Today, we will talk about Ominto Inc. (NASDAQ:OMNT), the e-commerce operator and pioneer of online Cash Back shopping. The share price seems to be reaching a consolidation and accumulation phase in the one year chart. The increase in volume at the share price level of $3 seems to be suggesting this hypothesis. Have a look at the recent share price action and form your own opinion.
In the summer, the share price declined; what happened?
The company did not release its Form 10-Q for the quarter ended June 30, 2017 and the Nasdaq noted in a letter that OMNT must submit a plan no later than October 23, 2017. Additionally, the company announced that it will be changing its auditor. These news affected the share price negatively.
Was the reaction justified?
The company lost almost 50% of its market capitalization and we believe that the reaction unjustifiable. We had a look at the recent news and the financial statements of the company and found that the market may be overreacting to the bad news. The market completely ignored that OMNT is changing its corporate identity, which may increase the brand equity. Additionally, we found big stockholders buying 185,000 shares at these prices. Let us provide all the details in just a second.
Ominto, Inc. was founded in Nevada in 1999. The company changed its name several times as a result of several transactions.
- Clamshell Enterprises, Inc.
- MediaNet Group Technologies, Inc.
- DubLi, Inc.
- Ominto, Inc.
Since March 2013, the company is focused on running DubLi.com; a shopping platform providing Cashback to customers on purchases made through the site. Ominto is headquartered in Boca Raton, Florida, but has subsidiaries in other countries:
- Dublicom Limited; a Cyprus limited company
- DubLi Network Limited; a British Virgin Islands limited company
- DubLi Properties, LLC; a Delaware limited liability company
- DubLi India Private Limited; a Haryana, India company
- BSP Rewards Inc.; a Florida corporation
- Ominto India Private Limited; a New Delhi, India company
- Ominto Limited; a limited company in Ireland
In a filing released on August 15, 2017, the company noted that management was devoting considerable time and resources to prepare the company’s 10-Q for the fiscal quarter ended June 30, 2017, but it had not yet been completed. This news and the fact that the company had acquired a company using 2,428,571 shares of Ominto’s common stock created pressure on the stock in July and August.
Additionally, on August 22, 2017, the NASDAQ exchange let the company know that it needs to find a solution to file the 10-Q. The company was not respecting the regulatory compliance required by the exchange. The company has until October 23, 2017 to file its 10-Q. The company may trade on the OTC Markets exchange if that does not happen.
How did the company react?
The company decided to change its auditing firm. The decision was taken on August 24, 2017 and we believe that it was the right thing to do. Now, another company will need to commence the work again, but the rapid reaction seems to have given some time for the new accountant. You can find the announcement here.
Additionally, the company decided that it was time to unveil a new corporate identity for dubli.com. The new change was explained with the following terms by the company:
“The color palette is fresh, bright and vibrant, representing dubli.com’s strength, focus on clarity and offers simplicity with the new typeface lending to a modern and cleaner look. The new dynamic logo eloquently expresses energy and excitement, which have always been part of the company’s culture. Implementing a flat design and clean geometric shapes, the new logo represents the next chapter of dubli.com, in its pursuit towards becoming the online Cash Back shopping destination of choice offering travel, fashion and beauty as well as electronics and home and garden.” Source
We invite readers to check the company’s new website to see the new style. We believe that it was the right time to increase brand equity through new marketing ideas and it will affect the share price in the near future.
The CEO is buying
An interesting fact is that CEO Hansen Michael bought shares recently.
|1. Title of Security (Instr. 3)||2. Transaction Date (Month/Day/Year)||2A. Deemed Execution Date, if any (Month/Day/Year)||3. Transaction Code (Instr. 8)||4. Securities Acquired (A) or Disposed Of (D) (Instr. 3, 4 and 5)||5. Amount of Securities Beneficially Owned Following Reported Transaction(s) (Instr. 3 and 4)||6. Ownership Form: Direct (D) or Indirect (I) (Instr. 4)||7. Nature of Indirect Beneficial Ownership (Instr. 4)|
|Code||V||Amount||(A) or (D)||Price|
Financials and Conclusion
Currently trading with a market cap of $49 million, OMNT seems to be showing good rebound signs. With $13 million in cash, $68 million in total assets and only $62 million in total liabilities in the previous 10-Q, we don’t see much more downside on this name. In our opinion, if the new auditor is able to file the new 10-Q document in due time, the market will push up the share price again. For this reason, we need to be alert on the next company announcements.
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Image courtesy of LDS Engineers via Flickr
Disclosure: We have no position in OMNT and have not been compensated for this article.