larger.  They are not moving to something new.  Maybe you are not familiar with what they have been doing the past year and a half.  Why are asset managers a sham??  They sell a service to clients just like other service businesses do.  Maybe you don't need it but that doesn't mean others don't.

Yea I've never understood this line of logic. In a world were casinos/betting are legit businesses, anonymous source based journalism is considered a legitimate business, and pay day loans are accepted as businesses, how is asset management a sham?

Asset management isn't a sham, but single manager funds ARE very different than normal businesses in that they are extraordinarily dependent on the services of a single person. If that person quits/retires/dies the business is gone -- or at least greatly diminished. Also, think about how much leverage the manager has over any entities that own parts of the GP.

IIRC the Fortress Investment Group/Graticule Asia Macro/Adam Levinson situation is a good example of how this dynamic can play out.
Title: Re: SYTE - Enterprise Diversified
Post by: Gregmal on October 07, 2018, 02:36:09 PM
It's sort of funny how the only real "investment" that SYTE management made was the HVAC and that was a horrible one.  But, now the investors who made that investment will be moving on to remake themselves as asset managers.  It really shows how much of a sham asset managers are.  Complete fee-driven business without performance being accurately accounted for.  This case has that written all over it.

Your comment doesn't make sense.  Yes HVAC has not performed well.  Why is the existing asset management business not an investment?  Why is Mt. Melrose not an investment?  Both are many times larger.  They are not moving to something new.  Maybe you are not familiar with what they have been doing the past year and a half.  Why are asset managers a sham??  They sell a service to clients just like other service businesses do.  Maybe you don't need it but that doesn't mean others don't.

Yea I've never understood this line of logic. In a world were casinos/betting are legit businesses, anonymous source based journalism is considered a legitimate business, and pay day loans are accepted as businesses, how is asset management a sham?

Asset management isn't a sham, but single manager funds ARE very different than normal businesses in that they are extraordinarily dependent on the services of a single person. If that person quits/retires/dies the business is gone -- or at least greatly diminished. Also, think about how much leverage the manager has over any entities that own parts of the GP.

IIRC the Fortress Investment Group/Graticule Asia Macro/Adam Levinson situation is a good example of how this dynamic can play out.

I don't disagree, but don't people realize that this is the product they are investing in when they chose to do so? I mean I get the complaints here, but at the same time I think it's also pretty naive if folks were buying THIS, because they wanted to be in the HVAC biz and didn't realize this was massively reliant on an asset manager...

That said, I've heard from quite a few respected people that asset/money managers make great CEO's(in a sarcastic, biding their time to bilk value type of sense), especially with small companies because they know the lingo, know which levers to bump to produce aesthetically promising but still ultimately hollow results and generally speaking play the long game. Not saying that's the case here but it's something I tend to watch out for with smaller companies run by finance guys.
Title: Re: SYTE - Enterprise Diversified
Post by: globalfinancepartners on October 07, 2018, 03:35:42 PM
So y'all are saying that by going from an HVAC roll up strategy to a group of one-man money management businesses SYTE is making the same mistake twice because it's an identical key-man business.  Seems possible but I feel the money mangers will be a lot more loyal.  Time will tell
Title: Re: SYTE - Enterprise Diversified
Post by: Spekulatius on October 07, 2018, 05:58:19 PM
To me, it always looked like SYTE had many (perhaps too many) lines of business, and now they are trimming those that don’t work out or don’t have a future long term, I don’t know if this doesn’t make sense, what does? Should Berkshire have stuck with the textile business?
Title: Re: SYTE - Enterprise Diversified
Post by: Sportgamma on October 08, 2018, 03:31:30 AM
Although a permanent loss of capital is never a good thing, at least I would credit them for jumping out of the HVAC hole early. I think it's actually a much harder thing to do than to keep on digging.
Title: Re: SYTE - Enterprise Diversified
Post by: writser on October 08, 2018, 04:05:26 AM
Bit odd that HVAC wasn't mentioned at all in the letter. Stay tuned for additional details, I guess.
Title: Re: SYTE - Enterprise Diversified
Post by: InelegantInvestor on October 08, 2018, 04:15:15 AM
Bit odd that HVAC wasn't mentioned at all in the letter. Stay tuned for additional details, I guess.
Not odd at all.
https://en.wikipedia.org/wiki/Misdirection_(magic)
Title: Re: SYTE - Enterprise Diversified
Post by: Spekulatius on October 08, 2018, 04:19:24 AM
Bit odd that HVAC wasn't mentioned at all in the letter. Stay tuned for additional details, I guess.

It’s not odd. If it doesn’t get mentioned, it means it get sold off.  It’s implied ,the way I read this letter. I have been in the corporate world long enough to read the tea leaves, and this seem as clear as they come.
Title: Re: SYTE - Enterprise Diversified
Post by: writser on October 08, 2018, 04:33:25 AM
It’s not odd. If it doesn’t get mentioned, it means it get sold off.  It’s implied ,the way I read this letter. I have been in the corporate world long enough to read the tea leaves, and this seem as clear as they come.

What I was trying to convey: that they possibly want to get rid of the HVAC business isn't odd at all. But if HVAC is a disaster then I believe our great value investing hero WEB would say just that in his shareholder letter. I'd expect the same from these guys. But maybe there are some (legal) issues with that that I am not aware of - explaining the 'stay tuned for more details' in the shareholder letter.
Title: Re: SYTE - Enterprise Diversified
Post by: BG2008 on October 08, 2018, 07:18:19 AM
I see a pattern with "fund managers" who wind up buying businesses like WEB.  WEB at one point bought a gas station in Omaha and he quickly found out that it is a tough business and he and his family wind up working on the weekends and pumping gas and cleaning windows.  I think a lot of us, asset managers, don't know or forget how hard it is to run actual businesses.  We read annual reports and argue about what is a good business move and what is a bad business move and how we would do things differently.  We're kind of like the talking heads doing Monday morning quarterbacking.  In reality, if you ever played an actual sport or ran a business, you will know that the real world is very different and much harder.  Your opponents don't just lay down and let you run all over them.  Your employees don't do exactly what you tell them to do.  On paper, running a Chinese food take place is a great business because you don't need to manage working capital.  It is a capital light business.  Yes, it cost $100-150k to open up a place, but if you run it well, you can net $100k in a year.  Your customers pay you at the point of sale, but you pay your vendors after 1-2 months.  It's fairly recession proof.  Everyone has to eat, right?  $6 lunch specials is the cheapest you will get.  As a fund manager, we would mistaken many of these view points as being advantages and someone may say "hey, let's roll them up"  I'm sure that the mom and pop people don't know how to run it as well as a professional fund manager.  What the fund manager forget is that the owner's got his wife and three kids working pretty much full time to make that $100k a year.  It is not representative of the true business.  I have an uncle who does very well as a HVAC guy.  But he works like 12-14 hours a day and he's very good at what he does.  You can't take him out and replace him with a 20 year old who clocks in and clocks out.   

Peter Lynch mentioned that some financial entities tried to roll up the lobster fishing industry mentioning scale etc.  The truth is lobster fisherman is a irrational breed of people who smoke Marlboros, are grumpy, but work like hell, and loves being on the water.  Yes, it's a shitty living and they don't make anything.  But they go to work everyday being on the water.  They may even dislike their job/business, but they show up everyday to do it.  It's being a part of a shitty American dream.  You try to roll up the lobster fishing industry, you will go broke.  If an industry is fragmented, there is likely a good reason why it is.  As a manager, you really need to understand why and examine what you're bringing to the table that will alter the economics.   

Rant over.  I think guys like Keith Smith are salt of the earth and great assets for SYTE.  I also think that the asset management business offers something that is truly differentiated from the S&P 500.     
Title: Re: SYTE - Enterprise Diversified
Post by: Jurgis on October 08, 2018, 07:21:33 AM
I see a pattern with "fund managers" who wind up buying businesses like WEB.  WEB at one point bought a gas station in Omaha and he quickly found out that it is a tough business and he and his family wind up working on the weekends and pumping gas and cleaning windows.  I think a lot of us, asset managers, don't know or forget how hard it is to run actual businesses.  We read annual reports and argue about what is a good business move and what is a bad business move and how we would do things differently.  We're kind of like the talking heads doing Monday morning quarterbacking.  In reality, if you ever played an actual sport or ran a business, you will know that the real world is very different and much harder.  Your opponents don't just lay down and let you run all over them.  Your employees don't do exactly what you tell them to do.  On paper, running a Chinese food take place is a great business because you don't need to manage working capital.  It is a capital light business.  Yes, it cost $100-150k to open up a place, but if you run it well, you can net $100k in a year.  Your customers pay you at the point of sale, but you pay your vendors after 1-2 months.  It's fairly recession proof.  Everyone has to eat, right?  $6 lunch specials is the cheapest you will get.  As a fund manager, we would mistaken many of these view points as being advantages and someone may say "hey, let's roll them up"  I'm sure that the mom and pop people don't know how to run it as well as a professional fund manager.  What the fund manager forget is that the owner's got his wife and three kids working pretty much full time to make that $100k a year.  It is not representative of the true business.  I have an uncle who does very well as a HVAC guy.  But he works like 12-14 hours a day and he's very good at what he does.  You can't take him out and replace him with a 20 year old who clocks in and clocks out.   

Peter Lynch mentioned that some financial entities tried to roll up the lobster fishing industry mentioning scale etc.  The truth is lobster fisherman is a irrational breed of people who smoke Marlboros, are grumpy, but work like hell, and loves being on the water.  Yes, it's a shitty living and they don't make anything.  But they go to work everyday being on the water.  They may even dislike their job/business, but they show up everyday to do it.  It's being a part of a shitty American dream.  You try to roll up the lobster fishing industry, you will go broke.  If an industry is fragmented, there is likely a good reason why it is.  As a manager, you really need to understand why and examine what you're bringing to the table that will alter the economics.   

Good post.
Title: Re: SYTE - Enterprise Diversified
Post by: globalfinancepartners on October 08, 2018, 07:24:21 AM
+1, good post.  I think a lot of folks on this board can attest that investment management and real estate investment can be really good businesses.  There are certainly worse strategies than focusing on these strengths.
Title: Re: SYTE - Enterprise Diversified
Post by: Spekulatius on October 08, 2018, 09:26:00 AM
It’s not odd. If it doesn’t get mentioned, it means it get sold off.  It’s implied ,the way I read this letter. I have been in the corporate world long enough to read the tea leaves, and this seem as clear as they come.

What I was trying to convey: that they possibly want to get rid of the HVAC business isn't odd at all. But if HVAC is a disaster then I believe our great value investing hero WEB would say just that in his shareholder letter. I'd expect the same from these guys. But maybe there are some (legal) issues with that that I am not aware of - explaining the 'stay tuned for more details' in the shareholder letter.

You don‘t state that a business is a disaster before you sell it obviously, but they will probably more frank regarding their assessment, once the business is sold.

BG2008 hit the nail on the head, imo.
Title: Re: SYTE - Enterprise Diversified
Post by: BG2008 on October 08, 2018, 02:53:25 PM
I see a pattern with "fund managers" who wind up buying businesses like WEB.  WEB at one point bought a gas station in Omaha and he quickly found out that it is a tough business and he and his family wind up working on the weekends and pumping gas and cleaning windows.  I think a lot of us, asset managers, don't know or forget how hard it is to run actual businesses.  We read annual reports and argue about what is a good business move and what is a bad business move and how we would do things differently.  We're kind of like the talking heads doing Monday morning quarterbacking.  In reality, if you ever played an actual sport or ran a business, you will know that the real world is very different and much harder.  Your opponents don't just lay down and let you run all over them.  Your employees don't do exactly what you tell them to do.  On paper, running a Chinese food take place is a great business because you don't need to manage working capital.  It is a capital light business.  Yes, it cost $100-150k to open up a place, but if you run it well, you can net $100k in a year.  Your customers pay you at the point of sale, but you pay your vendors after 1-2 months.  It's fairly recession proof.  Everyone has to eat, right?  $6 lunch specials is the cheapest you will get.  As a fund manager, we would mistaken many of these view points as being advantages and someone may say "hey, let's roll them up"  I'm sure that the mom and pop people don't know how to run it as well as a professional fund manager.  What the fund manager forget is that the owner's got his wife and three kids working pretty much full time to make that $100k a year.  It is not representative of the true business.  I have an uncle who does very well as a HVAC guy.  But he works like 12-14 hours a day and he's very good at what he does.  You can't take him out and replace him with a 20 year old who clocks in and clocks out.   

Peter Lynch mentioned that some financial entities tried to roll up the lobster fishing industry mentioning scale etc.  The truth is lobster fisherman is a irrational breed of people who smoke Marlboros, are grumpy, but work like hell, and loves being on the water.  Yes, it's a shitty living and they don't make anything.  But they go to work everyday being on the water.  They may even dislike their job/business, but they show up everyday to do it.  It's being a part of a shitty American dream.  You try to roll up the lobster fishing industry, you will go broke.  If an industry is fragmented, there is likely a good reason why it is.  As a manager, you really need to understand why and examine what you're bringing to the table that will alter the economics.   

Rant over.  I think guys like Keith Smith are salt of the earth and great assets for SYTE.  I also think that the asset management business offers something that is truly differentiated from the S&P 500.   

BTW, I meant to say the asset management business of SYTE (not just any asset management business) offers something that is truly differentiated from the S&P 500. 
Title: Re: SYTE - Enterprise Diversified
Post by: Junto on October 09, 2018, 08:20:01 PM
I see a pattern with "fund managers" who wind up buying businesses like WEB.  WEB at one point bought a gas station in Omaha and he quickly found out that it is a tough business and he and his family wind up working on the weekends and pumping gas and cleaning windows.  I think a lot of us, asset managers, don't know or forget how hard it is to run actual businesses.  We read annual reports and argue about what is a good business move and what is a bad business move and how we would do things differently.  We're kind of like the talking heads doing Monday morning quarterbacking.  In reality, if you ever played an actual sport or ran a business, you will know that the real world is very different and much harder.  Your opponents don't just lay down and let you run all over them.  Your employees don't do exactly what you tell them to do.  On paper, running a Chinese food take place is a great business because you don't need to manage working capital.  It is a capital light business.  Yes, it cost $100-150k to open up a place, but if you run it well, you can net $100k in a year.  Your customers pay you at the point of sale, but you pay your vendors after 1-2 months.  It's fairly recession proof.  Everyone has to eat, right?  $6 lunch specials is the cheapest you will get.  As a fund manager, we would mistaken many of these view points as being advantages and someone may say "hey, let's roll them up"  I'm sure that the mom and pop people don't know how to run it as well as a professional fund manager.  What the fund manager forget is that the owner's got his wife and three kids working pretty much full time to make that $100k a year.  It is not representative of the true business.  I have an uncle who does very well as a HVAC guy.  But he works like 12-14 hours a day and he's very good at what he does.  You can't take him out and replace him with a 20 year old who clocks in and clocks out.   

Peter Lynch mentioned that some financial entities tried to roll up the lobster fishing industry mentioning scale etc.  The truth is lobster fisherman is a irrational breed of people who smoke Marlboros, are grumpy, but work like hell, and loves being on the water.  Yes, it's a shitty living and they don't make anything.  But they go to work everyday being on the water.  They may even dislike their job/business, but they show up everyday to do it.  It's being a part of a shitty American dream.  You try to roll up the lobster fishing industry, you will go broke.  If an industry is fragmented, there is likely a good reason why it is.  As a manager, you really need to understand why and examine what you're bringing to the table that will alter the economics.   

Rant over.  I think guys like Keith Smith are salt of the earth and great assets for SYTE.  I also think that the asset management business offers something that is truly differentiated from the S&P 500.   

There are real reasons why private equity firms have operating partners. Very insightful post and applicable in many industries.
Title: Re: SYTE - Enterprise Diversified
Post by: globalfinancepartners on October 26, 2018, 10:32:39 AM
https://www.valuewalk.com/2018/10/arquitos-3q18-commentary-long-endi/

Seems relevant to post the Arquitos letter here.  Contains more detail on Willow Oak and the other positions might be of interest to some.  I, for one, am a large shareholder of MMAC, which is attractively priced today at 25.xx.  Not as familiar with Westaim, but I remember some here following it.
Title: Re: SYTE - Enterprise Diversified
Post by: globalfinancepartners on November 05, 2018, 12:08:08 PM
https://www.sec.gov/Archives/edgar/data/1096934/000143774918019519/syte20181105_8k.htm

Quote
The Company’s determination to terminate the Purchase Agreement resulted from the Company’s management conducting a detailed budget process in the third quarter of this year that revealed that in addition to the 113 properties previously acquired under the Purchase Agreement, Mt Melrose’s management had significantly expanded Mt Melrose’s staffing and operations and had purchased 34 additional other properties during the quarter ended June 30, 2018—with Mt Melrose carrying, in accordance with the requirements of generally accepted accounting principles concerning consolidation, a total of 195 properties on its balance sheet as of September 30, 2018—and that the carrying costs of certain of Mt Melrose’s holdings together with Mt Melrose’s increased general and administrative expenses were not financially prudent, and, if continued, would not be in the best interests of the Company and its shareholders. The Company’s management is in the process of implementing an outsourced property management model at Mt Melrose similar to what it implemented at its EDI Real Estate property operations in Roanoke, Virginia. A third-party property manager has been engaged as of November 1, 2018 to manage certain of the real properties previously acquired by Mt Melrose. In addition, the Company’s management currently is undertaking an assessment of all of the real properties previously acquired by Mt Melrose to determine which holdings should be divested or restructured, depending upon, for example, each property’s current physical condition, any renovation costs projected to be required for each property, the current state of occupancy of each property, the amount and interest rate of debt of each property and each property’s current and projected cash flow. The Company expects to sell a significant number of the Mt Melrose real properties that are not currently generating revenue.

Quote
In addition, and also in connection with the above, Mt Melrose and Moore have entered into a certain Termination of Employment Agreement also effective November 1, 2018, pursuant to which the parties mutually agreed to terminate the above-noted Moore Employment Agreement as of November 1, 2018. Under the termination agreement, Moore irrevocably waived any and all right and interest that Moore may have had to receive any further payment or other amounts of any kind under the Moore Employment Agreement (including with respect to any annual bonus compensation and any right of first refusal as to the Company’s equity interests in Mt Melrose). Accordingly, Moore’s employment by and with Mt Melrose was terminated, and Moore was removed as an officer of Mt Melrose, effective as of November 1, 2018. Moore’s termination resulted from the Company’s determination, made in connection with the other matters above, to terminate the employment of all Mt Melrose staff and outsource Mt Melrose’s property management and renovation operations to a third-party service provider. Notwithstanding Moore’s termination, Moore and Mt Melrose have agreed that Mt Melrose will pay to Moore on March 31, 2019 a one-time fee equal to 0.25% of the aggregate amount of any indebtedness secured by the real properties owned by Mt Melrose for which Moore provides a personal guaranty, provided that Moore maintains each such personal guaranty throughout the term of the applicable loan.
Title: Re: SYTE - Enterprise Diversified
Post by: NBL0303 on November 05, 2018, 12:37:21 PM
https://www.sec.gov/Archives/edgar/data/1096934/000143774918019519/syte20181105_8k.htm

Quote
The Company’s determination to terminate the Purchase Agreement resulted from the Company’s management conducting a detailed budget process in the third quarter of this year that revealed that in addition to the 113 properties previously acquired under the Purchase Agreement, Mt Melrose’s management had significantly expanded Mt Melrose’s staffing and operations and had purchased 34 additional other properties during the quarter ended June 30, 2018—with Mt Melrose carrying, in accordance with the requirements of generally accepted accounting principles concerning consolidation, a total of 195 properties on its balance sheet as of September 30, 2018—and that the carrying costs of certain of Mt Melrose’s holdings together with Mt Melrose’s increased general and administrative expenses were not financially prudent, and, if continued, would not be in the best interests of the Company and its shareholders. The Company’s management is in the process of implementing an outsourced property management model at Mt Melrose similar to what it implemented at its EDI Real Estate property operations in Roanoke, Virginia. A third-party property manager has been engaged as of November 1, 2018 to manage certain of the real properties previously acquired by Mt Melrose. In addition, the Company’s management currently is undertaking an assessment of all of the real properties previously acquired by Mt Melrose to determine which holdings should be divested or restructured, depending upon, for example, each property’s current physical condition, any renovation costs projected to be required for each property, the current state of occupancy of each property, the amount and interest rate of debt of each property and each property’s current and projected cash flow. The Company expects to sell a significant number of the Mt Melrose real properties that are not currently generating revenue.

Quote
In addition, and also in connection with the above, Mt Melrose and Moore have entered into a certain Termination of Employment Agreement also effective November 1, 2018, pursuant to which the parties mutually agreed to terminate the above-noted Moore Employment Agreement as of November 1, 2018. Under the termination agreement, Moore irrevocably waived any and all right and interest that Moore may have had to receive any further payment or other amounts of any kind under the Moore Employment Agreement (including with respect to any annual bonus compensation and any right of first refusal as to the Company’s equity interests in Mt Melrose). Accordingly, Moore’s employment by and with Mt Melrose was terminated, and Moore was removed as an officer of Mt Melrose, effective as of November 1, 2018. Moore’s termination resulted from the Company’s determination, made in connection with the other matters above, to terminate the employment of all Mt Melrose staff and outsource Mt Melrose’s property management and renovation operations to a third-party service provider. Notwithstanding Moore’s termination, Moore and Mt Melrose have agreed that Mt Melrose will pay to Moore on March 31, 2019 a one-time fee equal to 0.25% of the aggregate amount of any indebtedness secured by the real properties owned by Mt Melrose for which Moore provides a personal guaranty, provided that Moore maintains each such personal guaranty throughout the term of the applicable loan.

Wow - this seems like a huge deal. Moore was the reason or the catalyst for all of the others getting involved with this right. And wasn't the Mt. Melrose deal just struck in January or so of this year?

So is what Enterprise Diversified is now saying is that the properties were not as advertised or expected in the purchase agreement? And additionally that since the purchase agreement for Mt. Melrose was struck - that they added expenses beyond what were warranted? This makes me quite sad, because I enjoyed following what Moore did with Sitestar when he learned of its problems and I guess I'm just really surprised by this turn of events.
Title: Re: SYTE - Enterprise Diversified
Post by: globalfinancepartners on November 05, 2018, 12:41:15 PM
Not sure thats the exact story - but we do know there is a new CEO and they are exiting a bunch of businesses.
Title: Re: SYTE - Enterprise Diversified
Post by: Tim Eriksen on November 05, 2018, 01:01:58 PM

Wow - this seems like a huge deal. Moore was the reason or the catalyst for all of the others getting involved with this right. And wasn't the Mt. Melrose deal just struck in January or so of this year?

So is what Enterprise Diversified is now saying is that the properties were not as advertised or expected in the purchase agreement? And additionally that since the purchase agreement for Mt. Melrose was struck - that they added expenses beyond what were warranted? This makes me quite sad, because I enjoyed following what Moore did with Sitestar when he learned of its problems and I guess I'm just really surprised by this turn of events.

Sad yet in the long run may be good.  Mt Melrose is capital intensive and going to be hit with depreciation charges, meaning low return on capital and low EPS.  Asset management is the opposite once it is to scale.  Moving away from real estate may prove very beneficial over time.

Other thoughts:
1. You should not put out an 8-k like this during market hours.
2. It reads to me that there was increased staffing, and hence higher operating costs.  Since this was not prudent it must mean increased loss from operations in the unit.  Poor management at the unit level.  Implied is some miscommunication between unit and corporate parent at best.  We shouldn't assume anything worse than that.  Hopefully that proves correct.
Title: Re: SYTE - Enterprise Diversified
Post by: InelegantInvestor on November 05, 2018, 01:22:41 PM
From Dec 11, 2017:
"Mt Melrose is at an inflection point. It owns 122 residential properties and has the potential, with Sitestar’s help, of becoming the dominant property owner in Lexington, Kentucky. Jeff’s strategy is to find undervalued properties, repair and upgrade them, rent them out to tenants, and own them indefinitely. This is a similar strategy that attracted us to Sitestar in the first place. 

 Mt Melrose’s current portfolio is exceptional. Jeff is an excellent, passionate, operator. He uses debt appropriately. And, Lexington is the ideal location to take advantage of rising rents and rising property values.

...

Sitestar intends to commit the next $10 million of cash that we internally generate to the subsidiary. Some of that will come from debt that we will raise at the corporate level. The initial allocation to the subsidiary will likely be in the range of $3 million. 

Jeff will not earn a salary. He will receive an annual bonus based on book value growth with a high-water mark.

As an investor, I have a strong preference for a stable or decreasing share count. We have done the opposite over the last year and a half. Believe actions, not words. We will work to prove those words over time. On this issue, I prefer Sitestar to be less of a Teledyne (issuing shares at opportune times and then buying them back when attractive) and more of a Berkshire (only using shares for acquisitions in unique cases). We think this transaction will prove to be more akin to Burlington Northern than Dexter Shoes. I am certain we will not regret issuing shares."

 
While we are certainly excited about this transaction, you should be patient. We urge our subsidiaries to think long-term. Often that negatively affects short-term results."

-Steven Kiel

"I bring this up to say that, coming from a person who values his autonomy as much as the air he breathes, if you are a person who is looking to sell your business or partner with a public entity while still remaining at its helm, then you should consider partnering with Sitestar."
-Jeff Moore

Less than a year later, the arrangement ends with some insinuations, but no clear statement. The insinuations seem to imply that Mr. Moore did what Mr. Kiel had expected him to do, but the company no longer had an interest in its funding commitment or in granting autonomy. Is Mr. Moore still on the Board? 
Title: Re: SYTE - Enterprise Diversified
Post by: Tim Eriksen on November 05, 2018, 01:40:23 PM
I think the insinuation is that debt was not used appropriately.  Growing too fast and not getting properties on the rental market quickly and efficiently means high carrying costs.  In that sense I read the 8-K as implying that the operating philosophy changed after the purchase - buying too many properties on debt = increased carrying costs plus increased operating cost structure.  We will find out more in the quarterly financials.  Many organizations struggle with growth. 

As a shareholder this sucks in the short term, but these issues are fixable.  How much it will cost to fix is the issue. 
Title: Re: SYTE - Enterprise Diversified
Post by: roark33 on November 05, 2018, 01:50:30 PM
So, let me get this straight.  The company has made two private investments in operating companies, HVAC and real estate, and both have turned sour in short order.  And this guy is running an investment advisory business, where most of his returns are driven by his ownership in SYTE?  Yeah, this will not work out well.....

Title: Re: SYTE - Enterprise Diversified
Post by: fishwithwings on November 05, 2018, 03:15:26 PM
So, let me get this straight.  The company has made two private investments in operating companies, HVAC and real estate, and both have turned sour in short order.  And this guy is running an investment advisory business, where most of his returns are driven by his ownership in SYTE?  Yeah, this will not work out well.....

Well to be fair, I think they bought bad businesses but his portfolio @ Ark is very different as he is invested in higher quality companies (e.g. MMAC).
Title: Re: SYTE - Enterprise Diversified
Post by: matts on November 05, 2018, 03:31:31 PM
So, let me get this straight.  The company has made two private investments in operating companies, HVAC and real estate, and both have turned sour in short order.  And this guy is running an investment advisory business, where most of his returns are driven by his ownership in SYTE?  Yeah, this will not work out well.....

Well to be fair, I think they bought bad businesses but his portfolio @ Ark is very different as he is invested in higher quality companies (e.g. MMAC).

What do you mean by businesses? I thought Mt. Melrose was just a shell with a bunch of properties in it, which SYTE had appraised at the time of acquisition. And my impression was that there wasn't much to HVAC when SYTE "bought" that as well. Most of the apparent damage here seems to have taken place as these things were being scaled under current management, not before.

How does the CEO not know how many people Jeff is hiring until months later? or how many houses he is buying and how quickly they are getting into the rental market? Either Jeff was supposed to report up and didn't (which will make Jeff look very bad), or Steve wasn't engaged as he should have been, which will make him look bad.
Title: Re: SYTE - Enterprise Diversified
Post by: oddballstocks on November 05, 2018, 04:21:21 PM
This is such a weird situation. So Jeff cashed out and they’re stuck with the buildings? Is that good or bad? Is the portfolio decent? It seemed like Jeff knew what he was doing pre-purchase. Did he suddenly go rogue or something?

Why the sudden reversal on RE?

I guess I have more questions than the 8-k has answers. The optics doesn’t look great.
Title: Re: SYTE - Enterprise Diversified
Post by: Foreign Tuffett on November 05, 2018, 05:46:31 PM
Let me see if I've got this right:

SYTE agreed to acquire Mt Melrose and all of its owned properties late last year. At the time Mt Melrose owned 122 properties. The owner operator of My Melrose was also SYTE's Chairman.

Fast forward 11 months to the present. Now Mt Melrose carries 195 properties on its balance sheet. 113 of these properties are actually owned by SYTE. Contra the original plan, SYTE won't be acquiring the remaining properties. Instead, SYTE will either sell the properties it already owns, or contract with a 3rd party leasing manager.

Hmmmm......

If Moore and his team aren't going to be managing the 113 owned properties, then all of the properties should likely be sold off -- something I recognize will take some time.

Title: Re: SYTE - Enterprise Diversified
Post by: DTEJD1997 on November 05, 2018, 05:58:59 PM
Hey all:

If SYTE is going to be liquidating the property portfolio of 100+ properties...that is going to be a large amount of properties in the lower cost housing segment for that market.

If they liquidate over the course of a year, I imagine they will have to discount them OR offer seller financing, OR a combination of both.

Who would buy a lot of those properties?  Somebody who is familiar with the market.

If SYTE is outsourcing management of the properties, that is going to take away a lot of their income.  The management company will get a lot of it.

SYTE is probably going to liquidate the internet company.  Maybe they get 1x or 2x EBIDTA for it?  There are no earnings for the HVAC, so either sell it at a large loss or shut it down.

I am going to predict that there is going to be a big writedown(s) in the near future for SYTE.

I am further going to predict that the share price is going to be going SUBSTANTIALLY lower in the upcoming year. 

One could even argue that the whole thing just had it's wheels come off.
Title: Re: SYTE - Enterprise Diversified
Post by: Spekulatius on November 05, 2018, 06:03:55 PM
Let me see if I've got this right:

SYTE agreed to acquire Mt Melrose and all of its owned properties late last year. At the time Mt Melrose owned 122 properties. The owner operator of My Melrose was also SYTE's Chairman.

Fast forward 11 months to the present. Now Mt Melrose carries 195 properties on its balance sheet. 113 of these properties are actually owned by SYTE. Contra the original plan, SYTE won't be acquiring the remaining properties. Instead, SYTE will either sell the properties it already owns, or contract with a 3rd party leasing manager.

Hmmmm......

If Moore and his team aren't going to be managing the 113 owned properties, then all of the properties should likely be sold off -- something I recognize will take some time.

The new Sytestar looks like the old Sytestar. Reminds me of a book I read a long time ago in school - the title was “Animal Farm”.
Title: Re: SYTE - Enterprise Diversified
Post by: InelegantInvestor on November 05, 2018, 08:10:54 PM
Let me see if I've got this right:

SYTE agreed to acquire Mt Melrose and all of its owned properties late last year. At the time Mt Melrose owned 122 properties. The owner operator of My Melrose was also SYTE's Chairman.

Fast forward 11 months to the present. Now Mt Melrose carries 195 properties on its balance sheet. 113 of these properties are actually owned by SYTE. Contra the original plan, SYTE won't be acquiring the remaining properties. Instead, SYTE will either sell the properties it already owns, or contract with a 3rd party leasing manager.

Hmmmm......

If Moore and his team aren't going to be managing the 113 owned properties, then all of the properties should likely be sold off -- something I recognize will take some time.

The new Sytestar looks like the old Sytestar. Reminds me of a book I read a long time ago in school - the title was “Animal Farm”.
Indeed. This all began with "All shareholders are equal, but some are more equal than others"
Title: Re: SYTE - Enterprise Diversified
Post by: Tim Eriksen on November 05, 2018, 08:23:07 PM
I may be wrong but I think you are all over reacting.  It is not about selling all the properties.  Some certainly will be.  I doubt there is a meaningful write down. 

Outsourcing management is how it should be done and is much better.    Let's assume all 113 properties are rented for $800 month average = $90,400 per month.  You can use 90% occupancy at $900 if you like.  Assume a property manager takes 6-8% to manage or $5,400 to $7,200 per month.  That is a whole lot cheaper than building a property management team.  That is cheaper than one decent accountant or maintenance person.  With 113 properties are you better off with in house maintenance and contracting out services as needed.  If it were a single apartment complex maybe an in house person makes sense but if you have properties spread around a city contracting out services as needed seems cheaper.   

My read is that Mt Melrose was just buying too quickly and over hiring.  There is no evidence that the problem is that the properties are bad or that they over paid.  With a holding company approach you are sometimes going to have issues like this.  In their case it has happened twice, since HVAC had some similar problems.  Asset management and Internet are doing well.  VA real estate is being liquidated.   
Title: Re: SYTE - Enterprise Diversified
Post by: matts on November 05, 2018, 08:42:26 PM
I may be wrong but I think you are all over reacting.  It is not about selling all the properties.  Some certainly will be.  I doubt there is a meaningful write down. 

Outsourcing management is how it should be done and is much better.    Let's assume all 113 properties are rented for $800 month average = $90,400 per month.  You can use 90% occupancy at $900 if you like.  Assume a property manager takes 6-8% to manage or $5,400 to $7,200 per month.  That is a whole lot cheaper than building a property management team.  That is cheaper than one decent accountant or maintenance person.  With 113 properties are you better off with in house maintenance and contracting out services as needed.  If it were a single apartment complex maybe an in house person makes sense but if you have properties spread around a city contracting out services as needed seems cheaper.   

My read is that Mt Melrose was just buying too quickly and over hiring.  There is no evidence that the problem is that the properties are bad or that they over paid.  With a holding company approach you are sometimes going to have issues like this.  In their case it has happened twice, since HVAC had some similar problems.  Asset management and Internet are doing well.  VA real estate is being liquidated.

If this is just a case of going too fast, why would Steve terminate the man who up until a month ago was chairman of his board? Sure, change course and hire an external manager, but wouldn't you let Jeff keep his job and have Jeff issue a statement with the announcement saying "Hey, we figured out a more efficient way of running Melrose" ?? Or the other logical option is that you let him resign. To me, Jeff's silence is telling here. As is the general lack of communication other than the filing at 2:30pm. They couldn't wait 90 minutes and also issue a press release to explain better and let the market digest outside market hours? The fact that we are trying to figure out what the filing is trying to say indicates that the company dropped the ball on communicating with shareholders on top of everything else. I'm surprised it's only down 30%.

Title: Re: SYTE - Enterprise Diversified
Post by: slkiel on November 05, 2018, 08:44:45 PM
Please find below a thread that I tweeted out earlier about the situation.

The bottom line is that we decided to restructure the subsidiary to better support our asset management operations. The goal is to generate predictable cash flow from the real estate. Jeff’s goals were different as he was more focused on capital appreciation. There is no animosity between Jeff and the company, simply different goals.

Things have not worked out exactly as planned for HVAC and Mt Melrose, but those challenges have pushed us to focus on our strengths and on the operations that we control at the corporate level. That is a big long-term plus. Doing things in a decentralized manner, as we attempted with HVAC and Mt Melrose, in a small company is very, very difficult. The public company aspect is much different than a private company.

The stock price will do what it does, and, as we all know, it is not always rational (especially for a small company). Our operations, though, are no different than yesterday. As we said in the 8-K, we are cutting expenses and simplifying the business. There isn’t much more to it than that.

https://twitter.com/steven_kiel/status/1059661220507250688?s=21
Title: Re: SYTE - Enterprise Diversified
Post by: slkiel on November 05, 2018, 08:49:29 PM
Also, I appreciate the comments about the timing of the filing. We typically try to file the Qs on Friday afternoons, for example. In retrospect we should have been more sensitive about the timing of this filing. Clearly we did not believe that it would be market moving.
Title: Re: SYTE - Enterprise Diversified
Post by: Gregmal on November 05, 2018, 08:49:55 PM
I'm not accusing this company of doing this, but generally speaking, IMO these type of deals are generally the equivalent of stock promotions for sophisticated investors. These communities(COBF) inadvertently cultivate a sense of "in the know" from members and "access" that generally speaking, impairs ones ability to look at a high risk, low quality businesses as such. I'm curious to know how many investors are involved in this and Premier Diversified simply because of this site? Again, I am not accusing the managers here of anything....But being here, amongst sophisticated investors, likely gives a bit of a boost somewhere. You see folks here rigorously rip through other investments, and I can't help but think there is less diligence with companies like these because people want to believe.

And in relation to this, why not just start an in house property manager? The ROI in that business is typically high. Asset light and very scale-able, much like money management. You wouldn't need an accountant, anyone who runs money should be able to do basic accounting or find a handyman. The problem with these "management" schemes is there's double and triple and quadruple layers of people getting paid to essentially do the same thing. If the CEO is managing the company, he should be able to do some accounting without drawing a fee or outsourcing it for one. I own investment properties and I do all my own management stuff. I guess if it was someone else's money I'd hire it off and bill them the cost though...
Title: Re: SYTE - Enterprise Diversified
Post by: fishwithwings on November 05, 2018, 09:02:32 PM
So, let me get this straight.  The company has made two private investments in operating companies, HVAC and real estate, and both have turned sour in short order.  And this guy is running an investment advisory business, where most of his returns are driven by his ownership in SYTE?  Yeah, this will not work out well.....

Well to be fair, I think they bought bad businesses but his portfolio @ Ark is very different as he is invested in higher quality companies (e.g. MMAC).

What do you mean by businesses? I thought Mt. Melrose was just a shell with a bunch of properties in it, which SYTE had appraised at the time of acquisition. And my impression was that there wasn't much to HVAC when SYTE "bought" that as well. Most of the apparent damage here seems to have taken place as these things were being scaled under current management, not before.

How does the CEO not know how many people Jeff is hiring until months later? or how many houses he is buying and how quickly they are getting into the rental market? Either Jeff was supposed to report up and didn't (which will make Jeff look very bad), or Steve wasn't engaged as he should have been, which will make him look bad.

HVAC is known to be a horrible business with low margins.  As for real estate it is very capital intensive and if I recall correctly, Buffett once said if there was an easy way to manage a lot of single family homes, he would do it. The businesses should not have been entered into the first place.

However, the poorly timed press release and firing (not resignation) of Jeff from the BOD and company leaves a lot of questions. Also, I don’t understand why the new direction focuses on cash flow and not capital gains from the properties. These are SINGLE FAMILY homes which usiually provide very low cap rate. 
Title: Re: SYTE - Enterprise Diversified
Post by: DTEJD1997 on November 05, 2018, 09:57:05 PM
I may be wrong but I think you are all over reacting.  It is not about selling all the properties.  Some certainly will be.  I doubt there is a meaningful write down. 

Outsourcing management is how it should be done and is much better.    Let's assume all 113 properties are rented for $800 month average = $90,400 per month.  You can use 90% occupancy at $900 if you like.  Assume a property manager takes 6-8% to manage or $5,400 to $7,200 per month.  That is a whole lot cheaper than building a property management team.  That is cheaper than one decent accountant or maintenance person.  With 113 properties are you better off with in house maintenance and contracting out services as needed.  If it were a single apartment complex maybe an in house person makes sense but if you have properties spread around a city contracting out services as needed seems cheaper.   

My read is that Mt Melrose was just buying too quickly and over hiring.  There is no evidence that the problem is that the properties are bad or that they over paid.  With a holding company approach you are sometimes going to have issues like this.  In their case it has happened twice, since HVAC had some similar problems.  Asset management and Internet are doing well.  VA real estate is being liquidated.

I am going to guess that there is eventually a HUGE write down on these properties.

I doubt they will be able to get a property manager that cheap.  Maybe? Let us say that I am wrong assume that they do for that low a price. 

What of the quality and diligence of monitoring/watching/fixing/improving the properties?  A 3rd party management company is not going to be that good, certainly not for that price.

Remember, unless I am mistaken, most of the properties are "lower priced" houses.  They assets are a little rough around the edges and take a tremendous amount of management time/skill/experience.  You've got to know EXACTLY what you are doing, you've got to be ON TOP of everything, all the time.  If you aren't, things blow apart.

Why was Jeff scaling up the in house management/repair/development?  He built his fortune/business by doing this.  I am going to guess that he knows best.  Do you honestly think that Jeff would not have figured out, "Gee, what the HECK am I doing?  I should just farm this out to an external manager! What a dunce I've been wasting my time/energy/talent!"

I think property management companies work best with commercial/industrial properties and higher end residential.

Finally, something went terribly wrong here.  Either SYTE management was wrong in their judgement to begin with OR something went terribly askew with Jeff. 

My guess is that management just woke up one day and decided they want to be fund managers and not get their hands dirty with low priced houses, HVAC, and the interwebs.

Does ANYBODY think this a good turn of events?

Either way, doesn't really matter, end result is the same, damaged company, ruined reputation, and low stock price that is probably going lower.
Title: Re: SYTE - Enterprise Diversified
Post by: Sportgamma on November 06, 2018, 02:58:03 AM
If they are terminating the purchase agreement, how come they end up with all the properties? Or does the purchase agreement only apply to 113 of the 195?
Title: Re: SYTE - Enterprise Diversified
Post by: globalfinancepartners on November 06, 2018, 03:52:19 AM
They were buying the properties and Mt. Melrose in stages, 44 properties in the first closing, 69 properties in the second, etc..  But they terminated the deal when they had only purchased 113.  If they hadn't, it is my understanding that they would have been set to acquire all 195 and counting.

If they are terminating the purchase agreement, how come they end up with all the properties? Or does the purchase agreement only apply to 113 of the 195?
Title: Re: SYTE - Enterprise Diversified
Post by: Ballinvarosig Investors on November 06, 2018, 04:01:23 AM
I am going to guess that there is eventually a HUGE write down on these properties.

I doubt they will be able to get a property manager that cheap.  Maybe? Let us say that I am wrong assume that they do for that low a price. 

What of the quality and diligence of monitoring/watching/fixing/improving the properties?  A 3rd party management company is not going to be that good, certainly not for that price.
When you are dealing with lower end residential property, third party management is a bad idea. Any of the successful people I know who are involved in this area are all very hands-on and run their business directly, usually using a few trusted tradespeople. Yields on these properties are generally good, but the business requires more direct management (things get broken more often, tenants will try to stiff you, etc.). Third party management will simply not do as good a job as a motivated owner operator. They won't chase down tenants for arrears, they will not spend time on bodge repairs, etc.

Personally, I think it's a mistake for the company to part ways with Moore in this fashion. If they don't want to be in the business and want to back out, by all means start liquidating. But I would be surprised if it works any better with a third party manager.
Title: Re: SYTE - Enterprise Diversified
Post by: writser on November 06, 2018, 04:13:13 AM
Also, I appreciate the comments about the timing of the filing. We typically try to file the Qs on Friday afternoons, for example. In retrospect we should have been more sensitive about the timing of this filing. Clearly we did not believe that it would be market moving.

The chairman is leaving the company effective immediately, a subsidiary is buying real estate without the company knowing and is deemed 'not financially prudent' and now the real estate portfolio will be restructured. There are still many unanswered questions re: internal controls, restructuring costs, estimated losses on the real estate portfolio, etc. etc. If Biglari would do something like this the board would go utterly crazy. I find it hard to believe that you sincerely think you can release such a press release during market hours because you think it won't move the market.

You know more than we do about the break-up so I guess it's possible you look at this press release with rosier glasses but still: blank out all the names, show the press release to any random investor and he/she will tell you in 5 seconds that this looks like major bad news. "I didn't think it would impact the market" vs. a 30% price drop on huge volume implies a ridiculous disconnect between what you think and what the market thinks. So either the market is crazy, you are way too optimistic or the press release was badly phrased. And in my experience it's never just the market being crazy ..
Title: Re: SYTE - Enterprise Diversified
Post by: Spekulatius on November 06, 2018, 04:22:26 AM
Also, I appreciate the comments about the timing of the filing. We typically try to file the Qs on Friday afternoons, for example. In retrospect we should have been more sensitive about the timing of this filing. Clearly we did not believe that it would be market moving.

The chairman is leaving the company effective immediately, a subsidiary is buying real estate without the company knowing and is deemed 'not financially prudent' and now the real estate portfolio will be restructured. There are still many unanswered questions re: internal controls, restructuring costs, estimated losses on the real estate portfolio, etc. etc. If Biglari would do something like this the board would go utterly crazy. I find it hard to believe that you sincerely think you can release such a press release during market hours because you think it won't move the market.

You know more than we do about the break-up so I guess it's possible you look at this press release with rosier glasses but still: blank out all the names, show the press release to any random investor and he/she will tell you in 5 seconds that this looks like bad news and I think you should have considered that.

Yes, I don’t get it either how Jeff can buy another 83 properties (195-113) without the board knowing. there are not many charitable explanations for this. Managing a portfolio of 113 single home properties in Kentucky isn’t exactly like eating a piece of cake either and I think a disposition at a considerable loss is quite likely, now that interest rates move up. Jeff bought these so quickly in a geographically confined area, he almost must have cornered the market.
Title: Re: SYTE - Enterprise Diversified
Post by: valueyoda on November 06, 2018, 06:51:47 AM
 The current price still looks extremely expensive too me, given the likely writedowns on the real estate portfolio, the discount that should be placed on corporate governance issues and the ongoing volatile nature of cash flows from the asset management division. How do some of the bulls value this company now given these headwinds? I can't put more than a $5 valuation on the company if I am generous.
Title: Re: SYTE - Enterprise Diversified
Post by: DTEJD1997 on November 06, 2018, 07:09:25 AM
Also, I appreciate the comments about the timing of the filing. We typically try to file the Qs on Friday afternoons, for example. In retrospect we should have been more sensitive about the timing of this filing. Clearly we did not believe that it would be market moving.

The chairman is leaving the company effective immediately, a subsidiary is buying real estate without the company knowing and is deemed 'not financially prudent' and now the real estate portfolio will be restructured. There are still many unanswered questions re: internal controls, restructuring costs, estimated losses on the real estate portfolio, etc. etc. If Biglari would do something like this the board would go utterly crazy. I find it hard to believe that you sincerely think you can release such a press release during market hours because you think it won't move the market.

You know more than we do about the break-up so I guess it's possible you look at this press release with rosier glasses but still: blank out all the names, show the press release to any random investor and he/she will tell you in 5 seconds that this looks like major bad news. "I didn't think it would impact the market" vs. a 30% price drop on huge volume implies a ridiculous disconnect between what you think and what the market thinks. So either the market is crazy, you are way too optimistic or the press release was badly phrased. And in my experience it's never just the market being crazy ..

I was thinking about this later in the night.  Senior management didn't think it would affect the stock price?  wut, Wut, WUT?

Rightly or wrongly, some shareholders are going to be concerned/upset about this.  That alone will lead to a lot of "forced" selling as investors re-evaluate the investment thesis.

If senior management was blindsided by the market's reaction, what else are they missing?
Title: Re: SYTE - Enterprise Diversified
Post by: Tim Eriksen on November 06, 2018, 07:15:28 AM
Either I am going to look foolish or others are.  Some of the comments do not make sense to me.
a disposition at a considerable loss is likely now that interest rates are moving up -
1. they are not selling all the properties, only ones that are not rehabbed (I suspect they may even rethink this).
2. higher interest rates are good for rents.  So that is a positive on properties they hold.  They are going to hold nearly all the properties to stay in compliance with the 40 Act.  They have to.  Investments must be less than 40% which means they must have more than $26 million of assets.

Jeff is smart... expect a HUGE loss on disposition.
1. I agree Jeff is smart.  That implies Jeff made good purchases, appropriately rehabbed, secured good renters.  Jeff sold for stock not cash.  Meaning he was essentially a buyer in the transaction as well.  So which is it?  Is Jeff smart or dumb?  The only way to have a huge loss is if Jeff was dumb or SYTE irrationally sells off the properties, which they will not and can not do.   

Here is another point.  If Jeff bought 80 properties.  That would cost roughly $5 million.  If he is keeping the properties, then all SYTE is hit with is the interest charge during the period.  Let's assume 6% or $300k per year, or $75k for the quarter.  That creates a loss but not a huge one.  If you add in staffing in the quarter - let's assume five people at 5k per month would be another 75k for the quarter.  I do not expect a large charge this quarter or next.

 Yet investors have taken $10 million off the market cap.  Nearly the whole value of all the Lexington properties.  Three times the net purchase price (equity issued to Jeff). 

I buy the story that it was a difference over execution - grow with cash generated internally from the business with acquisition debt available from the parent (mgmt thought) versus grow rapidly with interim losses being acceptable (Jeff thought).  We will see.     
Title: Re: SYTE - Enterprise Diversified
Post by: valueyoda on November 06, 2018, 07:18:19 AM
Hey Tim. I agree with most of your points. But what is the bull case at this price?
Title: Re: SYTE - Enterprise Diversified
Post by: bizaro86 on November 06, 2018, 07:50:49 AM
The bull case is that one of the hedge funds they're incubating blows up to $10B AUM, and they get a fee override.

This is terrible news though. Single family residential is an owner-operator business, it isn't something that scales well. But before the story was we have a great owner operator who is chairman and has a big stake. Now we have a hedge fund type who has a big portfolio of low end single family houses in Kentucky getting professionally managed for income. Hard to see how that could go very well, imo.

I really don't like 'not selling because of the 40 act' as a reason to own something. If it's not a good business to own I'd rather sell and buy something that is.
Title: Re: SYTE - Enterprise Diversified
Post by: matts on November 06, 2018, 07:57:20 AM

I buy the story that it was a difference over execution - grow with cash generated internally from the business with acquisition debt available from the parent (mgmt thought) versus grow rapidly with interim losses being acceptable (Jeff thought).  We will see.   

Tim, that story is certainly possible, but to me, it would seem a lot more likely if the story ended with:

1) Moore resigns
2) Moore issues a statement saying "difference of opinion on strategy folks, I'm off to do it the way I want"

how do you explain what actually happened?

1) they terminate their up-until-a-month-ago chairman effective immediately
2) file a public document stating Moore's actions "were not financially prudent".
3) Don't bother with a press release, just dump an 8-k during market hours


Don't you think if this was just a difference of opinion Jeff would fight like heck not to have his reputation impacted this way in a public document that lives forever?! and wouldn't Steve also want to avoid the optics of a termination and such harsh language in the filing?

We've all read hundreds of these kinds of corporate announcement and it seems to me, that whenever possible, companies allow everyone to save face. "he went to spend time with family", "I'm leaving, but I believe in the company and in fact I will keep a substantial position in the stock." This is in fact what Steve has attempted via his tweets late last night after the market reaction. But what prevented a mutual press release in the first place? To me, the simple "difference of strategy" narrative just does not fit with the events surrounding the announcement.
Title: Re: SYTE - Enterprise Diversified
Post by: matts on November 06, 2018, 08:02:21 AM
The bull case is that one of the hedge funds they're incubating blows up to $10B AUM, and they get a fee override.

This is terrible news though. Single family residential is an owner-operator business, it isn't something that scales well. But before the story was we have a great owner operator who is chairman and has a big stake. Now we have a hedge fund type who has a big portfolio of low end single family houses in Kentucky getting professionally managed for income. Hard to see how that could go very well, imo.

I really don't like 'not selling because of the 40 act' as a reason to own something. If it's not a good business to own I'd rather sell and buy something that is.

Sure, except each of their current managers have stated multiple times in public that their strategies only work with small amounts of capital. I really wouldn't want to be in that 10 billion dollar OTC Adventures fund...

Title: Re: SYTE - Enterprise Diversified
Post by: Foreign Tuffett on November 06, 2018, 08:02:38 AM
Either I am going to look foolish or others are.  Some of the comments do not make sense to me.
a disposition at a considerable loss is likely now that interest rates are moving up -
1. they are not selling all the properties, only ones that are not rehabbed (I suspect they may even rethink this).
2. higher interest rates are good for rents.  So that is a positive on properties they hold.  They are going to hold nearly all the properties to stay in compliance with the 40 Act.  They have to.  Investments must be less than 40% which means they must have more than $26 million of assets.

Jeff is smart... expect a HUGE loss on disposition.
1. I agree Jeff is smart.  That implies Jeff made good purchases, appropriately rehabbed, secured good renters.  Jeff sold for stock not cash.  Meaning he was essentially a buyer in the transaction as well.  So which is it?  Is Jeff smart or dumb?  The only way to have a huge loss is if Jeff was dumb or SYTE irrationally sells off the properties, which they will not and can not do.   

Here is another point.  If Jeff bought 80 properties.  That would cost roughly $5 million.  If he is keeping the properties, then all SYTE is hit with is the interest charge during the period.  Let's assume 6% or $300k per year, or $75k for the quarter.  That creates a loss but not a huge one.  If you add in staffing in the quarter - let's assume five people at 5k per month would be another 75k for the quarter.  I do not expect a large charge this quarter or next.

Yet investors have taken $10 million off the market cap.  Nearly the whole value of all the Lexington properties.  Three times the net purchase price (equity issued to Jeff). 

I buy the story that it was a difference over execution - grow with cash generated internally from the business with acquisition debt available from the parent (mgmt thought) versus grow rapidly with interim losses being acceptable (Jeff thought).  We will see.   

Aren't you missing the larger point here? The whole point of buying the properties was so that Jeff and his team could manage them. With Jeff and his team out, the rationale for SYTE owning 119 low quality single family rental properties in Lexington, KY is gone. I don't know who the best owner of these properties is, but I guarantee that it's not SYTE. If they need to hold on to some of them to avoid 40 Act concerns that's one thing, but let's not pretend like this isn't a dumpster fire.

Also, SYTE was trading at a large premium to TBV because "the market" had lots of faith in the company's management. To put it mildly, that faith has now been shaken.


The bull case is that one of the hedge funds they're incubating blows up to $10B AUM, and they get a fee override.

This is terrible news though. Single family residential is an owner-operator business, it isn't something that scales well. But before the story was we have a great owner operator who is chairman and has a big stake. Now we have a hedge fund type who has a big portfolio of low end single family houses in Kentucky getting professionally managed for income. Hard to see how that could go very well, imo.

I really don't like 'not selling because of the 40 act' as a reason to own something. If it's not a good business to own I'd rather sell and buy something that is.

These are smart thoughts.

Title: Re: SYTE - Enterprise Diversified
Post by: matts on November 06, 2018, 08:11:02 AM
I feel I should explain my reasoning for making some of my skeptical comments

I'm not a shareholder. I was up until a month ago, so I made a lot of money thanks to Jeff and Steve. I'm not bitter in the least. I feel very bad for Steve, Jeff, and everyone involved here, including all shareholders. Looks like Steve made some strategic mistakes. No one is perfect.

I'm posting here and pushing back on the narrative because I think this is an area we can all get better. After years of doing this, you start to understand the numbers along with everyone else, but this, this reading of the tea leaves when we really don't know what is happening inside a company and must read between the lines, this is a valuable skill that if developed can be a huge advantage, especially with small caps.

Maybe I'm wrong, and they now go off and write a beautiful letter explaining everything. But even if that happens it will just prove the point that they mishandled this entire situation, made 2 massive blunders (by their own admission) and the jury is out on the third (the asset managers).



 
Title: Re: SYTE - Enterprise Diversified
Post by: Tim Eriksen on November 06, 2018, 09:37:49 AM

Aren't you missing the larger point here? The whole point of buying the properties was so that Jeff and his team could manage them. With Jeff and his team out, the rationale for SYTE owning 119 low quality single family rental properties in Lexington, KY is gone. I don't know who the best owner of these properties is, but I guarantee that it's not SYTE. If they need to hold on to some of them to avoid 40 Act concerns that's one thing, but let's not pretend like this isn't a dumpster fire.

Also, SYTE was trading at a large premium to TBV because "the market" had lots of faith in the company's management. To put it mildly, that faith has now been shaken.


I don't think I am.  I think others are.  I understood the whole point of buying properties so Jeff and his team (whether employees or contractors) could reposition them.  The expertise and value creation was in repositioning not managing rentals.   The properties went from low quality to medium quality, or better.   

Maybe it is because I bought the stock before the Mt Melrose acquisition so it was never key to the thesis.  I never hated the property business but was never excited about it either.  I want them to be an asset manager.  They don't have to be big seeders.  They cannot do a bunch of Alluvial deals due to the 40 Act, but can do a bunch of Bonhoeffer deals.  I would like to see them acquire some closed end funds and grow AUM. 

I agree the market reaction is due to reputation.  That happens. 
Title: Re: SYTE - Enterprise Diversified
Post by: latticework on November 06, 2018, 10:02:50 AM
"As an investor, I have a strong preference for a stable or decreasing share count. We have done the opposite over the last year and a half. Believe actions, not words."

"Mt Melrose’s crews are busy bringing properties online and the subsidiary is building out its infrastructure, so short-term results will not be fully informative to investors. Jeff built his predecessor company from $20,000 in value to more than $4 million. The strategy is to continue to grow Mt Melrose’s net assets. We are less concerned about Mt Melrose’s income statement and encourage you to focus on the value that the subsidiary creates over time."

"Jeff needs no advice from me, but I will constantly tell him to continue to focus on long-term success. There is no reason for him to change his mindset now that he is operating within a publicly-traded company."

"Jeff will become the president and continue to manage the business as he has done previously. Sitestar will add significant working capital to the business and provide Jeff with the freedom to allocate that capital." 

"Sitestar intends to commit the next $10 million of cash that we internally generate to the subsidiary."

"This transaction also embodies the Sitestar's bottom-up culture and the highly decentralized nature of the holding company that it has become. Because it is a reasonable conclusion to come to, everyone at Sitestar believes in letting people who are good at their jobs, do their jobs, and getting the hell out of the way."

"I bring this up to say that, coming from a person who values his autonomy as much as the air he breathes, if you are a person who is looking to sell your business or partner with a public entity while still remaining at its helm, then you should consider partnering with Sitestar."

If you told me when these letters were written that in less than a year the agreement with Mt Melrose would be terminated and Jeff would be terminated from Mt Melrose and the Board of ENDI I would say you're crazy.  But I'm going to start to believe the actions, not words of management. 

Obviously what Jeff and the co agreed on to begin with they no longer do.  Jeff had so much autonomy he was buying up homes and expenses were rising without management realizing?  Seems like a lack of internal controls, checks and balances or just outright communication.  Is this problem going on in other subsidiaries of the company?  Maybe that's part of the reason for the CEO change?  Was Steven Kiel too busy running his fund and ENDI simultaneously that he couldn't keep an eye on Jeff's spending?

It's clear that management wants to focus on the asset management business going forward.  That's the better business.  Capital light, scalable and in a way provides float.  That's a silver lining in this news.  The question is whether they will botch this business as well even though it's within their circle of competence.  The managers they partner with (Dave Waters and Keith Smith) have great track records, but will they continue into the future?  The managers have been granted autonomy to run the funds as they choose, but will management step in like they did with Jeff?  It will also be interesting to see how the Willow Oak Select Fund operates.  How will shares bought be allocated between fund managers in their own funds and in the Willow Oak Select Fund? 

Also they didn't think the 8-K would move markets?  I mean come on.  You're announcing the termination of a material agreement and a board member in an illiquid microcap stock.  What do you expect the stock to be up?

I am long the stock and consider myself a long-term investor, but these developments are deeply troubling to me. 
Title: Re: SYTE - Enterprise Diversified
Post by: stahleyp on November 06, 2018, 11:01:44 AM
This might be a really stupid question, but let's say they bring in a manager that kills it and assets go up to several billion. What would stop the manager from setting up shop on their own?
Title: Re: SYTE - Enterprise Diversified
Post by: Sunrider on November 06, 2018, 11:26:33 AM
This might be a really stupid question, but let's say they bring in a manager that kills it and assets go up to several billion. What would stop the manager from setting up shop on their own?

Nothing.

Also, from my own experience, I agree with whoever pointed out that in this space you better be hands-on. They will NOT get the same results with an external manager. All these guys do is find tenants (usually not very well vetted) and collect rent. They mindlessly instruct tradespeople to fix issues when a tenant calls. They don't care about costs, efficiency or logic.
Title: Re: SYTE - Enterprise Diversified
Post by: DTEJD1997 on November 06, 2018, 11:40:15 AM
Hey all:

SYTE is going to have severe problems bringing on money managers and future partners.  All they have to do is look at what has gone on.  Who is going to want to work with them?  Changing the nature of the company instantly, botching communications, probably big losses coming. 

SYTE has not been able to work with their prior partners/divisions.  How are they going to work with future ones?
Title: Re: SYTE - Enterprise Diversified
Post by: alpha asset strategies on November 06, 2018, 11:41:46 AM
Also, from my own experience, I agree with whoever pointed out that in this space you better be hands-on. They will NOT get the same results with an external manager. All these guys do is find tenants (usually not very well vetted) and collect rent. They mindlessly instruct tradespeople to fix issues when a tenant calls. They don't care about costs, efficiency or logic.

Sunrider is 100% correct about this.  I've unfortunately experienced this myself on a relatively large scale.  Additionally, I've personally interacted with dozens of landlords over the years, and I can recall exactly 2 who had fair to decent results with external property managers.  If these properties require a decent amount of repairs and maintenance, the expenses will soar with an external property manager.
Title: Re: SYTE - Enterprise Diversified
Post by: oddballstocks on November 06, 2018, 11:42:43 AM
This might be a really stupid question, but let's say they bring in a manager that kills it and assets go up to several billion. What would stop the manager from setting up shop on their own?

Nothing.

Also, from my own experience, I agree with whoever pointed out that in this space you better be hands-on. They will NOT get the same results with an external manager. All these guys do is find tenants (usually not very well vetted) and collect rent. They mindlessly instruct tradespeople to fix issues when a tenant calls. They don't care about costs, efficiency or logic.

This is a well trod path.  Most of corporate America "We're going to replace our internal team with home grown knowledge and expertise that costs us $65/hr fully loaded with an external consultant at $150/hr. Oh they also have 50 other clients, so we're sure they'll focus entirely on us.  Why...mumbles about scale<shrug>"

There is clearly more to this story. We will probably never find out. The mention of cash flow makes me think these were barely break-even and one day someone woke up and realized they probably didn't like having millions stuck in the middle of KY (which is a nice area btw) generating $0 or maybe even a loss.

Unless there was something illegal or unethical this seems like a big knee jerk reaction. Isn't this a long term thing? Yet less than a year later the plug is pulled?

To me this reads like: Something crazy and unimaginable came up and the liability loomed so large we wrote an 8-k and fired Jeff in one fell swoop as quick as we possibly could.

I say that from person experience.  When I've seen people terminated quickly the reason given is never the actual reason.  Maybe Jeff saw something and wanted out, maybe Steve saw something.  Who knows, I don't care either way.  It is what it is. I hope it was simply a difference of opinion.
Title: Re: SYTE - Sitestar
Post by: ragnarisapirate on November 06, 2018, 12:20:26 PM
The same way that the below quotes from Nate and myself was pertinent to the operating business months ago, I could say similar things about the speculation over what happened with the situation at hand. Some a ton of the speculation that’s being talked about in regard to Mt Melrose is totally off base.

There will be more clarity given at an appropriate time.

I applaud Sanjeev for what he did.  Running a company is very difficult, very difficult.

I wouldn't want to be public, it's a curse.  A bunch of people who made a few clicks online have the ability to make armchair decisions and second guess.  I'd hate if those same clickers take a look at my own business.  I've made excellent decisions and also bad ones.  But to those at home making a bad decision seems to be a fatal flaw, as if they've never done it themselves.

As a public CEO you can either play it safe, or take risks and when you take risks public shareholders will cry and complain.  You cannot please everyone.

I stand by my mantra that EVERY investor should try to go out there and sell something.  Try to sell a "commodity" item.  You'll realize quickly that academic finance and theories don't match the real world.  Just because you're item is similar or a lower price doesn't mean people will buy it.

Very well put, Nate.

On a personal note, this is something that I have been thinking on- both since, and before selling my business to SYTE. I already know that a lot of people won’t understand what’s going on at Mt Melrose, and how we run things. It is also going to be hard for people to understand the intrinsic value of Mt Melrose, based solely on the balance sheet, income statement, and the like. I think that this is also the case for many companies, not just ones that are SYTE related. Certainly, we will do our best to communicate this in the future at the annual meetings (because that is the time efficient and ethical way to do this), but, there are 364 OTHER days in the year that people have to make assumptions about what is going on. Kinda one sided when putting that against arm chair quarter backing.

On that same note, (in general) it is hard for people to understand what goes on inside of a business as an outsider. 2 of our employees were literally working til 4 AM yesterday morning. One was our financial controller working on financials, and the other was our project manager. They are not the only people that work super long hours at Mt Melrose, nor are they the only people that are like this at SYTE and its subs. Everyone at Mt Melrose is all about the business, and does everything in their power to improve it. Many of the employees own stock, and want to build something. Again, this is the same for SYTE and it’s subsidiaries.

When reading things online that are so far off base and half informed, it does damage to that ethic. This also works the other way, if there is too much praise given to an organization- the ramifications can be dire. I have gotten a ton of praise on how great my real estate business is, yet, only a few people have seen it in action how credible does that make any of the claims? I don’t know. I think that we will do well for SYTE/ENDI... AND I think that people should view things objectively. If results of a business seem excellent, maybe ask “why? Are they really that good?” And if they seem terrible, maybe ask “Are they really that bad?” And try to get going with what is actually going on.


Certainly, we all try to sum up thousands (and with a company alike AAPL, MILLIONS if not BILLIONS) of hours of labor and such... all in the 15-60 minutes that we spend reading an annual report and whatever other research we do (even message board posting). I know I often do that. But maybe, just maybe, we should all remember and think about the implicit time leverage that is being employed, while we are making assumptions- it could improve the analytical process.
Title: Re: SYTE - Enterprise Diversified
Post by: Sportgamma on November 06, 2018, 12:22:37 PM
This might be a really stupid question, but let's say they bring in a manager that kills it and assets go up to several billion. What would stop the manager from setting up shop on their own?

Nothing.

Also, from my own experience, I agree with whoever pointed out that in this space you better be hands-on. They will NOT get the same results with an external manager. All these guys do is find tenants (usually not very well vetted) and collect rent. They mindlessly instruct tradespeople to fix issues when a tenant calls. They don't care about costs, efficiency or logic.

I think Stahleyp is talking about the Asset Management Business.
Title: Re: SYTE - Enterprise Diversified
Post by: bizaro86 on November 06, 2018, 12:54:49 PM

Aren't you missing the larger point here? The whole point of buying the properties was so that Jeff and his team could manage them. With Jeff and his team out, the rationale for SYTE owning 119 low quality single family rental properties in Lexington, KY is gone. I don't know who the best owner of these properties is, but I guarantee that it's not SYTE. If they need to hold on to some of them to avoid 40 Act concerns that's one thing, but let's not pretend like this isn't a dumpster fire.

Also, SYTE was trading at a large premium to TBV because "the market" had lots of faith in the company's management. To put it mildly, that faith has now been shaken.


I don't think I am.  I think others are.  I understood the whole point of buying properties so Jeff and his team (whether employees or contractors) could reposition them.  The expertise and value creation was in repositioning not managing rentals.   The properties went from low quality to medium quality, or better.   

Maybe it is because I bought the stock before the Mt Melrose acquisition so it was never key to the thesis.  I never hated the property business but was never excited about it either.  I want them to be an asset manager.  They don't have to be big seeders.  They cannot do a bunch of Alluvial deals due to the 40 Act, but can do a bunch of Bonhoeffer deals.  I would like to see them acquire some closed end funds and grow AUM. 

I agree the market reaction is due to reputation.  That happens.

These are good points, but your response is buried in a multi-quote (and so looks like I said it). I'm not offended, but I bet a lot of people breezed over this because it doesn't appear to be a new post. I noticed it was new, because I would have remembered typing it.
Title: Re: SYTE - Enterprise Diversified
Post by: valueyoda on November 06, 2018, 01:19:08 PM
The premium placed on the entire holding company was in my opinion unsustainable, and the decline so far has only put a dent into this premium valuation. Even being generous when it comes to the asset management business, I still think that the stock should trade at a discount to book (and the question now becomes how overstated book value is).
Title: Re: SYTE - Enterprise Diversified
Post by: stahleyp on November 06, 2018, 01:31:28 PM
This might be a really stupid question, but let's say they bring in a manager that kills it and assets go up to several billion. What would stop the manager from setting up shop on their own?

Nothing.

Also, from my own experience, I agree with whoever pointed out that in this space you better be hands-on. They will NOT get the same results with an external manager. All these guys do is find tenants (usually not very well vetted) and collect rent. They mindlessly instruct tradespeople to fix issues when a tenant calls. They don't care about costs, efficiency or logic.

I think Stahleyp is talking about the Asset Management Business.

Yeah, that's correct. I should've made that more clear.
Title: Re: SYTE - Enterprise Diversified
Post by: gg on November 06, 2018, 02:33:35 PM
I wasn't clear on the 8-k .... is Jeff no longer on the board of ENDI? My reading was that he was no longer an officer of Mt Melrose, but wasn't clear on his position with ENDI.
Title: Re: SYTE - Enterprise Diversified
Post by: NoCalledStrikes on November 06, 2018, 02:42:04 PM
I wasn't clear on the 8-k .... is Jeff no longer on the board of ENDI? My reading was that he was no longer an officer of Mt Melrose, but wasn't clear on his position with ENDI.

On Friday, October 5, 2018, the Board of Directors of the Company, acting unanimously, appointed Director, Steven L. Kiel as Chairman of the Board of the Board of Directors of the Company.  As Chairman of the Board, Mr. Kiel replaces Jeffrey I. Moore, whose service on the Board of Directors continues in the capacity as a regular Director.

Title: Re: SYTE - Enterprise Diversified
Post by: Tim Eriksen on November 06, 2018, 02:54:05 PM
The premium placed on the entire holding company was in my opinion unsustainable, and the decline so far has only put a dent into this premium valuation. Even being generous when it comes to the asset management business, I still think that the stock should trade at a discount to book (and the question now becomes how overstated book value is).

It is easy to throw comments out there.  Can you support it with some facts?  Book value of the asset management business is the investment in Alluvial.  The revenue interests in Bonhoeffer have no book value and certainly has some worth.  The Alluvial revenue interest is tied to the investment but I would argue has value in excess of the investment.  Huckleberry is carried at cost.  Likely worth more.  The internet operations are clearly worth multiples of its 400k book.  They earned over 725k pre-tax in ttm.   Virginia real estate has already been written down.  So there is no reason to value it at less than book.  HVAC may be worth a bit less than book.  That leaves Mt. Melrose.  While some properties that have not been repaired may be worth a bit less than the purchase, those that have been repaired and have stable renters are likely worth more. 

Please explain why you disagree     
Title: Re: SYTE - Enterprise Diversified
Post by: roark33 on November 06, 2018, 06:28:44 PM
Well, I think the easiest argument against book value is that Kiel is basically 0 out of 2 in investments in operations, so, no offense to Dave Waters, but you have to assume there might be a pattern there, i.e. Alluvial might not turn out.  If so, then that is a huge write down to book value.  And same thing with the other investment, forget the name off hand. 
Title: Re: SYTE - Enterprise Diversified
Post by: Foreign Tuffett on November 06, 2018, 07:10:45 PM
The premium placed on the entire holding company was in my opinion unsustainable, and the decline so far has only put a dent into this premium valuation. Even being generous when it comes to the asset management business, I still think that the stock should trade at a discount to book (and the question now becomes how overstated book value is).

It is easy to throw comments out there.  Can you support it with some facts?  Book value of the asset management business is the investment in Alluvial.  The revenue interests in Bonhoeffer have no book value and certainly has some worth.  The Alluvial revenue interest is tied to the investment but I would argue has value in excess of the investment.  Huckleberry is carried at cost.  Likely worth more.  The internet operations are clearly worth multiples of its 400k book.  They earned over 725k pre-tax in ttm.   Virginia real estate has already been written down.  So there is no reason to value it at less than book.  HVAC may be worth a bit less than book.  That leaves Mt. Melrose.  While some properties that have not been repaired may be worth a bit less than the purchase, those that have been repaired and have stable renters are likely worth more. 

Please explain why you disagree     

NPV corporate expenses needs to be factored in.

From the most recent 10-Q: "Corporate expenses for the six months ended June 30, 2018 totaled $510,304."
Title: Re: SYTE - Enterprise Diversified
Post by: Spekulatius on November 06, 2018, 07:31:07 PM
The premium placed on the entire holding company was in my opinion unsustainable, and the decline so far has only put a dent into this premium valuation. Even being generous when it comes to the asset management business, I still think that the stock should trade at a discount to book (and the question now becomes how overstated book value is).

It is easy to throw comments out there.  Can you support it with some facts?  Book value of the asset management business is the investment in Alluvial.  The revenue interests in Bonhoeffer have no book value and certainly has some worth.  The Alluvial revenue interest is tied to the investment but I would argue has value in excess of the investment.  Huckleberry is carried at cost.  Likely worth more.  The internet operations are clearly worth multiples of its 400k book.  They earned over 725k pre-tax in ttm.   Virginia real estate has already been written down.  So there is no reason to value it at less than book.  HVAC may be worth a bit less than book.  That leaves Mt. Melrose.  While some properties that have not been repaired may be worth a bit less than the purchase, those that have been repaired and have stable renters are likely worth more. 

Please explain why you disagree     

NPV corporate expenses needs to be factored in.

From the most recent 10-Q: "Corporate expenses for the six months ended June 30, 2018 totaled $510,304."

With 2 of the 3 business lines being workout situations,  and the high afformentioned corporate cost burden, I don’t think book value represents a good value here, so it looks like SYTE is still overvalued from my POV.  Doesn’t matter to me, because as it stands, it’s uninvestible for my anyways.
Title: Re: SYTE - Enterprise Diversified
Post by: gg on November 06, 2018, 08:10:40 PM
I wasn't clear on the 8-k .... is Jeff no longer on the board of ENDI? My reading was that he was no longer an officer of Mt Melrose, but wasn't clear on his position with ENDI.

On Friday, October 5, 2018, the Board of Directors of the Company, acting unanimously, appointed Director, Steven L. Kiel as Chairman of the Board of the Board of Directors of the Company.  As Chairman of the Board, Mr. Kiel replaces Jeffrey I. Moore, whose service on the Board of Directors continues in the capacity as a regular Director.

This is from early October. Says Jeff moved from Chairman to Director. Nothing in the November release says whether he's a director still or not.
Title: Re: SYTE - Enterprise Diversified
Post by: matts on November 06, 2018, 08:14:49 PM
I think the implication is that if nothing was disclosed then there is no change from Oct 5. If Moore was removed or resigned as director I'm almost certain it would need to be filed with the SEC along with the other announcement.
Title: Re: SYTE - Enterprise Diversified
Post by: Tim Eriksen on November 06, 2018, 09:16:14 PM
Corporate expenses are not a part of book value.  So my point still stands.

If you want to discuss intrinsic value and factor in corporate expenses, fine but it washes with internet operations. 

Please explain how there would be huge write down in Alluvial.  Of course the fund could go down due to performance but the revenue royalty is carried at zero.

Kiel is not 0 for 2.  Alluvial has worked fine.  Mt Melrose is not a failure that is a huge assumption. 

You all are not being rational.  To say that because HVAC didn't work and Mt Melrose had a hiccup that therefore Alluvial may now be suspect is illogical.   
Title: Re: SYTE - Enterprise Diversified
Post by: Tim Eriksen on November 06, 2018, 09:17:44 PM
I think the implication is that if nothing was disclosed then there is no change from Oct 5. If Moore was removed or resigned as director I'm almost certain it would need to be filed with the SEC along with the other announcement.

A board cannot remove a director.  And yes director changes have to be filed within a few days.
Title: Re: SYTE - Enterprise Diversified
Post by: DTEJD1997 on November 07, 2018, 09:43:18 AM
Corporate expenses are not a part of book value.  So my point still stands.

If you want to discuss intrinsic value and factor in corporate expenses, fine but it washes with internet operations. 

Please explain how there would be huge write down in Alluvial.  Of course the fund could go down due to performance but the revenue royalty is carried at zero.

Kiel is not 0 for 2.  Alluvial has worked fine.  Mt Melrose is not a failure that is a huge assumption. 

You all are not being rational.  To say that because HVAC didn't work and Mt Melrose had a hiccup that therefore Alluvial may now be suspect is illogical.   

The properties that Mt. Melrose has requires close supervision and "hands on" management.  This is going to be farmed out to an outside management company.   Odds are that an outside management company is NOT going to do anywhere near as good a job as what was being set up.
Over time, properties will deteriorate, there will be tenant issues, and other problems will crop up.

Thus, I would suspect that the properties are going to be in a much position in a year or two than they are now.  Management will get tired/frustrated at things not working out and decide that they want out.  Wanting out, they sell, and will sell at a discount.  Thus, the write off.

I would also not call what has happened a "hiccup".  What was told to shareholders in prior communications has been completely reversed. 

How are shareholders to think that anything OTHER than the wheels are falling off?
Title: Re: SYTE - Enterprise Diversified
Post by: valueyoda on November 07, 2018, 10:05:45 AM
What is the AUM of the Alluvial Fund and Bonhoeffer  fund? At least, then we can make some assumptions what those revenue streams could be worth.
Title: Re: SYTE - Enterprise Diversified
Post by: Tim Eriksen on November 07, 2018, 10:10:11 AM
Corporate expenses are not a part of book value.  So my point still stands.

If you want to discuss intrinsic value and factor in corporate expenses, fine but it washes with internet operations. 

Please explain how there would be huge write down in Alluvial.  Of course the fund could go down due to performance but the revenue royalty is carried at zero.

Kiel is not 0 for 2.  Alluvial has worked fine.  Mt Melrose is not a failure that is a huge assumption. 

You all are not being rational.  To say that because HVAC didn't work and Mt Melrose had a hiccup that therefore Alluvial may now be suspect is illogical.   

The properties that Mt. Melrose has requires close supervision and "hands on" management.  This is going to be farmed out to an outside management company.   Odds are that an outside management company is NOT going to do anywhere near as good a job as what was being set up.
Over time, properties will deteriorate, there will be tenant issues, and other problems will crop up.

Thus, I would suspect that the properties are going to be in a much position in a year or two than they are now.  Management will get tired/frustrated at things not working out and decide that they want out.  Wanting out, they sell, and will sell at a discount.  Thus, the write off.

I would also not call what has happened a "hiccup".  What was told to shareholders in prior communications has been completely reversed. 

How are shareholders to think that anything OTHER than the wheels are falling off?

That is a lot of assumptions.  I don't understand why Mt Melrose properties require increased hands on management versus other properties.  These aren't low income properties or high maintenance, or likely high turnover.  Unless they have a different way of complying with the 40 Act they won't sell.  They need a leveraged entity.

The trade off of farming out versus in house is current cost versus long term risk .  With a management company costs are known and overhead is spread over your properties and others.  In house means multiple people, an office, increased audit costs, etc.  Farming out is probably 15k less cost per month.  It is the difference of being profitable or not if revenue is only 100k a month.    At 300 properties the cost structure probably flips the other way.  The decision makes sense to me.

To armchair quarterback it is to assume that management is now irrational.

Title: Re: SYTE - Enterprise Diversified
Post by: Tim Eriksen on November 07, 2018, 10:15:05 AM
What is the AUM of the Alluvial Fund and Bonhoeffer  fund? At least, then we can make some assumptions what those revenue streams could be worth.

So you drew a conclusion before knowing the facts???  =)

Alluvial 22.4 million 
Bonhoeffer 13.8 million
Title: Re: SYTE - Enterprise Diversified
Post by: DTEJD1997 on November 07, 2018, 10:22:19 AM
Corporate expenses are not a part of book value.  So my point still stands.

If you want to discuss intrinsic value and factor in corporate expenses, fine but it washes with internet operations. 

Please explain how there would be huge write down in Alluvial.  Of course the fund could go down due to performance but the revenue royalty is carried at zero.

Kiel is not 0 for 2.  Alluvial has worked fine.  Mt Melrose is not a failure that is a huge assumption. 

You all are not being rational.  To say that because HVAC didn't work and Mt Melrose had a hiccup that therefore Alluvial may now be suspect is illogical.   

The properties that Mt. Melrose has requires close supervision and "hands on" management.  This is going to be farmed out to an outside management company.   Odds are that an outside management company is NOT going to do anywhere near as good a job as what was being set up.
Over time, properties will deteriorate, there will be tenant issues, and other problems will crop up.

Thus, I would suspect that the properties are going to be in a much position in a year or two than they are now.  Management will get tired/frustrated at things not working out and decide that they want out.  Wanting out, they sell, and will sell at a discount.  Thus, the write off.

I would also not call what has happened a "hiccup".  What was told to shareholders in prior communications has been completely reversed. 

How are shareholders to think that anything OTHER than the wheels are falling off?

That is a lot of assumptions.  I don't understand why Mt Melrose properties require increased hands on management versus other properties.  These aren't low income properties or high maintenance, or likely high turnover.  Unless they have a different way of complying with the 40 Act they won't sell.  They need a leveraged entity.

The trade off of farming out versus in house is current cost versus long term risk .  With a management company costs are known and overhead is spread over your properties and others.  In house means multiple people, an office, increased audit costs, etc.  Farming out is probably 15k less cost per month.  It is the difference of being profitable or not if revenue is only 100k a month.    At 300 properties the cost structure probably flips the other way.  The decision makes sense to me.

To armchair quarterback it is to assume that management is now irrational.

The assumption that SYTE management is irrational may be perfectly fine. 

Mr. Moore, who built Mt. Melrose, did it by being "hands on".  He had help from a "crew" of people that he vetted & hired.  I would have to assume it was known by SYTE's management how Mr. Moore did things.  Further, I would have to assume, that they had a good idea of how Mr. Moore was to proceed in the near future in having a team to work on the properties.

Mr. Moore, who built Mt. Melrose, decided on how to do it.  If it were better/cheaper to simply farm out management/supervision to an outside management company, would he have not already done that.  Would he not have done from VERY EARLY stages of Mt. Melrose? 

Finally, Mr. Moore was DIRECTLY involved with those properties, working on some of them himself.  I would trust his judgement on how to proceed/work those properties over the management of SYTE.

In the end, does not matter what I think...only thing that matters is how much $$$ SYTE can make and what the stock price is. 

We will see.
Title: Re: SYTE - Enterprise Diversified
Post by: valueyoda on November 07, 2018, 10:35:18 AM
Thanks. Yes, I did my assumptions before knowing all the facts. Easy to do so when  you have no position haha. I still fail to see how with the revenue sharing agreements based on those AUMs and normalized returns really adds substantial value, unless AUM really grow substantially or if they would continue to perform well. Hedge fund partnership interests are notoriously undervalued by the market due to the erratic nature of the performance fee cash flows.
Title: Re: SYTE - Enterprise Diversified
Post by: Tim Eriksen on November 07, 2018, 10:50:08 AM

Mr. Moore, who built Mt. Melrose, did it by being "hands on".  He had help from a "crew" of people that he vetted & hired.  I would have to assume it was known by SYTE's management how Mr. Moore did things.  Further, I would have to assume, that they had a good idea of how Mr. Moore was to proceed in the near future in having a team to work on the properties.


It is my understanding that there was a misunderstanding in how Mt Melrose was to proceed in the near future and the size of the team.  That is the whole point.  It was nothing improper.  I don't know how many years it took Jeff to build up the company.  I will guess four, which means acquiring on average 30 homes per year.  That accelerated to more than 30 per quarter.  The 8-k notes additional operational (personnel) expense.  So it seems management expected slower growth from internally generated cash flows which would provide the equity part of the purchase price of additional properties.  It seems that is not what happened.  Thus the changes. 

The reality is SYTE could not support a fast growing "start up" losing money without raising capital  either through equity, changing terms of Alluvial agreement, selling HVAC quickly,or internet operations.  They decided to stop the growth all together instead of restructuring.  That is not explained.  Did Jeff want to grow fast?  Did he not want to let go of people he just hired?  Who would.  We just don't know. 

So we are left with two choices: we either believe management (and Jeff's comment on this board) that it was unfortunate, painful, yet friendly, necessary refocusing from SYTE's point of view, etc. or we don't.  I have always found Jeff and Steve to be straight forward and honest.
Title: Re: SYTE - Enterprise Diversified
Post by: globalfinancepartners on November 07, 2018, 10:55:43 AM
Who gets to keep the ambulances, that's the important question...

(I guess some folks didn't get the reference - https://twitter.com/ragnarisapirate/status/956609512877772809 )


Here are some of the properties, by the way.  Should be able to search Lexington assessor's website for Mt Melrose LLC to find other representative deals:
$40k all in, rented for $600/month - wonder if this one transferred to SYTE?
https://twitter.com/ragnarisapirate/status/958566232789323777

This one is mixed use, $725k all cash
https://twitter.com/ragnarisapirate/status/956935470193225728
Title: Re: SYTE - Enterprise Diversified
Post by: writser on November 07, 2018, 10:58:36 AM
If the comments of insiders are correct then they only have to fire the person responsible for writing and releasing an 8K during market hours that caused massive panic among investors and made the stock drop ~40% while nothing significant happened from a valuation perspective.
Title: Re: SYTE - Enterprise Diversified
Post by: Broeb22 on November 07, 2018, 11:27:22 AM
I'm just not 100% buying this.

How can Kiel chalk this up to "we wanted cash flow" and "Jeff wanted capital appreciation". That's like saying you got divorced because you didn't know the other person didn't want to have kids. These are foundational conversations a partnership has, and either the conversation never happened, or one side changed their priorities after they said their vows.

Why take the drastic step of removing Moore from his employment agreement if they simply wanted him to stop buying properties and focus on generating cash from existing units. Seems like there were a whole bunch of intermediate outcomes here that could have taken place that would have left Moore in place, but they had "irrenconcilable  differences" that necessitated a change.

I wonder also if these properties were not well-financed. I went to the annual meeting this year, and met the guy who provides financing to Jeff. He was getting paid double-digit rates to lend Jeff money. (I thought to myself, I'd like to be that guy doing the lending.) If these properties were not generating as much cash as Jeff hoped, maybe they were in a negative carry situation, where the property was yielding less than the cost of capital. Seems potentially possible given the move in rates this year. I wonder how much the cost of capital over time.

Either way, there are a ton of questions and not very many satisfactory answers.
Title: Re: SYTE - Enterprise Diversified
Post by: LC on November 07, 2018, 11:49:41 AM
Oh man what a sh1tshow we've got here.

I periodically pop into this thread to quickly catch-up, since I remember when SYTE was being written up when Frank? ran it and then these guys came in and took control.

Jeff is ragnarisapirate, right? I think that was his name when he wrote about RE acquisitons.

Anyways, my memory is obviously a bit sloppy and I don't know all the details of what is going on here, but:

My take is (1) they couldn't manage an HVAC business (2) they couldn't manage a RE portfolio

These people do not seem like "get their hands dirty" kinds of people. Both (1) and (2) require experience. You can't just walk in with a checkbook and do it. I guess they found that out the hard way.

So now we're left with (3) an asset management business. What's the business model here, they seed managers for a take in the future?

What value do these people bring to the asset management business. I'm not talking about Keith because I've met him and he's a stand up guy who has a circle of competence and can work. I'm taking about the guys seeding him. What the hell do they bring other than cash? Can they help with marketing and introductions to funds of funds? It doesn't seem like it. So are they just tossing cash at some managers, walking away, and hoping 1 of 10 strikes it rich?

Isn't that similar to the playbook for the HVAC and RE businesses? Throw money at it?

What value do these people add? And if you have to respond with the words "scale" or "platform", then you are fvcked!
Title: Re: SYTE - Enterprise Diversified
Post by: globalfinancepartners on November 07, 2018, 12:05:34 PM
Yes, Jeff is ragnarisapirate.

I think Jeff does in fact know how to manage a Real Estate investment enterprise.  By all appearances he was quite successful at building a sizable operation.  It looked like he was also quite aggressive in growing the business, which may have been what spooked the new management at SYTE.  Or it may have been that someone discovered what the accounting would look like for a public company.  Or it may be that the new guy just didn't like the business.  However successful, it may not have appeared super profitable through the accounting.  When you're a private real estate investor, primarily presenting your accounting to the IRS and lenders, its fine - you know the economic reality and are happy to minimize taxes along the way.


Oh man what a sh1tshow we've got here.

I periodically pop into this thread to quickly catch-up, since I remember when SYTE was being written up when Frank? ran it and then these guys came in and took control.

Jeff is ragnarisapirate, right? I think that was his name when he wrote about RE acquisitons.

Anyways, my memory is obviously a bit sloppy and I don't know all the details of what is going on here, but:

My take is (1) they couldn't manage an HVAC business (2) they couldn't manage a RE portfolio

These people do not seem like "get their hands dirty" kinds of people. Both (1) and (2) require experience. You can't just walk in with a checkbook and do it. I guess they found that out the hard way.

So now we're left with (3) an asset management business. What's the business model here, they seed managers for a take in the future?

What value do these people bring to the asset management business. I'm not talking about Keith because I've met him and he's a stand up guy who has a circle of competence and can work. I'm taking about the guys seeding him. What the hell do they bring other than cash? Can they help with marketing and introductions to funds of funds? It doesn't seem like it. So are they just tossing cash at some managers, walking away, and hoping 1 of 10 strikes it rich?

Isn't that similar to the playbook for the HVAC and RE businesses? Throw money at it?

What value do these people add? And if you have to respond with the words "scale" or "platform", then you are fvcked!
Title: Re: SYTE - Enterprise Diversified
Post by: slkiel on November 07, 2018, 01:23:51 PM
Please find a joint statement that Jeff and I released through ENDI:

https://backend.otcmarkets.com/otcapi/company/dns/news/document/33645/content

As a fellow investor in small and micro-cap companies, I sympathize with the idea that things are not always as they seem and it can be healthy to be skeptical of management's statements. Heck, I have built the success of my fund on that idea! However, that also does not mean that management should never be taken at face value. Both Jeff and I have a long history of being direct and plain-spoken. We have no reason to be any different here.

The fact is that we thought we had to make a change based on the reasons in the link above. Clearly we both thought things would be different, but the reality is what it is after a thorough internal review and strategic planning process within the company. We have a great collection of properties, but the strategy that we enthusiastically announced when we made the acquisition didn't work. We could admit that now and change it with little economic impact, or we could continue down the path with larger ramifications.

I hope this information is helpful and more clear than the 8-K earlier this week. I apologize for the delay in getting this information out to you.
Title: Re: SYTE - Enterprise Diversified
Post by: NBL0303 on November 07, 2018, 01:39:36 PM
I appreciate how difficult it is to run a micro-cap and I believe some of the most critical comments on CoBF about SYTE over the last few days were unwarranted. For a major change of strategic direction relating to a very large financial transaction, I personally was shocked at the initial 8-K and how it raised more questions than it answered. For a situation of this level of importance to the company, I would have expected an explanation and disclosure more akin to what Steve just put out. This statement is, I believe, what this situation requires and I commend Steve and everyone at SYTE for putting it out in relatively short order after the initial 8-K. I think perfection in such matters is impossible and I give Steve credit for realizing that more disclosure was required and providing it in short order.
Title: Re: SYTE - Enterprise Diversified
Post by: LC on November 07, 2018, 01:47:55 PM
Well Steve I don't know you but Jeff has a special place in my investing heart. He had a series back in the day of trying to buy a retirement home and convert it into rentals. Like a 4 part series and it was just brilliant.

In general I'm sad to see you having failed in this venture - but kudos on the announcement and putting it out there publicly.

I was never a SYTE shareholder - just a spectator. But from my seat, I wish you the best with the asset management business. Would love to see this thread filled with good news!
Title: Re: SYTE - Enterprise Diversified
Post by: Hielko on November 07, 2018, 01:59:15 PM
I appreciate the letter, good to provide a bit more of an explanation.

What I'm wondering though, why is SYTE so hell bent on being a SEC reporting company? I rarely think it makes sense for nanocap companies given the costs involved, and especially in this case since apparently the accounting overhead with running the real-estate operations were one of the big factors that made the thing not work.
Title: Re: SYTE - Enterprise Diversified
Post by: bizaro86 on November 07, 2018, 02:05:33 PM
I read the update, and my only comment is this:

On behalf of property owners everywhere, I want to thank Jeff for installing 1/4 turn ball valves on his plumbing shut-offs. I've replaced so many seized gate valves over the years (roughly all of the ones I own!) that hearing someone else with a practical bent to real estate makes me very happy. Plumbers love gate valves for reasons that make no sense to me, and I've had them installed in properties I own after I explicitly specified 1/4 turn ball valve (by plumbers that no longer do work for me). That type of attention to detail is key for small scale real estate investment. It costs an extra couple bucks, but it is basically guaranteed to save a $100 service call within the next 10 years. And once in awhile it will save a $10,000 flood issue when something is leaking and the crappy gate valve can't be closed. I doubt that level of attention to detail is available from an outsourced property management firm, but I sincerely wish this company the best.
Title: Re: SYTE - Enterprise Diversified
Post by: ragnarisapirate on November 07, 2018, 02:17:23 PM
I read the update, and my only comment is this:

On behalf of property owners everywhere, I want to thank Jeff for installing 1/4 turn ball valves on his plumbing shut-offs. I've replaced so many seized gate valves over the years (roughly all of the ones I own!) that hearing someone else with a practical bent to real estate makes me very happy. Plumbers love gate valves for reasons that make no sense to me, and I've had them installed in properties I own after I explicitly specified 1/4 turn ball valve (by plumbers that no longer do work for me). That type of attention to detail is key for small scale real estate investment. It costs an extra couple bucks, but it is basically guaranteed to save a $100 service call within the next 10 years. And once in awhile it will save a $10,000 flood issue when something is leaking and the crappy gate valve can't be closed. I doubt that level of attention to detail is available from an outsourced property management firm, but I sincerely wish this company the best.

Thank you. That comment made my evening! It also guarantees that a floor joist won’t rot out when the gate valves in a washer box go bad and the tenants don’t tell you about it. Prolly because they can’t see the problem that’s occupant behind their washer, wall, and floor.

I’m even crazy about the specific type of wire nuts our electricians use, and how they install them. Seen too many melt off electrical connections before!
Title: Re: SYTE - Enterprise Diversified
Post by: bizaro86 on November 07, 2018, 02:49:46 PM
I read the update, and my only comment is this:

On behalf of property owners everywhere, I want to thank Jeff for installing 1/4 turn ball valves on his plumbing shut-offs. I've replaced so many seized gate valves over the years (roughly all of the ones I own!) that hearing someone else with a practical bent to real estate makes me very happy. Plumbers love gate valves for reasons that make no sense to me, and I've had them installed in properties I own after I explicitly specified 1/4 turn ball valve (by plumbers that no longer do work for me). That type of attention to detail is key for small scale real estate investment. It costs an extra couple bucks, but it is basically guaranteed to save a $100 service call within the next 10 years. And once in awhile it will save a $10,000 flood issue when something is leaking and the crappy gate valve can't be closed. I doubt that level of attention to detail is available from an outsourced property management firm, but I sincerely wish this company the best.

Thank you. That comment made my evening! It also guarantees that a floor joist won’t rot out when the gate valves in a washer box go bad and the tenants don’t tell you about it. Prolly because they can’t see the problem that’s occupant behind their washer, wall, and floor.

I’m even crazy about the specific type of wire nuts our electricians use, and how they install them. Seen too many melt off electrical connections before!

Glad that made you grin, as I was definitely grinning when I read that in your letter. Those valves are one of my number one pet peeves in life.

I agree you can't reasonably expect tenants to keep an eye on things, so installing the low-failure version definitely makes sense.
Title: Re: SYTE - Enterprise Diversified
Post by: matts on November 07, 2018, 03:23:33 PM
I appreciate the full update from Steve. I bet going forward they will take this approach. Lesson learned.

I'm a bit confused about why the accounting burden is so much heavier as an SEC reporting entity. Mt Melrose has to do all the same tedious accounting work (many small purchases, depreciation schedules) to file its taxes no? They might only have to do it once a year, all at once, but is that really an improvement over doing it on an ongoing basis? It's still the same number of invoices for screws and bolts.

Any accountants around that could enlighten me?
Title: Re: SYTE - Enterprise Diversified
Post by: Tim Eriksen on November 07, 2018, 03:48:53 PM
I appreciate the full update from Steve. I bet going forward they will take this approach. Lesson learned.

I'm a bit confused about why the accounting burden is so much heavier as an SEC reporting entity. Mt Melrose has to do all the same tedious accounting work (many small purchases, depreciation schedules) to file its taxes no? They might only have to do it once a year, all at once, but is that really an improvement over doing it on an ongoing basis? It's still the same number of invoices for screws and bolts.

Any accountants around that could enlighten me?

The comparison is to if everything was sub-contracted where Mt Melrose gets a single invoice per job and the sub buys all these things.

To do all or most of it in house results in a multitude of invoices, vehicles that have depreciation, inventory that must be audited for shrinkage, excess & obsolescence, utility bills, etc.   Segregation of duties means one person can't handle it all or you have a material weakness.  So you need one person to write up a purchase order, a different person to approve it.  One person to make the journal entry and someone else to approve and sign the check. 

Tax accounting has depreciation, but not the same as GAAP which has to be audited.  No segregation of duties is necessary if not audited.
Title: Re: SYTE - Enterprise Diversified
Post by: matts on November 07, 2018, 04:11:46 PM
I appreciate the full update from Steve. I bet going forward they will take this approach. Lesson learned.

I'm a bit confused about why the accounting burden is so much heavier as an SEC reporting entity. Mt Melrose has to do all the same tedious accounting work (many small purchases, depreciation schedules) to file its taxes no? They might only have to do it once a year, all at once, but is that really an improvement over doing it on an ongoing basis? It's still the same number of invoices for screws and bolts.

Any accountants around that could enlighten me?

The comparison is to if everything was sub-contracted where Mt Melrose gets a single invoice per job and the sub buys all these things.

To do all or most of it in house results in a multitude of invoices, vehicles that have depreciation, inventory that must be audited for shrinkage, excess & obsolescence, utility bills, etc.   Segregation of duties means one person can't handle it all or you have a material weakness.  So you need one person to write up a purchase order, a different person to approve it.  One person to make the journal entry and someone else to approve and sign the check. 

Tax accounting has depreciation, but not the same as GAAP which has to be audited.  No segregation of duties is necessary if not audited.

So there are 2 different comparisons here that I don't want to mix up.

1) Jeff seems to imply that the accounting burden got much worse when mt melrose became part of ENDI. That was the focus of my question, independent of an external manager. And yes ok, so a second person has to sign off, what else? because that doesn't sound like a dealbreaker.

2) There is less accounting if you just outsource management. Makes perfect sense. But the manager now has to do all the shitty work and that would factor into what he charges ENDI. So are you really saving that much? Yes, the manager might have some scale efficiency but since it's just the nature of the industry to have a million different accounting entries I don't see how those costs won't get expensed to ENDI, one way or another.

If someone can convince me in 1) that accounting for a private property manager is FAR easier than a public one, then I'll be more inclined to concede on 2).

Title: Re: SYTE - Enterprise Diversified
Post by: ragnarisapirate on November 07, 2018, 06:19:20 PM
I appreciate the full update from Steve. I bet going forward they will take this approach. Lesson learned.

I'm a bit confused about why the accounting burden is so much heavier as an SEC reporting entity. Mt Melrose has to do all the same tedious accounting work (many small purchases, depreciation schedules) to file its taxes no? They might only have to do it once a year, all at once, but is that really an improvement over doing it on an ongoing basis? It's still the same number of invoices for screws and bolts.

Any accountants around that could enlighten me?

The comparison is to if everything was sub-contracted where Mt Melrose gets a single invoice per job and the sub buys all these things.

To do all or most of it in house results in a multitude of invoices, vehicles that have depreciation, inventory that must be audited for shrinkage, excess & obsolescence, utility bills, etc.   Segregation of duties means one person can't handle it all or you have a material weakness.  So you need one person to write up a purchase order, a different person to approve it.  One person to make the journal entry and someone else to approve and sign the check. 

Tax accounting has depreciation, but not the same as GAAP which has to be audited.  No segregation of duties is necessary if not audited.

So there are 2 different comparisons here that I don't want to mix up.

1) Jeff seems to imply that the accounting burden got much worse when mt melrose became part of ENDI. That was the focus of my question, independent of an external manager. And yes ok, so a second person has to sign off, what else? because that doesn't sound like a dealbreaker.

2) There is less accounting if you just outsource management. Makes perfect sense. But the manager now has to do all the shitty work and that would factor into what he charges ENDI. So are you really saving that much? Yes, the manager might have some scale efficiency but since it's just the nature of the industry to have a million different accounting entries I don't see how those costs won't get expensed to ENDI, one way or another.

If someone can convince me in 1) that accounting for a private property manager is FAR easier than a public one, then I'll be more inclined to concede on 2).

Let me give an example from our onboarding audit earlier in the year:

We were needing to give documentation of our historic revenue. Fine. I get that. You want to verify stuff. I support that, and think it’s a good thing.

We gave our quickbooks/appfolio records for documentation... Not enough.

We then gave our bank deposit slips... Not enough- they needed to see a breakdown of every property’s rent, on the deposit slips.

We then referenced the quickbooks/appfolio files, that had both the rent amounts, and the serial numbers on the money orders... Not enough.

We reconciled these records to ensure that they MATCHED THE DEPOSIT SLIPS. Not enough.

I offered my tax returns, you know, because me lying about revenue on there, would do a good job of getting me in jail. SURELY, that, with the records we had (keep in mind SERIAL NUMBERS OF EVERY MONEY ORDER, and documentation where all those numbers reconciled with our bank deposit slips...

Nope.

We had to get our bank to go through THEIR deposit records, and print off a photo copy of EVERY rent money order (I stopped taking checks years ago because of them bouncing) that we had received during the period being audited... I had to call in a favor to get it done under the time that we had to get it done in. When I picked the copies of what I am guessing was in the thousands of money order photocopies, I hugged my banker because he’d done us such a solid.

This occurred... I want to say within the last 5 days of our deadline for the audit to be finalized, and 2 of those days were on the weekend. That monday may have been a holiday too. Can’t remember. What I do remember is this: It was stressful as hell, Jenn worked literally til 3 AM several times, Marie (her assistant) was booked like crazy, and there were others that were helping as well. I was pissed off because of the absurdity of it, and we almost didn’t get a clean audit opinion because of something that was pretty stupid in my mind. That said, I get it. People need to have faith in the capital markets.

_______

And no, the manager doesn’t have to do all the work that we did in terms of bookkeeping. They literally send a statement. It could consist of whatever they want it to, and be pretty simple. When audited, that’s pretty cut and dry for corporate. The auditors don’t go through and audit the records of your property manager... what could take them 15 minutes to do could have taken us an hour, just to cover all our bases.

Monthly reporting for corporate also becomes easier with a manager. Re-read what I said about the cutoff dates in our software. If a tenant made a payment on their late rent, that could really throw things off, and would require adjustments to be made, and took time to figure out exactly where problems were happening.

This was not insignificant...

Also, a lot of the various entries that were so time consuming were from the FIX UP operations. NOT the rental ones. At one point, we had more than 30 active house renovations going on. Once our stuff was rented, our maintenance expenses were generally pretty low because of how we went about fixing the houses.

As Steve and I said, this make so much more sense in the way that it will be, going forward. Both in terms of the public entity, and me doing stuff privately. A fund setup makes sense as well.
Title: Re: SYTE - Enterprise Diversified
Post by: Spekulatius on November 07, 2018, 06:54:34 PM
QuickBooks is not going to cut it for accounting /tracking when you are a public enterprise. I am no expert on this, but there is a reason why companies employ accountants Larger ones run ERP systems that integrate several functions and you have independent  auditors and internal controllers poking around stuff. It’s a whole different league to run the same outfit in a public company vs private.
Title: Re: SYTE - Enterprise Diversified
Post by: Schwab711 on November 07, 2018, 07:03:22 PM
I appreciate the full update from Steve. I bet going forward they will take this approach. Lesson learned.

I'm a bit confused about why the accounting burden is so much heavier as an SEC reporting entity. Mt Melrose has to do all the same tedious accounting work (many small purchases, depreciation schedules) to file its taxes no? They might only have to do it once a year, all at once, but is that really an improvement over doing it on an ongoing basis? It's still the same number of invoices for screws and bolts.

Any accountants around that could enlighten me?

The short answer is the management company isn't audited so they don't have these expenses
Title: Re: SYTE - Enterprise Diversified
Post by: maybe4less on November 07, 2018, 09:30:20 PM
A fund setup makes sense as well.

Does this mean you are contemplating an RE fund?
Title: Re: SYTE - Enterprise Diversified
Post by: Sunrider on November 07, 2018, 10:55:19 PM
Spot on. This was my earlier point, an external manager seeks to collect his/her fees with the least amount of effort and just passes along costs ... show me the incentives ...!


I read the update, and my only comment is this:

On behalf of property owners everywhere, I want to thank Jeff for installing 1/4 turn ball valves on his plumbing shut-offs. I've replaced so many seized gate valves over the years (roughly all of the ones I own!) that hearing someone else with a practical bent to real estate makes me very happy. Plumbers love gate valves for reasons that make no sense to me, and I've had them installed in properties I own after I explicitly specified 1/4 turn ball valve (by plumbers that no longer do work for me). That type of attention to detail is key for small scale real estate investment. It costs an extra couple bucks, but it is basically guaranteed to save a $100 service call within the next 10 years. And once in awhile it will save a $10,000 flood issue when something is leaking and the crappy gate valve can't be closed. I doubt that level of attention to detail is available from an outsourced property management firm, but I sincerely wish this company the best.
Title: Re: SYTE - Enterprise Diversified
Post by: LowIQinvestor on November 08, 2018, 05:45:16 AM
I'm behind the curve on SYTE so I might have missed this but:
reading all the comments/concerns on costs of running a tiny publicly traded SEC reporting company, why is/should SYTE be a public co.

Why deal with these headaches? Not convinced that capital raising is easier with a thinly traded OTC co.
Title: Re: SYTE - Enterprise Diversified
Post by: fishwithwings on November 08, 2018, 08:49:57 AM
Why didn't Jeff just create a new LLC with him as CEO to manage the properties?   Seems like that would have been a better alternative than outsourcing the management to a random third party who doesn't know the properties as intimately as Jeff.
Title: Re: SYTE - Enterprise Diversified
Post by: rkbabang on November 08, 2018, 08:55:53 AM
Why didn't Jeff just create a new LLC with him as CEO to manage the properties?   Seems like that would have been a better alternative than outsourcing the management to a random third party who doesn't know the properties as intimately as Jeff.

+1, I'd feel a lot better about all of this with Ragnar Property Management, LLC taking care of the properties.
Title: Re: SYTE - Enterprise Diversified
Post by: matts on November 08, 2018, 08:58:59 AM
Pirate Property Partners (TM).

Jeff, give me a ring and we can talk about a licensing agreement :)
Title: Re: SYTE - Enterprise Diversified
Post by: sarganaga on November 08, 2018, 09:21:19 AM
I'm behind the curve on SYTE so I might have missed this but:
reading all the comments/concerns on costs of running a tiny publicly traded SEC reporting company, why is/should SYTE be a public co.

Why deal with these headaches? Not convinced that capital raising is easier with a thinly traded OTC co.

It may be management's sugar plum dreams of creating the next Berkshire Hathaway.
Title: Re: SYTE - Enterprise Diversified
Post by: roark33 on November 08, 2018, 10:34:15 AM
Just think of the value invested in Willow Oak.  What is the best vehicle to make this investment for now and in the future.  Is it through a public company?  I promise you, it is not.  The same mistake that was made by creating a real estate vehicle in a public company entity will eventually be realized when it comes to Willow Oak.  It should be done through a private LLC/S-Corp.  The only difference is that Jeff has realized this quicker than the others and got out. 
Title: Re: SYTE - Enterprise Diversified
Post by: valueyoda on November 08, 2018, 10:49:16 AM
It is hard to grow a hedge fund beyond a certain size (e.g. $50mln) nowadays. Smaller hedge funds can be lucrative for their operators when they keep costs down and perform well. However, it is hard for these revenue sharing agreements to add substantial value to SYTE beyond the ongoing operating expenses, especially if both funds' sizes remain moderately small or if these funds have a period of below average performance.
Title: Re: SYTE - Enterprise Diversified
Post by: roark33 on November 08, 2018, 10:55:00 AM
The real point isn't how big any of the funds in Willow Oak become, the real point is that the capital investment should not be made through Syte or ENDI.  It's a poor structure, and that will become clear over time. 
Title: Re: SYTE - Enterprise Diversified
Post by: Broeb22 on November 08, 2018, 11:01:58 AM
The real point isn't how big any of the funds in Willow Oak become, the real point is that the capital investment should not be made through Syte or ENDI.  It's a poor structure, and that will become clear over time.

Roark, can you elaborate?
Title: Re: SYTE - Enterprise Diversified
Post by: Spekulatius on November 08, 2018, 12:25:24 PM
The real point isn't how big any of the funds in Willow Oak become, the real point is that the capital investment should not be made through Syte or ENDI.  It's a poor structure, and that will become clear over time.

Roark, can you elaborate?
Taxation and corporate overhead would be my guess. If you like Willow Oak, just invest in the funds as a limited partner.
Title: Re: SYTE - Enterprise Diversified
Post by: oddballstocks on November 08, 2018, 02:06:19 PM
This is basically a FoF as a C-Corp instead of an LLC/S.

I guess the thesis is if you invest you only get your return after fees.  Whereas if you invest in the top level entity you get most of your return because some of the fee revenue is paid back as income.


I guess this could make sense if they had a lot of funds.  Asset managers are extremely valuable, look at the big ones, Fidelity, BlackRock etc. But you need a lot of scale.
Title: Re: SYTE - Enterprise Diversified
Post by: Grafter on November 08, 2018, 05:08:49 PM

Let me give an example from our onboarding audit earlier in the year:

We were needing to give documentation of our historic revenue. Fine. I get that. You want to verify stuff. I support that, and think it’s a good thing.

We gave our quickbooks/appfolio records for documentation... Not enough.

We then gave our bank deposit slips... Not enough- they needed to see a breakdown of every property’s rent, on the deposit slips.

We then referenced the quickbooks/appfolio files, that had both the rent amounts, and the serial numbers on the money orders... Not enough.

We reconciled these records to ensure that they MATCHED THE DEPOSIT SLIPS. Not enough.

I offered my tax returns, you know, because me lying about revenue on there, would do a good job of getting me in jail. SURELY, that, with the records we had (keep in mind SERIAL NUMBERS OF EVERY MONEY ORDER, and documentation where all those numbers reconciled with our bank deposit slips...

Nope.

We had to get our bank to go through THEIR deposit records, and print off a photo copy of EVERY rent money order (I stopped taking checks years ago because of them bouncing) that we had received during the period being audited... I had to call in a favor to get it done under the time that we had to get it done in. When I picked the copies of what I am guessing was in the thousands of money order photocopies, I hugged my banker because he’d done us such a solid.

This occurred... I want to say within the last 5 days of our deadline for the audit to be finalized, and 2 of those days were on the weekend. That monday may have been a holiday too. Can’t remember. What I do remember is this: It was stressful as hell, Jenn worked literally til 3 AM several times, Marie (her assistant) was booked like crazy, and there were others that were helping as well. I was pissed off because of the absurdity of it, and we almost didn’t get a clean audit opinion because of something that was pretty stupid in my mind. That said, I get it. People need to have faith in the capital markets.

_______

And no, the manager doesn’t have to do all the work that we did in terms of bookkeeping. They literally send a statement. It could consist of whatever they want it to, and be pretty simple. When audited, that’s pretty cut and dry for corporate. The auditors don’t go through and audit the records of your property manager... what could take them 15 minutes to do could have taken us an hour, just to cover all our bases.

Monthly reporting for corporate also becomes easier with a manager. Re-read what I said about the cutoff dates in our software. If a tenant made a payment on their late rent, that could really throw things off, and would require adjustments to be made, and took time to figure out exactly where problems were happening.

This was not insignificant...

Also, a lot of the various entries that were so time consuming were from the FIX UP operations. NOT the rental ones. At one point, we had more than 30 active house renovations going on. Once our stuff was rented, our maintenance expenses were generally pretty low because of how we went about fixing the houses.

As Steve and I said, this make so much more sense in the way that it will be, going forward. Both in terms of the public entity, and me doing stuff privately. A fund setup makes sense as well.

Mr. Moore, 

It does sound like there was a substantial burden with the documentation of prior history (most likely with showing historic information; though I haven't gone and looked).  But, after that beginning burden, and with the use of some scanning software going forward, I would imagine that you would be good to go (but that is past history). 

The more pressing point to me, is some of the comments made about turning over the rentals to a 3rd party management company.  It sounds that the company is turning over most of the day to day running of the business unit to a 3rd party manager and that you are relying on them for various financial information.  So, you are basically farming out management and accounting to them and then in turn, relying on them for information that the company will use in its financial reporting. 

If that is the case, I don't think it is as simple as you are presenting of "The auditors don’t go through and audit the records of your property manager".  It will very much depend on the terms of the relationship and who is doing what (especially if they are managing cash or the revenue cycle of the rentals for the company), but the company may very well end up needing a service auditor's report on the manager (such as a SOC 1 report; which is basically an audit of the service organization's controls) for your external auditors to feel comfortable with their work.  And I really doubt that many rental management companies have such an audit done (given that it is a considerable expense).  Given the the company is public, and some of the issues with meeting prior audit deadlines, I would strongly suggest that you communicate with your external auditor (and potentially your legal team) about the terms and conditions of the contract with the 3rd party manager sooner rather than latter, and how it could potentially impact your regulatory burden.

Granted, this is coming from a outside by-stander (no ownership) and offered free of charge, so make of it what you will.  As well as I'm aware that you probably can't respond/outline the structure at this time either.
Title: Re: SYTE - Enterprise Diversified
Post by: matts on November 08, 2018, 05:35:39 PM
Thank you Grafter!

Seriously, I was about to give up since everyone is talking about this like they have never been audited and assuming the same about everyone else. And actually, Jeff is not one of those people. His post was very informative. But I had the same response as you did.

1) I own a company that is regularly audited under IFRS, so pretty much the same standard as a US public co so I know what is required. Was it painful the first year like Jeff described? Hell YES. I don't think Jeff even did it justice. It was awful and I can totally see where he is coming from. But then you learn that going forward you have to photocopy and scan each money order before you take it to the bank. This applies to a lot of the painful aspects of an audit. The next year it's a lot better.

2) not sure what Jeff meant by "And no, the manager doesn’t have to do all the work that we did in terms of bookkeeping. They literally send a statement."   Maybe ENDI won't see it because they will just get an invoice but the manager HAS to do all that bookkeeping for their own tax purposes, especially if they manage 100+ homes. There might be a slight saving because the standard is not as high as an audit but I'm guessing it's 80-90% of the accounting workload (assuming again, that we are comparing a private 100 house manager vs a public one in the steady state, not in their first audit year). Any of that benefit will be eaten up by the profit the external manager will demand, and then some.

Listen, I now understand the situation from Jeff's point of view and if I was him I'd bail too. That sounds like a nightmare compared to how he used to run things. But ENDI presenting this as a way of lowering costs, and keeping the high quality of product and service by going external is almost insulting. The management of these properties will now cost more (all-in economic costs), not less, and they will be managed worse, not better. Shareholders will pay a price for making ENDI management's life simpler and easier.




Title: Re: SYTE - Enterprise Diversified
Post by: Spekulatius on November 08, 2018, 06:50:46 PM
This is basically a FoF as a C-Corp instead of an LLC/S.

I guess the thesis is if you invest you only get your return after fees.  Whereas if you invest in the top level entity you get most of your return because some of the fee revenue is paid back as income.


I guess this could make sense if they had a lot of funds.  Asset managers are extremely valuable, look at the big ones, Fidelity, BlackRock etc. But you need a lot of scale.

And the mediocre ones go for almost nothing like MN, BEN....
Title: Re: SYTE - Enterprise Diversified
Post by: roark33 on November 08, 2018, 08:18:03 PM
Yes, corporate-level taxation and public company G&A costs.  Both of those things are completely unnecessary (LLC and private company).  Kiel should, if questioned directly, respond why Willow Oak (or the other two failed investments) make sense in the structure they are.  He won't because there is no answer.  Additionally, the fact that the structure is a really bad way to make these investments make you question the investment acumen of the management.  That sounds harsh, but it is basically what happened with Jeff's situation and sooner or later it will happen with Willow Oak. 
Title: Re: SYTE - Enterprise Diversified
Post by: fishwithwings on November 09, 2018, 07:45:51 AM
Yes, corporate-level taxation and public company G&A costs.  Both of those things are completely unnecessary (LLC and private company).  Kiel should, if questioned directly, respond why Willow Oak (or the other two failed investments) make sense in the structure they are.  He won't because there is no answer.  Additionally, the fact that the structure is a really bad way to make these investments make you question the investment acumen of the management.  That sounds harsh, but it is basically what happened with Jeff's situation and sooner or later it will happen with Willow Oak.

I wouldn't criticize their acumen.  Rather, it could their incentives.  Biglari Holdings v. 2.0?
Just Kidding!
Title: Re: SYTE - Enterprise Diversified
Post by: valueyoda on November 09, 2018, 08:15:51 AM
The fund managers are highly competent, but the SG&A at SYTE for running a public company and the relatively small size of the funds will make growing its book value or sum-of-the-parts valuation over time highly difficult. Plus the share price had already risen far beyond a fair valuation for the company before all of this chaos unfolded. It is hard to see a fair value beyond $5 for the stock (even if you don't take huge writedown hits on the real estate; the internet business is a melting ice-cube that deserves an extremely low multiple; the value of off balance sheet fund rev. sharing agreements are fairly insignificant at this point). The huge premium of the stock above that $5 is essentially the call option premium that investors are willing to pay for value growth beyond the status quo with regard to AUM and performance fees with both funds and optionality that management will add value in new areas in the future.

Running a successful holding company structure is very difficult when you are the size of SYTE. In my experience, it tends to work better when the size of the holding company gets above $75mln, because your fixed expenses relative to the size of the company and investments are more manageable. I wouldn't be amazed if the stock would trade below adjusted book value in the future once a true reset kicks in.
Title: Re: SYTE - Enterprise Diversified
Post by: andgroup on November 09, 2018, 01:30:18 PM

At the end of the day, you still have three big horses pulling this wagon. 

Steven Kiel, Dave Waters, and Keith Smith.

Everyone makes mistakes, the point when you do, is no thumb sucking, admitting it and getting back to your circle of competence.

Compounding can overcome quite alot, especially when combined with visibility, and even more so when combined with stable forms of leverage.  Who knows what the future holds.

In terms of structure, Buffett did the same thing with Berkshire, so the question is not whether it is PERFECT, the question is whether or not you can find anything better.  If you can, then go there. 

I'll take the long view.  I think these guys are smart enough to have wonderful futures ahead.

http://basehitinvesting.com/buffetts-underrated-investment-attribute/

Thanks,
John


Title: Re: SYTE - Enterprise Diversified
Post by: matts on November 09, 2018, 01:44:06 PM

At the end of the day, you still have three big horses pulling this wagon. 

Steven Kiel, Dave Waters, and Keith Smith.

Everyone makes mistakes, the point when you do, is no thumb sucking, admitting it and getting back to your circle of competence.

Compounding can overcome quite alot, especially when combined with visibility, and even more so when combined with stable forms of leverage.  Who knows what the future holds.

In terms of structure, Buffett did the same thing with Berkshire, so the question is not whether it is PERFECT, the question is whether or not you can find anything better.  If you can, then go there. 

I'll take the long view.  I think these guys are smart enough to have wonderful futures ahead.

http://basehitinvesting.com/buffetts-underrated-investment-attribute/

Thanks,
John

Curious to hear what makes you call each one a "big horse".
Title: Re: SYTE - Enterprise Diversified
Post by: andgroup on November 09, 2018, 03:15:43 PM
Track records.  I think these guys will compound money.  That will attract capital. 

Title: Re: SYTE - Enterprise Diversified
Post by: Spekulatius on November 10, 2018, 07:49:56 AM
The fund managers are highly competent, but the SG&A at SYTE for running a public company and the relatively small size of the funds will make growing its book value or sum-of-the-parts valuation over time highly difficult. Plus the share price had already risen far beyond a fair valuation for the company before all of this chaos unfolded. It is hard to see a fair value beyond $5 for the stock (even if you don't take huge writedown hits on the real estate; the internet business is a melting ice-cube that deserves an extremely low multiple; the value of off balance sheet fund rev. sharing agreements are fairly insignificant at this point). The huge premium of the stock above that $5 is essentially the call option premium that investors are willing to pay for value growth beyond the status quo with regard to AUM and performance fees with both funds and optionality that management will add value in new areas in the future.

Running a successful holding company structure is very difficult when you are the size of SYTE. In my experience, it tends to work better when the size of the holding company gets above $75mln, because your fixed expenses relative to the size of the company and investments are more manageable. I wouldn't be amazed if the stock would trade below adjusted book value in the future once a true reset kicks in.

The holding structure does not work well at a small scale like SYTE or PDH, the overhead is just too much. I think SYTE has like $600k overheard. That’s a very high hurdle  when you are of a $10M scale. People talk about the BRK, but they forget that when BRK became public via the Berkshire takeover, their size was much larger, especially considering these were 1970’s $.
Title: Re: SYTE - Enterprise Diversified
Post by: roark33 on November 12, 2018, 01:30:55 PM

At the end of the day, you still have three big horses pulling this wagon. 

Steven Kiel, Dave Waters, and Keith Smith.

Everyone makes mistakes, the point when you do, is no thumb sucking, admitting it and getting back to your circle of competence.

Compounding can overcome quite alot, especially when combined with visibility, and even more so when combined with stable forms of leverage.  Who knows what the future holds.

In terms of structure, Buffett did the same thing with Berkshire, so the question is not whether it is PERFECT, the question is whether or not you can find anything better.  If you can, then go there. 

I'll take the long view.  I think these guys are smart enough to have wonderful futures ahead.

http://basehitinvesting.com/buffetts-underrated-investment-attribute/

Thanks,
John

The real ironic thing about this post is you cite a great author/investor, John Huber.  You answer your own question, you can find something better than SYTE--invest directly with John, no double-taxation issue and no corporate drag. 
Title: Re: SYTE - Enterprise Diversified
Post by: oddballstocks on November 12, 2018, 01:35:24 PM

At the end of the day, you still have three big horses pulling this wagon. 

Steven Kiel, Dave Waters, and Keith Smith.

Everyone makes mistakes, the point when you do, is no thumb sucking, admitting it and getting back to your circle of competence.

Compounding can overcome quite alot, especially when combined with visibility, and even more so when combined with stable forms of leverage.  Who knows what the future holds.

In terms of structure, Buffett did the same thing with Berkshire, so the question is not whether it is PERFECT, the question is whether or not you can find anything better.  If you can, then go there. 

I'll take the long view.  I think these guys are smart enough to have wonderful futures ahead.

http://basehitinvesting.com/buffetts-underrated-investment-attribute/

Thanks,
John

The real ironic thing about this post is you cite a great author/investor, John Huber.  You answer your own question, you can find something better than SYTE--invest directly with John, no double-taxation issue and no corporate drag.

I think the advantage of SYTE is you can invest $100 with SYTE. What's John's minimum, $50k? $100k? Plus you need to be a qualified investor.  The public listing of these things means you can get some exposure even if you're not qualified.

If you are qualified then I 100% agree, invest directly, not in the entity.  But for anyone who isn't they don't have that choice.
Title: Re: SYTE - Enterprise Diversified
Post by: iambagman on November 12, 2018, 08:48:29 PM
There seems to be some confusion about the actual business SYTE is in with Willow Oak.  As I understand it, a fund like Bonhoeffer has a general partner and limited partners.  The limited partners are the investors.  The General Partner is in charge of the partnership and receives a management fee and an incentive fee (share of profits).  The economics of a general partnership are very favorable if a fund can achieve scale (AUM).  That is why the Forbes 400 is littered with Hedge Fund managers - as they are the General Partners for very large funds.  Willow Oak / Sytestar owns a portion of the General Partnerships for the Willow Oak funds.  With low AUM and poor returns - these GP stakes do not generate real revenue yet.  They are call options in my opinion, but interesting call options as these GP stakes require zero additional capital to grow and they do not show up in the book value of the firm. 

If you think Alluvial or Bonhoeffer can raise real dollars and generate real returns - it can get interesting quickly.  Management fees vary by funds as do the incentive fees and the Willow Oak ownership.  There will also likely be additional funds in the future - so using a generic/hypothetical example - if in a few years, Willow Oak has a fund that has $200M in AUM with a 1% management fee and a 20% incentive fee of which they own 20% of the fund - in a year where the underlying fund generates 20% returns - the Willow Oak portion would be in round numbers $400K in management fees (20% of 1% of $200M)  and $8M in incentive fees (20% of 20% of $40M).  Now the number of funds that reach $200M is small and in a flat or down year the economics are far worse - my point here is they are building call options in Willow Oak that are very asymetric.  Depending on your opinion of the magnitude of success of the underlying funds - may make the current $30M market cap seem quaint or not.
Title: Re: SYTE - Enterprise Diversified
Post by: Hielko on November 13, 2018, 02:07:10 AM
SYTE is not only a general partner in the funds, but has also been providing seed money for the funds. Think they put $10 million in the Alluvial Capital fund as limited partners, right? I bet that stake is a order of magnitude more valuable than the GP interest.

I think you shouldn't put too much value on the general partner stakes they have. Alluvial Capital for example has now a bit more than $20M AUM, but half of that money is from SYTE itself. So really they have $10M of outside capital. That fund has a 1.5% management fee and 20% performance fee above a 6% hurdle. So in a 20% year you would make 30K in management fees and 200K in performance fees if they have a 20% stake in the GP (don't know what the deal exactly was?). Right now, even an excellent year barely produces anything meaningful.

Even if they grow the size of the fund to 100M of outside money (at which point it becomes questionable if their strategy works) you are still looking at 300K in management fees and 2 million in performance fees (for SYTE, assuming a 20% stake in GP). And that is at least a couple of years in the future, and probably more than a couple. And of course, that is if they ever reach it! And additionally, this is still a pretty good year even if they managed to reach that scale. So many things have to go right before a stake in a GP starts to become valuable. And then presumably overhead would be increasing as well. To come back to the Alluvial Capital example (which I follow because I do think Dave has a good nose for value), there is already an additional employee that was added this year. I would guess his salary is paid by the GP, and is thus eating into the amount of management en performance fees that are available for distribution as profit.

And then, when that stake does become valuable, how easy is it for SYTE to keep the managers on their platform? People invest in Alluvial Capital because they think Dave Waters is a good investor, not because "Enterprise Diversified" means anything to them. Especially the manager that is managing the fund that grows to $100M plus will presumably be becoming more of a star. If he (or she!) thinks "Enterprise Diversified" is getting a too big piece of the pie they might simply start their 100% own fund and take most of the clients with them.

And even if the fund manager is very loyal to "Enterprise Diversified" I think it's quite problematic that the real value would still be the fund manager. What happens if after 5 or 10 year the fund manager thinks, "Okay, I have had enough of this. I made plenty of money already, I can just as well focus on managing my own money, and quit." Would AUM be sticky? I doubt it. It's not like, that even if a fund reaches a good scale, that you can value it like it will exist into eternity.
Title: Re: SYTE - Enterprise Diversified
Post by: Spekulatius on November 13, 2018, 04:01:09 AM
^ There is nothing to prevent a successful fund manager from jumping ship / starting a new fund without SYTE. If there is any moat, it is with the manager, not with SYTE.
Title: Re: SYTE - Enterprise Diversified
Post by: Hielko on November 13, 2018, 04:11:09 AM
I'm not that pessimistic. The fund manager is important, but so is access to capital. If SYTE grows to have multiple funds, has a marketing department, has the relations with institutions and HNW individuals they would have a big part of what is important as well.
Title: Re: SYTE - Enterprise Diversified
Post by: NBL0303 on November 13, 2018, 04:50:18 AM
If he (or she!) thinks "Enterprise Diversified" is getting a too big piece of the pie they might simply start their 100% own fund and take most of the clients with them.


Good on you, Hielko.
Title: Re: SYTE - Enterprise Diversified
Post by: globalfinancepartners on November 13, 2018, 05:11:11 AM
And of course the general concept of Loyalty, Character, etc...

I'm not that pessimistic. The fund manager is important, but so is access to capital. If SYTE grows to have multiple funds, has a marketing department, has the relations with institutions and HNW individuals they would have a big part of what is important as well.
Title: Re: SYTE - Enterprise Diversified
Post by: Tim Eriksen on November 13, 2018, 10:34:07 AM
And of course the general concept of Loyalty, Character, etc...

I'm not that pessimistic. The fund manager is important, but so is access to capital. If SYTE grows to have multiple funds, has a marketing department, has the relations with institutions and HNW individuals they would have a big part of what is important as well.

There are a few misunderstandings here and in some of the other recent posts:

1. Unless Sitestar did a stupid deal, it doesn't work this way.  Having sold part of my GP, my agreement clearly does not allow me to close the fund and re-open under a different name to eliminate the fee share. 

2. If the GP hires additional personnel it does not cut into the revenue earned by Sitestar.  Sitestar basically has a royalty. 
Title: Re: SYTE - Enterprise Diversified
Post by: Tim Eriksen on November 13, 2018, 10:35:48 AM
There seems to be some confusion about the actual business SYTE is in with Willow Oak.  As I understand it, a fund like Bonhoeffer has a general partner and limited partners.  The limited partners are the investors.  The General Partner is in charge of the partnership and receives a management fee and an incentive fee (share of profits).  The economics of a general partnership are very favorable if a fund can achieve scale (AUM).  That is why the Forbes 400 is littered with Hedge Fund managers - as they are the General Partners for very large funds.  Willow Oak / Sytestar owns a portion of the General Partnerships for the Willow Oak funds.  With low AUM and poor returns - these GP stakes do not generate real revenue yet.  They are call options in my opinion, but interesting call options as these GP stakes require zero additional capital to grow and they do not show up in the book value of the firm. 

If you think Alluvial or Bonhoeffer can raise real dollars and generate real returns - it can get interesting quickly.  Management fees vary by funds as do the incentive fees and the Willow Oak ownership.  There will also likely be additional funds in the future - so using a generic/hypothetical example - if in a few years, Willow Oak has a fund that has $200M in AUM with a 1% management fee and a 20% incentive fee of which they own 20% of the fund - in a year where the underlying fund generates 20% returns - the Willow Oak portion would be in round numbers $400K in management fees (20% of 1% of $200M)  and $8M in incentive fees (20% of 20% of $40M).  Now the number of funds that reach $200M is small and in a flat or down year the economics are far worse - my point here is they are building call options in Willow Oak that are very asymetric.  Depending on your opinion of the magnitude of success of the underlying funds - may make the current $30M market cap seem quaint or not.

Under your scenario it would be $1.6 million not $8 million for incentive fees under the revenue share.  $8 million is gross.  $1.6 million would be 20% of the 20%. 
Title: Re: SYTE - Enterprise Diversified
Post by: Hielko on November 13, 2018, 12:21:23 PM
And of course the general concept of Loyalty, Character, etc...

I'm not that pessimistic. The fund manager is important, but so is access to capital. If SYTE grows to have multiple funds, has a marketing department, has the relations with institutions and HNW individuals they would have a big part of what is important as well.

There are a few misunderstandings here and in some of the other recent posts:

1. Unless Sitestar did a stupid deal, it doesn't work this way.  Having sold part of my GP, my agreement clearly does not allow me to close the fund and re-open under a different name to eliminate the fee share. 
I of course don't know what's in the agreement, but it almost has to be possible in some way or another. Sure, closing the fund and re-opening another one next day, maybe not. But it's probably also not the case that if you want to quit and then you can never ever ever start a fund again for the rest of your life. Hope no-one signs something like that ;)
Title: Re: SYTE - Enterprise Diversified
Post by: Tim Eriksen on November 13, 2018, 12:45:00 PM
And of course the general concept of Loyalty, Character, etc...

I'm not that pessimistic. The fund manager is important, but so is access to capital. If SYTE grows to have multiple funds, has a marketing department, has the relations with institutions and HNW individuals they would have a big part of what is important as well.

There are a few misunderstandings here and in some of the other recent posts:

1. Unless Sitestar did a stupid deal, it doesn't work this way.  Having sold part of my GP, my agreement clearly does not allow me to close the fund and re-open under a different name to eliminate the fee share. 
I of course don't know what's in the agreement, but it almost has to be possible in some way or another. Sure, closing the fund and re-opening another one next day, maybe not. But it's probably also not the case that if you want to quit and then you can never ever ever start a fund again for the rest of your life. Hope no-one signs something like that ;)

I have a five year restriction.  Not sure why you would hope no one signs something like that.  On a $10 million fund commitment, the manager gets a management fee of $100 k per year plus incentive fees (in addition to scale for a one person shop).  Not sure how that is a bad deal for a young manager.

In deals where the manager gets significant cash up front it is not unusual for inclusion of future earnings should for example, a manager close his/her small fund and be hired by a bigger fund.  It's a legal agreement both sides should protect themselves.
Title: Re: SYTE - Enterprise Diversified
Post by: Hielko on November 13, 2018, 02:50:33 PM
Yeah, I agree that should make it pretty hard to just leave and setup something new on your own.