Why is ReachLocal Inc. (RLOC) Stock Up Over 60% Today? Strategic Action Announcement May be the Cause


ReachLocal Inc. (NASDAQ:RLOC) shares have skyrocketed in early morning trading after the online advertising and marketing company released an announcement. The California-headquartered company, founded in 2003 has announced several strategic actions to improve Adjusted EBITDA in order to aid in future growth of the company.

Additionally, ReachLocal Inc. (NASDAQ:RLOC) announced a new financing agreement that they have reached with VantagePoint Capital Partners and made changes to their prior deal with Hercules Tech Growth Capital, in order to gain more liquidity.

The key to their announcement though is probably the fact that the company sees 2015 operating expenses coming in at just 75% of what they were in 2014, and they expect 2016 to reduce this number by yet another 15%.

“We have taken a number of proactive, strategic steps to reduce costs and improve our cash position and are pleased to raise our Adjusted EBITDA outlook for the fourth quarter and provide an initial view of our Adjusted EBITDA for next year,” said Sharon Rowlands, ReachLocal’s Chief Executive Officer. “One of our goals for 2015 was to progressively improve Adjusted EBITDA throughout the year, and today’s upward revision is evidence that we are moving in the right direction. Our revised outlook is driven primarily by more aggressive expense management and business optimization initiatives and incremental upside expected from recently revised publisher rebate agreements.”

The stock is up 62.35% or $0.7 following the news, hitting $1.83 per share. RLOC has declined 58.61% since May 15, 2015 and is downtrending. It has underperformed the S&P500 by 56.34%.

The institutional sentiment decreased to 0.33 in Q2 2015. It’s down 0.44, from 0.77 in 2015Q2. The ratio turned negative, as 12 funds sold all their ReachLocal Inc. shares they owned while 12 reduced their positions. 3 funds bought stakes while 5 increased their total positions. Institutions now own 10.17 million shares which is 0.15% more than the previous share count of 10.16 million in 2015Q2.

Trigran Investments Inc. holds 2.11% of its total portfolio in ReachLocal Inc., equating to 3.19 million shares. Rho Capital Partners Inc owns 2.57 million shares representing 1.8% of their total US portfolio. Moreover, Penbrook Management Llc has 0.28% of their total portfolio invested in the company, equating to 125,910 shares. The New York-based Permal Asset Management Llc has a total of 0.28% of their portfolio invested in the stock. Armistice Capital Llc, a New York-based fund reported 304,000 shares owned.

ReachLocal, Inc. offers a technology suite of online marketing and reporting solutions designed to deliver efficacy and insight to its clients. The company has a market cap of $47.76 million. The Company’s total digital marketing solution consists of products and solutions in three categories: software (ReachEdge and Kickserv), digital advertising (including ReachSearch, ReachDisplay and ReachRetargeting), and Web presence (including ReachSite + ReachEdge, ReachSEO, ReachCast and TotalLiveChat). It currently has negative earnings. The Company’s software products are designed to enable its clients to assess the efficacy of marketing efforts and to facilitate interactions with the customers.