Years ago JupiterMedia owned Search Engine Watch and Search Engine Strategies, but sold them off (along with ClickZ) for $43 million to raise funds to binge on buying stock image companies. Why? According to Alan Meckler, JupiterMedia’s CEO:

Why the sale? The simple reason is that Jupitermedia has evolved from being a media company with images into an Image company with media. A good part of the evolution came from the acquisition of 7 image companies since June 2003. Over a 25 month period we have spent close to $200 million making the above referenced acquisitions along with dozens of photo library collections. Most of these deals were done with cash. The cash came from our treasury and from bank borrowings. We plan to make more acquisitions and we plan to continue using cash. So how do we get more cash? Simple, we either go to the public market and offer our stock for cash or we sell assets such as the Search Engine trade shows and ClickZ network in order to raise more funds for acquisitions.

Recently I would have been prone to go to the public market and sell equity to raise cash. But even with our stock closing price yesterday of $22.80, I think Jupitermedia was undervalued based on what I believe the company will be worth over the coming years. So I chose asset sales and additional borrowing based on the fact that I think Jupitermedia should be more valuable tomorrow.

After spending a couple hundred million dollars buying image companies, JupiterMedia built up too much debt to service in this credit crisis and was forced to sell off their images division to Getty for $96 million – up to $40 to $45 million less than they were offered in August.

That image sale should allow JupiterMedia to pay off all their debts, but the company is off about 99% from when they were “under-priced.” They are trading at 27 cents a share, and have a market value under $10 million. They own a ton of great domains like Internet.com, InternetNews.com, Javascript.com, Developer.com, WebDeveloper.com, Jumbo.com, MediaBistro.com, and dozens of other valuable domain names and websites.

Will they start selling themselves off in chunks? Will a private equity investor try to take them private? Or will they go to $0?

* As a disclaimer, I bought a few thousand shares recently…though it was a bet more than an investment with conviction.

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