CUP – Cupid

Cupid plc, formerly Easydate plc, is a provider of online dating services.

The unfolding story is fascinating. The shares collapsed from around 114p in late March, when allegations were made that its business model or practices and procedures were flawed, inappropriate, or illegal.

The shares subsequently rebounded sharply from a low of around 71p, to a peak of around 86p. The shares then drifted. On 1 June 2013, I noted that the shares fell below 60p again – a scenario which I said was possible.

I also noted that a dead cat bounce was possible, but thought it unlikely on the balance of probabilities. As it turned out, I was wrong. The shares soon made a low of around 54p, and then went on to rebound strongly to around 76p.

This seems to be a surprisingly common feature in companies having setbacks. You get a steep decline which is “overdone”, a sharp rebound, a plateau period of several weeks, then another sharp decline, followed by either a plateauing, or a sharp rebound, then a plateauing. CUP had “elected” to adopt the latter route. None of these events are guaranteed to happen – they might not even by likely – but they do happen sufficiently often to form a noteworthy pattern.

The share price is now at 67.5p.

Here’s where things get interesting. The results of the audit of their business practises is due by the end of the month. I don’t expect them to find anything outside of standard industry practise – although let’s just say I expect it to be a low bar to step over. Yesterday Reuters reported that “Interest hots up for Cupid’s casual dating sites”. I think the idea here is that “casual dating” is a euphemism for “casual sex”. Apparently, co-founder Max Polyako was apparently on the verge of bidding £40m for that segment. Considering that CUP’s market cap is £57m, that’s quite interesting, if you believe the rumours.

I also note that CUP trades on a price to free cashflow of less than 7, and that director William Dobbie bought £987k of shares at 114.11p in early March 2013. Toscafund have been buying up shares lately.

As well as that, ROE has actually  increased its dividend payments. Free cashflow has also been increasing. This is all in stark contrast to companies like EROS, GNG, RCG and friends.

Watch this space.

67.50p

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About mcturra2000

Computer programmer living in Scotland.
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