Friday, November 19, 2010 12:08:45 PM
A Dot Com Bet
Discovery Equity Partners increased its position in Drugstore.com (Nasdaq:DSCM) by over 10%. In the last couple of weeks, Discovery bought over 800,000 shares at $1.58 - $1.69 each and now owns 8.7 million shares or 8.3% of the company. As the name implies, drugstore.com operates as an online provider of health, beauty, vision, and pharmacy products. In addition, the company has strategic agreements with Medco Health Solutions, Rite Aid Corporation, General Nutrition Corporation and Amazon.com (Nasdaq:AMZN). It is this relationship with Amazon.com that could be the most valuable.
With a market cap of $182 million, drugstore.com would make an easy acquisition target for Amazon. Amazon is known for eliminating its competition by buying them out. Last week, the company agreed to buy privately held Quidsi, which operates diapers.com, for nearly $600 million. Drugstore.com has no net debt and revenues of nearly $500 million. If Amazon operating structure can yield a decent profit rate from those sales, a buyout would not be that unlikely.
Slow Money is Fasho Money / Fast Money is Won't Last Money
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