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Justin Hibbard
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November 01, 2005

Seeking Answers about Answers

Justin Hibbard

Hey Answers Corp., answer me this: How does a company with negative trailing 12-month gross margins and negative trailing 12-month cash from operations get a stock price that's up 103% from its 52-week low? This stock went nuts back in February when somebody noticed that Google was starting to route searches for definitions to instead of Answers (then called GuruNet) had no formal deal with Google--the traffic just started coming. Boom! The stock took off like the space shuttle from $10 to $26. Never mind the cash falling away like so many foam panels. Answers/GuruNet has paid out more cash than it has taken in for at least the past six quarters (I got tired of counting).

Since February, the company has done a $31 million secondary offering (get it while it's hot, baby) and moved on and off's naked shorts list, meaning investors were shorting more shares of the stock than the company had issued (which is illegal). The stock has dropped back down to $10 but is still up from its 52-week low of $5. Trailing 12-month price to tangile book value is 3.9x. Last quarter, the company passed the threshold into positive gross margins, though net income and cash from operations were still in the red. Can someone give me some Answers?

05:05 PM

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