Not looking good for Penthouse /Adult Friend Finder

[RawAlex]

Note: All comments made here are my own personal opinion, based on the IPO documents that had been revealed in the past.

The biggest issue for FFN is what the debt is. Near as I can figure it, Penthouse appears to have borrowed the money to pay of Lars and Andrew, potentially as notes rather than actual borrowing. It would suggest that the price "paid" for AFF and the rest was signficantly higher than it's actual value.

Anyone looking at the books of this thing would be looking mostly at it's breakup value, and not it's value as a going forward company, as it has little hope. Essentially, they cannot sell enough stock to raise the money to lower the debt enough to make a difference. They need something like 250-300 million if I remember correctly, the what they pre-sold didn't even come up to 110 million.

The only way this one floats is if the debt holders agree to convert their debt into shares, which is pretty unlikely because it removes the big payout that was part of the deal originally. Even then, the dilution might make the stock almost worthless at that point. With less than 50 million year in income (and no obvious hope of a profit), the only value in the company normally would be the value of selling the parts. It appears that the market values the parts at less than half what was paid for them.

There is only so long that AFF can go on paying out more than it takes in for every membership as well. It's starting to look like a bros slaughter, as they will all do the top notch great paying sponsor thing to the end.