In a recent filing with the Securities and Exchange Commission, John H. Lewis‘ Osmium Partners disclosed a significant increase in its holding of Demand Media Inc (NYSE:DMD). The fund now owns about 1.30 million shares of the company through its affiliated funds, up from 477,900 shares that it held previously. The new stake represents about 6.6% of Demand Media’s outstanding common stock.
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Established in 2002, the San Francisco-based long/short hedge fund Osmium Partners primarily invests in undervalued small companies that show sound balance sheet strength, reasonable growth prospects and present attractive reinvestment opportunities. Osmium currently has about $143 million worth of assets under management and the market value of its equity portfolio stands at $121.08 million. The investment firm holds a concentrated public equity portfolio, with its top ten holdings accounting for more than 80% of its value. The companies heading that portfolio included Rosetta Stone Inc (NYSE:RST), Tucows Inc. (USA) (NASDAQ:TCX), and Spark Networks Inc (NYSEMKT:LOV), all of which we’ll look at shortly.
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First though, Demand Media, which had a disastrous first quarter, as its sales shrank by 26% on a year-over-year basis and the company posted a paltry EBIDTA of $0.5 million compared with the expected $4 million. The traffic on its key sites including eHow.com, Livestrong.com and Cracked.com dropped during the quarter, leading to lower ad monetization yields. Both eHow.com and Livestrong.com are in a transformative phase and Demand Media Inc (NYSE:DMD) expects to see better results from them in the future. Over the past six months, Demand Media’s stock has slumped by nearly 10%. Among the funds that we track, the interest in the company has increased over the quarter as 13 firms had invested a total of $15.32 million in the company at the end of March as compared to nine funds with $8.64 million invested at the end of the previous quarter. Steven Boyd‘s Armistice Capital is one of the prominent investors of the company, owning 916,000 shares valued at $5.24 million.
Osmium trimmed the stake of its largest holding, in Rosetta Stone Inc (NYSE:RST), by 7% during the first quarter to 1.97 million shares valued at $14.99 million. The stake represented about 12.38% of the fund’s portfolio value. Osmium’s stake accounts for about 9.7% of the company’s outstanding stock. Although down by 16% so far this year, Rosetta Stone Inc (NYSE:RST)’s stock rose 8% yesterday as an open letter by Osmium revealed that the company could be sold for $16 per share or more if a strategic buyer was found. John W. Rogers‘ Ariel Investments is the largest stockholder of Rosetta Stone Inc (NYSE:RST) within our database, owning some 4.26 million shares valued at $32.38 million.
Osmium reduced its stake in Tucows Inc. (USA) (NASDAQ:TCX) by 23% during the first quarter to 1.97 million shares valued at $14.99 million. The stock of the $294.51 million provider of internet service has appreciated by a staggering 38.64% year-to-date. Jim Simons‘ Renaissance Technologies held about 641,900 shares of Tucows Inc. (USA) (NASDAQ:TCX) valued at $12.20 million at the end of March.
Lewis’ fund let its third-largest holding, in Spark Networks Inc (NYSEMKT:LOV), remain unchanged during the first quarter at 3.38 million shares valued at $13.64 million. The $77.40 million global business media company is down by more than 14% so far this year. In its financial results for the first quarter, Spark Networks Inc (NYSEMKT:LOV) missed estimates for both its top and bottom lines. Another prominent stockholder of the company is Thomas Ellis and Todd Hammer’s North Run Capital, owning 1.86 million shares valued at $7.50 million.
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