IAC Stock Has Soared Through Spinoffs And Vimeo Is Next. Here’s Why You Should Take A Look.

Barry Diller of IAC is set to reap great rewards from his 15-year tech seed-and-harvest strategy of taking Vimeo public by June 2021.

Back in 2004, omnipotent visionary Diller, 78, knew he was on to a good thing when he made inroads with Rochester Institute of Technology students Jake Lodwick, now 39, from Baltimore, and 38 year-old Zach Klein from Rochester, NY.

Back then, Vimeo was a side project for the small team at Connected Ventures, who were focused on sharing site CollegeHumor.com.

Four years on from Millennium Bug Y2K losses, investors were also counting the cost of the dot.com crash and many didn't have the stomach for new tech - never mind mobile video.

IAC purchased a majority stake in Connected Ventures for over $20 million in 2006 and eventually the founders stepped back.

Now in 2020, Vimeo has a $2.75 billion valuation and IAC has had ten successful spins under its belt, and The Edge (the global leader for activist ideas, special situations and Spinoffs) believes Vimeo with its 41% growth in revenue from 2019 is set for a stellar 2021.

Across the pond, indie filmmakers are using Vimeo to enter the “'new normal film market” and showcase their work to global audiences.

Vimeo has 1.5 million paying subscribers, clever user monetization tools and 3,500 advertising and enterprise customers, including Amazon AMZN , Starbucks SBUX , Deloitte, Rite Aid and Siemens.

A stunning example of how independent filmmakers are using Vimeo to showcase their work is the adorable ten minute BAFTA crew-supported micro short “'Rose Pandemic”' which was made on a £500 budget. 

It premiered on December 29, 2020, and and stars beloved British actress Patricia Hodges, 74, as Rose and little Theo Hacquebord, who is outstanding as “Boy” when the pair meet in a garden in Pimlico, London.

Producer Thomas Shawcroft spoke exclusively to Forbes, saying, "It's a story about UK lockdown with a pensioner named Rose, a small dog, a young drug dealer and taking time to reconnect with the past.  We had two months to make the film from idea to delivery, we shot for two days in August 2020. 

"Our amazing talented cast were extremely careful and mindful of rules surrounding pandemic shooting. Our crew kept entirely within the UK guidelines for shooting during Covid-19. 

"Shooting interiors became a different ball game and it really makes you hone in on what the story is, within only a few critical frames."

Indeed, David Marcus of Evermore Global Advisors, sees the video streaming star is only going to grow, previously being a minnow and is fast becoming a giant.

He said, “I believe that IAC is a compounding money machine. 

“Barry Diller and CEO Joey Levin have done an exceptional job over the years of buying, building, growing and really scaling up and then spinning off to shareholders. There is a very long list of companies that may have never made it without their backing and nurturing.

“Before the spinoff of Match a few months ago, they sold shares and paid dividends in cash that created a massive war chest of net cash as they hunt their next prospects. The news of the looming spinoff of Vimeo is another notch in their belt of another successful process. I expect that we will continue to hold IAC/InterActiveCorp for years to come as they continue to create exceptional shareholder value. I think of IAC as an investment that continues to be at the intersection of both value and growth.”

Why IAC Is The King Of Spins

Given the company's long track record of Spinoffs and the "anti-conglomerate" style of business management, The Edge anticipates IAC to continue to grow its core holdings and distribute them to shareholders once strong enough to stand alone on the market.

These include its majority stake in ANGI Home Services, Inc. (ANGI) and wholly-owned businesses like Dotdash, Turo, and others, all of which IAC will eventually look to Spinoff while seeking other acquisitions to bolster and later list.

Insider Doubles Position Following MTCH Spinoff: Director Michael Eisner (former Disney DIS CEO, added to the board 2011) bought $5m in IAC shares on the open market in August 2020 at around $122 a share, doubling his stake in the company in the process.

His return on that purchase is +49%, and this seems to be his first open market buy since joining the board (the remaining half of his total shares seem to have been through awards and options).

Long History of Spinoffs: IAC has a history of maximizing shareholder returns by separating companies, an approach which has produced fruitful results. IAC has performed multiple Spinoffs in the last 15 years that have led to long-term value creation, including the separation of EXPE in August 2005 and TREE, TKTM, ILG, HSNI in August 2008.

All these transactions have led to an increase in value for both the Parent and Spinoff, reflected in their share price outperformances and acquisitions at a premium since their respective Spinoff dates. Several of these companies have since been taken over, all at premiums to their market caps at the time. The below table (provided to clients of The Edge) represents the value creation at IAC’s various Spins over the years.

The Edge believes this upcoming distribution of Vimeo is another quest to unlock potential value using the same strategy. For the full IAC analysis from The Edge and insight into Diller’s track record of value creation, get in touch.