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Chinese investor pumps $7 million into M+M as .vip pushes firm into profit

Kevin Murphy, September 20, 2016, 10:47:36 (UTC), Domain Registries

Minds + Machines made a profit, kinda, in the first half of the year, due to the popularity of .vip in China.

The company today announced a loss of $1.9 million for the six months to June 30, compared to a $1.6 million loss in the comparable 2015 period, on revenue that was up 115% at $7.4 million.

But factoring out discontinued operations — M+M started to close its registrar and registry back-end businesses during the half — it actually managed to sneak a profit of $56,000.

Its revenue was also unaffected by one-time gains from gTLD auction losses, something which had pumped up its top line regularly for the last few years.

Chairman Guy Elliot said in a statement to the markets that M+M “has successfully been navigated out of troubled waters”.

The turnaround is due in no small part to the success of .vip, which racked up over 400,000 registrations in its first month (back in May), the large majority of which were sold to Chinese investors.

The company said that $5.5 million of the $8 million in H1 billings were made in the first 21 days of .vip’s availability.

Having started 2016 with no sales in Asia whatsoever, it expects 45% of its revenue to come from China by the end of the year.

As a direct consequence of .vip’s sales, M+M has received a £5.5 million ($7.2 million) investment from Goldstream Capital Master Fund I, a Cayman Islands shell company owned by Chinese private equity firm Hony Capital.

Hony, which manages $10 billion in assets, is perhaps best known for owning the pizza restaurant chain Pizza Express, which it acquired for $1.54 billion in 2014.

According to its web site, Hony’s own investors include three large Chinese state-owned investment vehicles.

The investment deal includes clauses preventing Hony from trying to get a director on M+M’s board and/or launching a hostile takeover bid.

It will own 7.17% of M+M after buying 50 million shares at £0.13 each, assuming M+M’s simultaneously announced £13 million ($17 million) share buyback is fully subscribed.

M+M opened a subsidiary in China (a Wholly-Owned Foreign Enterprise) during the half, in order to better serve the Chinese market and comply with Chinese government regulations.

It simultaneously laid off 44% of its staff in the US — engineers no longer needed due to the shift into an almost entirely marketing-focused business — and expects to end the year with only 13 employees there.

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