IAC/InterActiveCorp (NASDAQ:IAC): Why Maran Capital Finds It Attractive

In its Q1 Investor Letter, Maran Capital, a value-driven investment management firm led by Dan Roller, discussed IAC/InterActiveCorp (NASDAQ:IAC) and other companies. IAC is a  New York City-based firm that owns more than 150 brands across 100 countries including Vimeo, Dictionary.com, Dotdash, The Daily Beast and Investopedia, HomeAdvisor, Angie’s List, Match, Tinder, PlentyOfFish and OkCupid. Let’s take a look at Maran Capital’s thoughts on IAC/InterActive.

IAC is the long side of the arbitrage trade that I mentioned in last quarter’s letter. We are long IAC and short their two core underlying publicly-traded holdings, Match.com (MTCH) and Angie’s list (ANGI). Every share of IAC, which trades for around $162, owns roughly $122/sh of MTCH and $68/sh of ANGI, as well as net cash, real estate, a venture capital portfolio, an online publishing business, and an online video streaming business, which all together are worth perhaps an additional $15-20+/sh (net of capitalized corporate overhead). Again, the trade is not riskless, but we are “buying” $15-20+ of net assets for negative $28 per share.

To put this into a slightly different context, if IAC were to spin out Match.com to IAC shareholders, IAC would be a ~$40 stock which owned $68 of ANGI per share, along with the net cash and additional assets of $1520 that I described above ($85+ of value, for $40/sh). IAC appears cheap on its own, but the ability to hedge out the risk of MTCH and ANGI makes it particularly attractive. While on a gross basis this is a moderately large position (large enough to break into our top five holdings), our net exposure to the position is fairly limited.

Credit: IAC

Credit: IAC

For the first quarter 2018 results, IAC/InterActiveCorp (NASDAQ:IAC) reported a revenue of $995.1 million, up 31% from $760.8 million for the same quarter a year ago. Its operating income jumped 143% to $90.0 million from $37.1 million last year. While the company had net earnings of $71.1 million, or $0.71 per share, compared to $26.2 million, or $0.29 per share, a year ago.

IAC closed up 0.30% at $162.75 on Friday. Its opening price on the last trading day was $162.13. The stock gained 60.44% over the past 12 months, while its year-to-date performance jumped 25.88%. Whereas, over the past six months, the share price increased 30.99%. IAC has a consensus average recommendation of ‘Buy’ and a consensus average target price of $190.56, according to analysts polled by FactSet.

IAC/InterActiveCorp (NASDAQ:IAC) is a popular stock among hedge funds covered by Insider Monkey. As of the end of 2017, there were only 54 funds in our database with positions in the company including Becker Drapkin Management and Cadian Capital.

Meanwhile, don’t miss Maran Capital’s comments about Clarus Corp (NASDAQ:CLAR), which is engaged in designing and manufacturing of active outdoor performance equipment and apparel for climbing, mountaineering, backpacking, skiing and other outdoor recreation activities.