We're posting up notes from the 2013 Value Investing Congress in New York. Next up is the runner-up in the Value Investing Challenge competition. David Swartz of Pacific West Land pitched a short: Life Lock (LOCK).
David Swartz's Value Investing Congress Presentation
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Short Life
Lock (LOCK)
Claims to protect against
identity theft. He says they are
misrepresenting their ability to protect against identity theft. Weak product, not useful, basic
product, 73% of members, doesn't even do credit report checks. $10/month basic service has no credit
monitor.
One of the founders had
his identity stolen several times. Own father accused him of
using his AMEX to run up $150k in charges. Name does not even appear
in Life Lock’s prospectus. Bankruptcies, lawsuits,
failed businesses, etc.
The very origin of the
company is a fiction. CEO: Todd Davis,
co-founder. Put his own SSN in
ads, his identity has been used in 13 separate incidents. He's been selling stock every
month.
LOCK just bought ID
Analytics, paid $186M in cash, for 7x revenue. Business is unprofitable.
LOCK has $1.3B market cap,
22x BV, 38x P/E forward eps.
Spending $170M on sales and marketing. Has a public comp, INTX. Its TEV/sub is only $39 vs. LOCK of $393.
Price target: $5.
Be sure to check out the other presentations from the New York VIC here.
