Why we all continue to invest in DNA Dynamics
Posted on Mon, Aug 15, 2011
Email This Email Article
inShare
Add to delicious delicious
0digg
When DNA acquired Slam Productions, one of the first decisions we made was the stop the ‘Work for hire’ projects that had been the bread and butter of the business. On average, over the previous 3 years, Slam and been profitable and had seen turnovers of around $250k. So why throw that away? People thought we were crazy!
The thing about ‘work for hire’ is that, unless you are charging top whack, you get nowhere quick. And here is some news - DNA didn’t buy Slam for its revenues. In fact, we were concerned that the revenues were going to hold back our plans – maybe it would be easier to build a new team from scratch without the legacy of revenues which would act like a comfort blanket?
We bought Slam for its people and its technology. We could have grown the ‘Work for Hire’ business by 20% each year, and soon been at a $1m turnover business. Ask yourself this though – would you invest in a business that shows steady, small growth? Or would you prefer to invest in something a little more interesting; something that is created to catch the eye of the big boys in the consolidation game and eventually to get acquired for a tidy sum, o
achieve a share price 100 times what you paid for it. It is all achievable now
.
So we took out the ‘Work for Hire’ element and took the people and the technology to the big names in the industry. In a high risk strategy, we are raising capital to acquire some household name licenses and set the studio the job of creating some fantastic games that would appeal to the masses. Four are nearly finished and we think the game buying public are going to love what they see.
I guess the reason we are all doing this, though, is to make money – right? Well we see an industry that is crying out for what we have and the acquisitions and floatations made in 2011 absolutely back that up. But the key question on everybody’s lips is – what will the company be worth at that key moment?
Market Valuation is always an interesting subject and, of course, none of us is ever valued at a price we believe reflects our full market worth. As a ‘public’ company, getting a valuation is seen to be much easier. Essentially, our market cap is published for all to see. However, with a major change in direction and no financials published yet which show the true value of the business – those will only come when the new direction starts to bear fruit in Q3 or Q
4 2011 – our valuation is about 1/3 of where we believe it should be right now an
d we are looking at a market cap in excess of $50m once we show good financial results from 2011 – and that is just the start.
However, if you compare our ‘Market Cap’ with how others, private companies, lay out their valuations it becomes a different ball game. Taking Groupon as a good case in point, they showed that they made a profit of $60m in 2010. This is calculated using the CSOI method – Consolidated Segment Operating Income. Talking simply, the CSOI method takes out major expenses which could include Marketing, for example, which has to be one of their top five expenses. If you add in all of their costs, they, in fact, made a loss of $456m in 2010. But we’ll all jump in to buy their shares right? In fact, they are hoping for a $60b valuation. Now, I doubt we’ll achieve an operating income near that in 2012, but I would happily take 30% of that valuation in December 2012.
In short – keep an eye on DNAD over the coming months and you’ll see a company that, in my opinion, fast becomes the company to watch in terms of shareholder value. Yes we are raising capital – but you just wait and see what we have bought and what we have produced – you will be amazed, and want to invest in us.
