SYTE - Enterprise Diversified

[rkbabang]

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.

 

[LR1400]

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.

[InelegantInvestor]

Why I'm Withholding My Votes For All Sitestar Directors http://www.inelegantinvestor.com/2016/09/16/im-withholding-votes-sitestar-directors/

[InelegantInvestor]

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.

[gg]

$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...

[writser]

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.

[eclecticvalue]

Wow........... I was excited for the rollup of the HVAC business and now they are branching out to another business already.

[Jurgis]

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 ...

[writser]

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.

[ratiman]

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.

[oddballstocks]

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.

 

 

[InelegantInvestor]

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

[Hielko]

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...

[Poor Charlie]

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. 

[InelegantInvestor]

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.

[oddballstocks]

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.

[InelegantInvestor]

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.

[NeverLoseMoney]

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.

[gg]

 

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...

[InelegantInvestor]

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.

[Ballinvarosig Investors]

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.

[InelegantInvestor]

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/

[InelegantInvestor]

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.

[Ballinvarosig Investors]

+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?

[Max Alpha]

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.