Their offer is kind of tired. I don’t think the company is going anywhere good.

A good time to sell out.

The deal with Penthouse was in process since early in the year. It was supposed to be complete by September, but that’s now two months past. It may be that Conru screwed the deal and is now denying it was ever going to happen.

Lars Mapstead, owner of 10% of the company since Conru bought out his webcams site, said “There is no deal, currently,” in this AVN article on Nov 19th:

http://www.avn....44842561D1B850F

This could be quite true, now, but there WAS going to be a deal with Marc Bell/Penthouse, at least as late as the end of August.

As for Conru wanting out, or trying to take the company public instead of selling it, see this article in the SJ Mercury from over a year ago:

http://www.azst...business/155372

(The original article published in the print edition of the SJ Mercury had the title “Andrew Conru has a problem”)

Also see this article in Business 2.0 that was written before the deal with Marc Bell was going anywhere, especially at the end:

http://money.cn...03370/index.htm

The inside scoop is that growth in the adult content industry (which is really what AFF is about) is stagnant compared to the rest of the tech industry. AFF’s numbers have been flattening out and that drives Conru just nuts. He’s got an ego the size of Canada and if anything happens or starts to happen to show that he isn’t on top of the game and the smartest guy in the room he just freaks out. What’s ironic is that he’s tied his ego so tightly to the profits of his company, when he doesn’t even know what to do with the money! He doesn’t have expensive tastes, he’s afraid of flying and he’s a workaholic so he doesn’t take vacations. Then with his personality it’s impossible to imagine him ever actually finding a woman, who he could potentially spend his money on, which was the whole point of why he got into online dating sites in the fist place.

This might be a very good opportunity for private equity. If some very talented people could mainstream AFF in popular opinion so that it ends up being considered less as “smut” and more of a social network for sexually-liberated adults, you’d get access to a whole new market. And we know that when new customers are exposed to online adult sales pitches for the first time- when they are “porn virgins”- they tend to buy at high ratios. So there would seem to be strong potential income growth in cross-sales to these new members: things like newly-released DVDs, porn site memberships, sex toys, etc…

The crux of this all is mainstreaming the company as much as possible in popular opinion. A very talented marketing team might be able to pull that off.

That’s the same valuation that Playboy is getting with about $50m EBITD/year margin.

The numbers don’t add up.

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