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Rightside refuses Donuts’ “opportunistic” $70m gTLD offer

Kevin Murphy, July 5, 2016, 13:38:23 (UTC), Domain Registries

Rightside has rebuffed Donuts’ semi-hostile takeover attempt for its portfolio of gTLD registry contracts.

The question now is: will Donuts up the offer from the $70 million already on the table?

In a pre-markets statement today, Rightside said the offer “undervalued” the assets.

CEO Taryn Naidu is quoted as saying:

After thoughtful evaluation, Rightside’s Board has determined that Donuts’ proposal significantly undervalues Rightside’s Registry assets. We believe Donuts’ proposal is an opportunistic attempt to acquire Rightside’s valuable portfolio of domain extensions with an undervalued price and in a manner that would not be in the best interests of Rightside shareholders.

The company reckons its gTLDs will be bringing in $50 million to $75 million in revenue a year in the next three two five years, which would represent substantial growth over current levels.

It made $2.6 million from the registry business in the first quarter this year.

Donuts’ offer could be considered “opportunistic” given that there’s some shareholder dissatisfaction with Rightside’s success rate with new gTLDs today.

Activist investor J Carlo Cannell and Uniregistry CEO Frank Schilling, both of whom own small but significant chunks of Rightside, have called on the company to get rid of some of its under-performers.

By announcing the offer publicly — apparently after months of private offers — Donuts might have been trying to capitalize on this unrest.

But pissed-off investors don’t necessarily want these gTLDs sold off cheap.

Rightside has 40 new gTLDs. A $70 million offer equals $1.75 million per gTLD. That’s fair way below the average sale price for gTLDs at ICANN auction, which is $7 million (or $3 million if you take the median).

Will Donuts now increase its offer, or back away?

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Comments (4)

  1. Francois says:

    Wise decision and a great victory for the domaining industry.

  2. Ryan says:

    Rightside & Donuts are like neighbours who works with each other, and are very close, very interesting the stock price started moving up, let’s see what insiders start selling now.

  3. Matt Keenan says:

    You noted that the price per gTLD of the offer was $1.75m and also that the average price at auction was $7m per gTLD. This elides one important fact, the gTLDs that went to auction had multiple interested parties, and interested parties that didn’t want to come to some arrangement and hence by definition were contested; and consequently more expensive.

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