Here are three reasons to invest in NZCH Corp. stock (ZPCM) and three reasons to avoid it.
What does NZCH Corp. (ZPCM) do?
NZCH was formed in Nevada in 1999 with the goal of “creating and operating a global network of independently owned websites.” As of last year, HRG Group owned approximately 97.9% of the company’s outstanding common shares. NZCH Corp.’s stock is currently classified as a penny stock.
Three reasons NOT to invest in NZCH Corp. stock (ZPCM)
1) No revenue, no focus. Formerly Zap.Com Corporation, NZCH Corp. owns a portfolio of domain names. Their dotcoms include nine names: betacenter.com, betaworld.com, buybid.com, eatfood.com, instantwinner.com, netcentralbank.com, paranoid.com, thefed.net and zap.com. Unfortunately, NZCH Corp. hasn’t figured out what to do with its portfolio of names. “The Company has not identified a specific industry to focus on,” NZCH writes. “As of June 30, 2016, the Company had not generated any revenues.”
2) Shedding cash. Over the past two years (2014-2015), NZCH Corp. lost about $150,000 a year. That loss was attributed to SG&A (Selling, General and Administrative Expenses) with $50,000 per year going to auditing. As of Dec. 31, 2015, the company had $595,514 on hand. At the NZCH’s current burn rate, it’ll be out of money in four years.
3) Thin trading. NZCH is a penny stock, but it’s thinly traded even for a penny stock. Average trading volume is 27 shares a day! Shares often go weeks without a single trade. That means if you buy some ZPCM and want to offload it, it could be weeks or months before you find a buyer.
Three reasons to invest in NZCH Corp. stock (ZPCM)
1) Leadership. The company’s president and CEO, Omar M. Asali, has an impressive resume. He currently heads up HRG Group Inc., a $3.2 billion company that trades on the NYSE under ticker HRG. HRG owns and operates NZCH Corp. Before joining HRG, Mr. Asali was Head of Global Strategy at Harbinger Capital Partners, LLC. “Before joining Harbinger Capital in 2009, Mr. Asali was the co-head of Goldman Sachs Hedge Fund Strategies (‘Goldman Sachs HFS’) where he helped manage approximately $25 billion of capital allocated to external managers,” per HRG Group. Over the past five years, HRG’s stock is up more than 500 percent. If Mr. Asali can’t figure out a business strategy for NZCH Corp. it’s probably because he doesn’t have time to devote to it.
2) Domain names. As stated above, NZCH does own the rights to nine domain names: betacenter.com, betaworld.com, buybid.com, eatfood.com, instantwinner.com, netcentralbank.com, paranoid.com, thefed.net and zap.com. Domain names are like real estate on the internet. NZCH could build whatever they want on any of their domains, and domains do have some intrinsic value. Insurance.com, for example, set an international record when it sold for more than $35 million in 2010. Zap.com is a memorable, three-letter domain, which gives it some value. That said, I’m not particularly impressed with NZCH’s other domains. If they build a thriving business out of any of their domains, it will be because of the underlying businesses – not the domain names.
3) Upward trend? ZPCM shares recently hit a 52-week high at $1.75.
Should I buy NZCH Corp. stock (ZPCM)?
Put it on the back burner. If and when they come up with a business strategy, it might be worth taking another look. My best guess is HRG will eventually sell their domains and shut down NZCH.
Nano-cap stocks are stocks with a market capitalization of $50 million or less. Check out more of my write-ups on nano-cap stocks here. Full disclosure: I do not own a position in ZPCM, and I do not plan to initiate one in the next 72 hours.