Ominto (OMNT): Something's Wrong In Denmark ... And Boca

by Sonya Colberg, Senior Editor - 6/30/2017 11:12:59 AM

After the market closed Thursday and the stock settled at one-month highs, Ominto (OMNT) insulted investors by releasing a filing that shows its acquisition was even worse than everyone thought.

In an odd action last December, Ominto paid $10.2 million in stock, cash and debt expense for a 40% stake in Lani Pixels, a company at the brink of going under. Far removed from Ominto’s struggling Boca Raton, Florida-based online coupon and cash-back business, the Denmark/Dubai company is basically a father-and-son shop that focuses on computer generated animated films.

It turns out that Lani is an even bigger wreck than we originally believed. Ominto’s preliminary estimates of what it actually received for that outlandish price were bad. But the actual numbers are miserable:

(Sources: Company SEC filings here, here, TheStreetSweeper)

Lani’s pathetic revenue turned out to be 80% lower than the estimated numbers. Loss per share was 33% more severe.

Instead of paying 16 times estimated sales for an unrelated business, Ominto paid a jaw-dropping 77 times actual sales!

Lani’s auditors, Sadler, Gibb & Associates, LLC, which the Public Company Accounting Oversight Board recently found deficient regarding issuing an opinion without being certain that financial statements were free of material misstatements, also expressed substantial doubt that Lani would continue as a going concern.

Despite hyping that great “animated movie production” deal, Ominto’s losses have been exacerbated by Lani. Recent quarterly financials show:

(Source: Company SEC filing, TheStreetSweeper)

*Conclusion

We plan to dive into the details of why this ludicrous acquisition happened, if the stock holds. No money-losing company pays $10 million … 76 times sales … for a tiny, money-losing Denmark company whose business is so far removed from its core.

Even in this market, Ominto’s nearly quarter-billion-dollar market cap is absolutely absurd. This company with a questionable business plan and zero institutional interest struggles under immense competition and then tops it all off with a wrong-headed acquisition. This shareholder-destroying company is not worth even one-tenth that figure.

* Important Disclosure: The owners of TheStreetSweeper hold a short position in OMNT and stand to profit on any future declines in the stock price.

* Editor's Note: As a matter of policy, TheStreetSweeper prohibits members of its editorial team from taking financial positions in the companies that they cover. To contact Sonya Colberg, the author of this story, please send an email to streetsweepereditor@yahoo.com.

 

 

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