Small cap RetailMeNot Inc (SALE) Jumps But Insiders Have Been Exiting (GRPN)

On Monday, small cap RetailMeNot Inc (NASDAQ: SALE) jumped 7.67% to $31.01 on an analyst upgrade, but the stock had declined after a pre-Christmas run-up – meaning investors might want to take a closer look at what is going on with the company plus take a look at the performance of peer Groupon Inc (NASDAQ: GRPN).

What is RetailMeNot Inc?

Small cap RetailMeNot, which went public in July 2013, operates the world's largest digital coupon marketplace as the company's websites enable consumers from across the globe to save money through hundreds of thousands of digital coupons and offers from retailers and brands. RetailMeNot experienced more than 500 million visits to its websites in the last 12 months and its portfolio of coupon and deal websites includes:

www.RetailMeNot.com, the leading digital coupon site in the United States. www.RetailMeNot.ca in Canada. www.VoucherCodes.co.uk, the leading digital coupon site in the United Kingdom. www.Deals.com in Germany. www.Actiepagina.nl, a leading digital coupon site in the Netherlands. Bons-de-Reduction.com and www.Ma-Reduc.com, leading digital coupon sites in France.   www.Poulpeo.com, a leading digital coupon site with cash back in France.  www.Deals2Buy.com, a leading discount offer site in North America.

Meanwhile, Groupon serves 500 markets and 48 countries with its deal-of-the-day website that features discounted gift certificates usable at local or national companies. However, the company has had a troubled history as outlined on its Wikipedia page.

What You Need to Know or Be Warned About RetailMeNot Inc

Late last Friday, RBC Capital Markets Internet analyst Mark Mahaney offered an update on the outlook for various online advertising and retail stocks where he predicted continued benefits to the group from trends in social, local and mobile transactions. In the update, Mahaney upgraded RetailMeNot from sector perform to outperform with a $33 price target.

However and just after Christmas, RetailMeNot was following Internet and social-media stocks downward by dropping some 7% after steadily rising during the last few weeks of the Christmas holiday season. Not helping matters was the fact that investors started noticing all the recent insider sales for the month of December with the only other insider sales since July occurring in October.

Insider Transactions Reported - Last Two Years

DateInsiderSharesTypeTransactionValue*

Dec 20, 2013	CUNNINGHAM G COTTEROfficer	35,306	Direct	Sale at $26 per share.	917,956
Dec 20, 2013	BALL CHARLES THOMASDirector	755,825	Indirect	Sale at $26 per share.	19,651,450
Dec 20, 2013	AV PARTNERS IX LLCBeneficial Owner (10% or more)	755,825	Indirect	Sale at $26 per share.	19,651,450
Dec 20, 2013	AV PARTNERS IX LLCBeneficial Owner (10% or more)	755,825	Indirect	Sale at $26 per share.	19,651,450
Dec 17, 2013	PHO STEVEN TOfficer	12,812	Direct	Sale at $26 per share.	333,112
Dec 17, 2013	AYLOR THOMASOfficer	7,031	Direct	Sale at $26 per share.	182,806
Dec 17, 2013	AYLOR THOMASOfficer	7,031	Direct	Option Exercise at $11.40 per share.	80,153
Dec 17, 2013	BATH JAGJIT S.Officer	17,156	Direct	Sale at $26 per share.	446,056
Dec 17, 2013	AV PARTNERS IX LLCBeneficial Owner (10% or more)	1,706,746	Indirect	Sale at $26 per share.	44,375,396
Dec 17, 2013	BEOUGHER KELLIOfficer	28,000	Direct	Sale at $26 per share.	728,000
Dec 17, 2013	BEOUGHER KELLIOfficer	28,000	Direct	Option Exercise at $1.12 per share.	31,360
Dec 17, 2013	ROGERS PAULOfficer	17,375	Direct	Sale at $26 per share.	451,750
Dec 17, 2013	PHO STEVEN TOfficer	3,000	Direct	Option Exercise at $2.08 per share.	6,240
Dec 17, 2013	BALIS JILLIAN L.Officer	17,156	Direct	Sale at $26 per share.	446,056
Dec 17, 2013	BALIS JILLIAN L.Officer	17,156	Direct	Option Exercise at $2.08 per share.	35,684
Dec 17, 2013	MALTZ JULES A.Director	250,000	Indirect	Sale at $26 per share.	6,500,000
Dec 17, 2013	AV PARTNERS IX LLCBeneficial Owner (10% or more)	1,706,746	Indirect	Sale at $26 per share.	44,375,396
Dec 17, 2013	ROGERS PAULOfficer	17,375	Direct	Option Exercise at $2.08 per share.	36,140
Dec 17, 2013	BALL CHARLES THOMASDirector	1,706,746	Indirect	Sale at $26 per share.	44,375,396
Dec 17, 2013	SHARPLES BRIANDirector	4,983	Indirect	Sale at $26 per share.	129,558
Dec 17, 2013	SHARPLES BRIANDirector	7,031	Direct	Option Exercise at $2.08 per share.	14,624
Dec 17, 2013	CUNNINGHAM G COTTEROfficer	190,694	Direct	Sale at $26 per share.	4,958,044
Dec 17, 2013	SHARPLES BRIANDirector	7,031	Direct	Sale at $26 per share.	182,806

 

It should be noted though that back in early December, RetailMeNot filed for an offering of 6.3 million shares consisting of 2 million shares of series 1 common stock with selling shareholders offering another 4.3 million shares of series 1 common stock. At the time, the company's float stood at 15.16 million shares while outstanding shares stood at 50.56 million shares - so it was a fairly large number of shares to dump on the market.

Nevertheless, investors should be aware that RetailMeNot is pretty profitable as its reported revenues of $47.35M (3 months ending 2013-09-30), $43.40M (3 months ending 2013-06-30), $40.56M (3 months ending 2013-03-31) and $144.69M (12 months ending 2012-12-31) for the past four reported quarters (notice the 4th quarter uptick) and net income of $5.59M (3 months ending 2013-09-30), $5.12M (3 months ending 2013-06-30), $6.97M (3 months ending 2013-03-31) and $25.99M. In addition, RetailMeNot has reported revenues of $144.69M (2012), $80.40M (2011) and $16.86M (2010) for the past three reported years and net income of $25.99M (2012), $16.96M (2011) and $2.34M (2010).  

Share Performance: RetailMeNot vs Groupon 

On Monday, small cap RetailMeNot rose 7.67% to $31.01 (SALE has a 52 week trading range of $25.51 to $39.50 a share) for a market cap of $1.82 billion plus the stock is up 11.95% for retail investors since last July. Her is a look at the performance of Groupon verses RetailMeNot:

As you can see from the above performance chart, Groupon has not exactly rewarded investors, but things started to improve in late 2012.

Finally, here is a look at the latest technical charts for RetailMeNot and Groupon:

The Bottom Line. Certainly insiders selling is never a good sign. Then again, insiders wanting to cash in some of their chips after an IPO is understandable. Given the fact that RetailMeNot has been profitable for the past three years, investors looking for action in the Internet or ecommerce space might want to at least take a closer look at what the stock might have to offer.