I've been following this with great interest. Full disclosure, I am not invested in this, nor have been. But I think it might be helpful to share some actual analysis because it seems like this is dominated by day traders or folks not doing any resemblance of work. Please note this all just my own opinion.
You can estimate advisorshares revenue because its all public disclosure. They tell you how large the funds are and the fees they get. People are forgetting on this board they sub-advise this all out, their effective fees are extremely low, usually around 0.4-0.5% per annum. Based on this at year end, I estimate around $4.3m in current revenue, assuming stable AUM. The market is down this year so it could be worse, but I haven't updated my numbers. There is no magic to this calculation. Now, their SEC filings have said they have 21 employees. What do you think they pay these employees? Let's give them the benefit of the doubt and say with benefits, payroll, etc, they are at $150k each. It could be a lot higher. But thats $3.2m. What does it cost to do regulatory work for a business like this? I estimate at a minimum, $300k. Then they need an office, call that $1k/employee per month, or around $250k per year. There are absolutely other costs involved but again, let's be generous. Anyway, this gets you to potential income estimation of $640k / year for advisorshares.
What's that worth? This is where you might be bullish. Its an interesting business model, with interesting products. Having said that, I look and I see a business with little competitive advantage; whats preventing a larger asset management platform like BNY from rolling out products with sub-advisors and undercutting their fee take? I personally think its a real risk. Couple this with daily liquidity on underlying AUM and a rough market environment, I think a 12x multiple is more than fair. This gets us to $7.7m in advisorshares value (for 100%).
Now we don't know how much they settled for, but they (in my opinion) didn't get 60% (their ask), but let's imagine they did. It would seem rational that if they did win the 60% or anything near it they'd have to cough up the $2.75m obligated under the original agreement to get that stake. So ($7.7m * 60%) - $2.75m = $1.86m. But wait, um who has been funding the litigation for all these years? Jason isn't running a charity here. There was barely any balance sheet when this started. You think that was free? I think we can all agree it wasn't free, at the very least, and shareholders are potentially exposed to getting a rude awakening on what deals were done to "finance" this. Again, let's imagine its all dandy, and figure 20% goes to the financier. We are now down to $1.5m.
$1.5m is $1.73/share. I view this as a very bullish potential value. I personally wouldn't buy this anywhere near that.
Disclosure: no position, and no plans to take a position. You should do your own due diligence on any point mentioned, and seek advice on this. This is not a recommendation of any sort.
