Author Topic: SYTE - Enterprise Diversified  (Read 148458 times)

SmallCap

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SYTE - Enterprise Diversified
« 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
« Last Edit: August 12, 2018, 06:06:26 PM by Parsad »
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DTEJD1997

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Re: SYTE - Sitestar
« Reply #1 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...

Sportgamma

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Re: SYTE - Sitestar
« Reply #2 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.

rkbabang

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Re: SYTE - Sitestar
« Reply #3 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 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

Arquitos Capital's Letter to Sitestar’s management - August 28, 2013  (A lot of good suggestions. A reverse split is a no-brainer and should be done immediately).

The recent 13D filing including the Letter to management - June 3, 2014

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

     Sitestar: The Cigar Butt That Isn'tAugust 1, 2011
     Scut-Scut-Scuttlebutt... March 4, 2012
     Why I Am 13D-ing SitestarMay 30, 2012
     Sitestar Properties For Sale/RentJune 23, 2012
     Portrait Of A CEO: Frank ErharticSeptember 1, 2012
     A Board Seat At Sitestar...October 31, 2013
     Starting Activism at Sitestar (SYTE)    June 23, 2014
« Last Edit: June 25, 2014, 06:22:44 AM by rkbabang »

writser

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Re: SYTE - Sitestar
« Reply #4 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.
« Last Edit: June 25, 2014, 06:25:29 AM by writser »
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Sportgamma

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Re: SYTE - Sitestar
« Reply #5 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."



rkbabang

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Re: SYTE - Sitestar
« Reply #6 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.

matjone

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Re: SYTE - Sitestar
« Reply #7 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?

When stocks are high, money rates rising, and business prosperous, at least half a given fund should be placed in short-term bonds. - Philip Carret

ragnarisapirate

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Re: SYTE - Sitestar
« Reply #8 on: June 29, 2014, 09:52:41 PM »
No schedule, but you can get an idea at sitestar.com/rentals and 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.

matjone

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Re: SYTE - Sitestar
« Reply #9 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.
When stocks are high, money rates rising, and business prosperous, at least half a given fund should be placed in short-term bonds. - Philip Carret