Long or Short Capital

Long or Short Capital has initiated prophylactic coverage of “Boy-on-Boy” in conjunction with recently picking up “Girl-on-Girl.”

The Boy-on-Boy space is saturated by multiple market actors and opportunities for price discrimination are muddled by a highly fragmented marketplace. Increasing commoditization in the space limits opportunities for upside absent domination by a stronger alpha player. In addition, low or no barriers to entry mean that the stiff foreign competition (Dutch in particular) has deeply penetrated the nearly frictionless space from the bottom up.

Though recent interest in the market by regulators and Google (NASDAQ: GOOG -0.94/-0.27%) may restrict supply, unregulated foreign access to loose markets is too potent for significant supply disruptions.

Strong players, even those with multiple prior acquisitions in their portfolio, will have difficulty forming a cohesive long-term coupling with smaller market players therefore frustrating attempts to bag multiple targets and develop a dominant position behind other players.

Recommendation: Short Boy-on-Boy.