stock ticker: IIG

Over the past three months, Stocklemon has written numerous articles on both iMergent (Amex: IIG) and Intermix (Amex: MIX) Due to high reader feedback, this entry updates all readers on these two companies and the different paths they have taken. Let this report be known as:

A Tale of Two Companies

iMergent

On July 7, iMergent stock rose 13% on an unsubstantiated rumor of a Leveraged Buyout by management at $20. Stocklemon finds this to be completely laughable and an act of utter irresponsibility by any news source that would repeat the rumor. iMergent has so little credibility that when Briefing.com reported on that rumor they wrote, “iMergent sees strength as LBO rumor circulates; b/c of the name, it sounds suspicious.” It sounds suspicious because this is the same company that told us - four and a half months ago — that the Texas AG suit would be settled any day. This is also the same company that states that government agencies challenging their business practices are just all part of the plan. It is the opinion of Stocklemon that everything about iMergent is suspicious and they win our CK Oliver Award for Suspicion. (to understand that joke read the report below)

http://www.stocklemon.com/report_view.asp?ReportID=8

No one would fund a leveraged buyout of a company who:

Has been served with an injunction in Australia that prevents the company from moving money out of the country.

Is currently being sued by the Texas Attorney General for consumer fraud

Is currently being investigated by California Attorney General

Is currently being investigated by the State of Washington

Is the subject of numerous shareholder class action lawsuits

Besides the “unsubstantiated rumors” that make the stock move, let us look at some of the real news of the company. iMergent discussed the legal action in Australia, not with the filing of an 8k, but rather with a press release that blames all of the ills of the company on short sellers.

http://biz.yahoo.com/bw/050607/76200.html?.v=1

Were the shorts also the reason for the previous actions by the States of Maine, Washington, California, and Utah? Were the shorts responsible for the Dateline expose and the numerous negative articles about Stores online? (Please Refer to Previous Stocklemon Articles)

Here is a selection of the recent substantiated news published about iMergent..and it is not pretty:

http://australianit.news.com.au/articles/0,7204,15684461%5E15344%5E%5Enbv%5E15306-15321,00.html

http://australianit.news.com.au/articles/0,7204,15532090^15317^^nbv^15306,00.html

http://www.consumer.org.nz/newsitem.asp?docid=2239&category=News&topic=iNetSeminars%20warning

http://australianit.news.com.au/articles/0,7204,15684461%5E15306%5E%5Enbv%5E,00.html

http://australianit.news.com.au/articles/0,7204,15310262^15306^^nbv^,00.html

http://www.accc.gov.au/content/index.phtml/itemId/611162

http://www.accc.gov.au/content/index.phtml/itemId/609146

In the last press release issued by iMergent, corporate council Jeff Korn states, “”In my numerous conversations with reporters, I have invited the media to attend workshops and demo our software. I have extended this invitation to dozens of reporters and not one has yet accepted the offer.” Yet, when a reporter from The Australian, Australia’s largest newspaper showed up, HE WAS THROWN OUT FOR BEING A JOURNALIST.

http://australianit.news.com.au/articles/0,7204,15305930^15309^^nbv^,00.html

Attention Mr. Danks and management: People are not short your stock because of an internet web log. Rather, the large short position in your stock is because some committed investors have judged your business model to be doomed. The gig is up. No rumor or innuendo is going to save your company from the deception you have inflicted on the many victims who have fallen prey to your “business model”. Their voices can be heard through the many government agencies and news reports that haunt iMergent. We encourage all to read www.ripoffreport.com and put in Storesonline for more clarity.

Government regulators are onto you. The press is onto you. The stockholders are onto you. Even your own customers are onto you. Yet you seem utterly unwilling to acknowledge the obvious - that the sales abuses of your company cause real hurt to real people. The 8 million in “bad debt” you write off each quarter reflects the ruined credit of over 2,500 families. You call them “incremental revenue” - when the correct term would be “collateral damage”.  

Intermix

Stocklemon is about to do a first. We are sweetening our “lemon” assessment about Intermix to “potential lemonade”. While we still believe that both the Hydroderm franchise (which should get closed down) and Grab.com properties add no value to shareholders, we cannot deny the power of Myspace.com. Myspace receives even more positive press attention than iMergent receives negative attention.

Even though the company has yet to monetize myspace.com, and we continue to have serious doubts about revenue that myspace can pull, the magnetic attraction that myspace has over the youth of America is so strong, that even that most cynical short seller cannot deny its reach.

Intermix has an option to buy out the other shareholders of Myspace based on a valuation of $125 million if the Company receives a bona fide offer by a third party to acquire more than 50% of the stock or assets of Intermix within 12 months of February 2005. Therefore, we believe that management has a strong incentive to sell Myspace before Feb 2006 — and we can’t say with confidence that some potential buyer won’t pay up big, regardless of the risks.

Myspace is for real and unlike all of the other announcements over the years by Intermix about the traffic on their many properties, Myspace seems to have struck a chord with the youth of America, sans spyware.

Another factor why Stocklemon is no longer bearish on Intermix is the track record of CEO Richard Rosenblatt. Whereas iMergent CEO Don Danks has a history of running companies that eventually trade for pennies (ADVT, POSO), Rosenblatt has a history of selling companies for big money (iMall, Great Domains) 

Conclusion

This tale of two companies goes to show that Stocklemon can identify when situations have changed. In the case of iMergent and Intermix, change has been evident in both. iMergent has changed for the worse as they have yet to settle with the Texas AG and the country of Australia has decided to file suit against them. Intermix has moved in a positive direction as they settled with the New York AG and have gained even more traction on their Myspace property.