ACND, MKTW - Ascendant Digital Acquisition Corp., MarketWise

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This SPAC deal was mentioned on another thread and I thought it might be of interest to other board members on its own thread.  Currently this trades pre-deal-close under the ticker ACND at $9.97.

 

The deal is with a former Agora Publishing subsidiary called Beacon Street group that will be changing their name yet again to MarketWise upon closing this deal.  The new ticker is supposed to be MKTW after deal close.

 

The primary line of business is selling subscriptions to investment newsletters.

 

The enterprise value of the company will be approximately $3 billion and there is no material debt.  ACND shares have traded below $10 since the deal was announced and I have purchased shares between 9.88 and 9.97.

 

Unlike your typical SPAC deal shitco, this is a 20+ year old business that is growing and has been a huge generator of free cash owner earnings since formation.  The history of this company is that around the 99-2000 internet boom a young guy named Porter Stansberry started a product within Agora Publishing called "Pirate Investor."  This was nothing to write home about but over time Porter brought in friends Steve Sjuggerud and many others and the subsidiary grew into a mini-Agora of its own.  They have over time made some acquisitions of other similar and complimentary businesses and formed many new products like the fairly recent Whitney Tilson product called Empire Financial Research.  Netflix did a true-crime episode of Unsolved Mysteries that (in my opinion, unfairly) hinted that Porter Stansberry may have been hiding something surrounding the death by suicide of his long time friend Rey Rivera (who was an employee of this company in Baltimore at the time he jumped off a hotel).  While I highly doubt Stansberry had anything to do with the death, the Netflix stuff was apparently enough of a problem that the founder of this carve-out-sub Porter Stansberry was forced to resign to make this SPAC deal happen and is barely mentioned in deal documents unless you dig into which shareholders of the private business hold what equity.  Agora founder Bill Bonner and his family would own the most equity, followed by Stansberry.

 

The principals of this business are experts at direct response marketing, which over the years has become online marketing and email marketing.  The roots of this business are sales letters through the mail and mailed newsletters.  Obviously the internet, email and the PDF document have changed the economics of the business for the better...

 

The investor presentations and conference calls are pretty helpful to get a handle on the business from the horse's mouth.  Total Billings is my favored revenue metric for this company, as it represents a cash basis look at this period versus "revenue" that uses subscription accounting to spread a dollar of revenue over the length of the subscription.  This is important because the company is still growing at a healthy clip.

 

The company will end up with around $150 million of cash on their balance sheet post-deal-close, which it doesn't seem like they should need.  Historically they have been able to take considerable cash out as profit distributions on top of the very generous compensation they pay to copywriters and marketing partners (typically if another publication sells a subscription to one of these guys' products the marketing partner could take something like the entire first year's subscription value as a commission - something like that at least)...  Anyway, I assume that $150m is to look at accretive acquisitions but who knows.  

 

Look through the most recent Q1 results to see the growth in cash flow from operations.  It is insane and starts to make the $3 Billion EV look pretty damn reasonable.  Pre-deal results are distorted by all of the noise surrounding pre-deal profits distributions, vesting of class B stock and other pre-deal adjustments that mostly show up under share-based compensation.  This noise should go away post-deal.  But there should be an increase in expenses from being a newly public company.

 

Of course, the Beacon Street / Agora / MarketWise machine is not allowed to pump this in any of their newsletters or free services.

 

Some places to start if interested: 

2021 Q1 Earnings press release:

https://static1.squarespace.com/static/5e81e117fb7d1e1df699db5f/t/60b60d00652a5e7ed49137e1/1622543617351/MarketWise+1Q21+Earnings+Release+6.1.21.pdf

 

Most recently updated deal presentation:

https://static1.squarespace.com/static/5e81e117fb7d1e1df699db5f/t/60b7a1b667f001412292c3c3/1622647230739/MarketWise+Presentation+05.27.2021_Final.pdf

 

SPAC website with links to presentations, conference calls, conferences, etc:

https://www.ascendant.digital

 

 

[Spekulatius]

Seems like an interesting business, based on the metrics. Their business seems to be to sell newsletters to boomers and the silent generation:

 

Edited June 10, 2021 by Spekulatius

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Hey Spek -  Yeah the core demographic of people willing to spend a few hundred dollars per year and up on subscriptions of this type are people who have at least a few hundred thousand dollars to invest.  That has been people over 50 and they have been the biggest part of the highest value subscriptions - what they call "lifetime" or "alliance" type products.  This company has always done a very good job of selling additional products to their existing customers.  I would bet a lot of those "silent generation" customers have been customers since they were in their 60s.

 

One think I forgot to address in my first post is that they are definitely guilty of the typical bullshit when it comes to TAM - Total addressable market.  They point to the value of the entire professional money management business as being included in their TAM which is complete bullshit.  On yesterday's Baird conference Zoom Q&A they did mention in passing that they have 1% market share but I have a hard time believing that they are only 1% market share in financial newsletter publishing so who knows what they are considering their market there.  Competitors / Comps would include Motley Fool (private), Morningstar (public but not a direct comp), subscription services like TheStreet.com, other Agora products not included in this company like the Oxford Club, etc...

 

I think they would probably love to buy something like Toggle but I have no idea what the valuation on something like that would be https://www.toggle.global