Spark Networks SE (LOV) Contrarian Musings

Introduced to LOV through my ownership of JDate/Spark Network symbol LOV. Affinitas GmbH merged with Spark Network(NYSE:LOV) in 2017. Then, LOV acquired Zoosk in 2019 for $258 million.

Affinitas GmbH was a small, fast-growing private European company. Affinitas's past financial success financed the merger. It listed on NYSE as Spark Networks (LOV). LOV before the merger known for Jdate. Jdate (LOV) had historical periods of outsize free cash flow. During the ~ two years before the merger financial performance faltered from outdated technology. Zoosk was a private, mismanaged, and failed future IPO. But, when managed, online dating is an asset-light FCF machine. Now NYSE: LOV is the second largest online dating company in North America. The new organization has experienced,talented,proven management.

LOV is a falling knife that doesn't screen well. A nano cap,low p/s and down 59% over the past six months with a historical record of strong outsize free cash flow. Spark Networks, NYSE: LOV is now German based headquarter after the merger.

The price decline began after the initial positive reaction for the Zoosk acquisition. LOV stock price crushed from Affinitas and Zoosk few but substantial long term initial investors sold after accruing years of long term gains. Management released an open letter on the stock decline (click). The six-month ~60% price drop creates an excellent buying opportunity.

Spark Networks has over one million global monthly paying subscribers. It also expects to achieve more than $50 million of adjusted EBITDA in 2020.The current 111.84 million market capitalization undervalues those customer metrics. Headquartered in Germany, Spark Networks is now America's second-largest dating company.

Spark Networks (LOV) is a portfolio of dating sites. Zoosk, EliteSingles, Jdate, Christian Mingle, eDarling, JSwipe, SilverSingles, and others encompass the company (click). Spark Networks formed when Affinitas GmbH and Spark Networks merged in 2017.  Zoosk added in 2019. Affinitas GmbH a small German startup with no presence in North America. But, over the last few years created an NYSE-listed business with over $300 million in total revenue. Its now the second-largest player in North America.

Value institutions purchased shares above the current price during the third quarter of 2019. 

Peak6 adds 1,763,185 shares during November 2019 at $5.60. Increase the position to 2,272,485 shares at an average price of $6.99.

Canaan Partner purchased 4,077,777 shares at an average price of $8.23 during quarter 3, 2019. Down -47.14% from current price. LOV represents 70% of its total portfolio value.

HARBOURVEST PARTNERS new holding during 2019, Q3 502,576 shares acquired at an average price of $8.21.

Osmium Partners added 166,332 shares to raise its stake to 1,412,284 shares at an average price of $7.14. Represent 9.77% of its portfolio and or 5.43% of shares outstanding.

Deer VII own 2,045,318 shares at an average price of $8.21 or 7.86% of shares outstanding or 13.06% of their portfolio.

Spark Networks (LOV)could use further analysis, such as the Zoosk financing details(click). But at this time I'm comfortable with the odds of a future higher stock price.

Spark story from their website. 

Long: LOV