Tucows, the unassuming internet conglomerate, has long been a quiet player in the digital landscape. While not a household name like Google or Amazon, Tucows quietly operates a robust portfolio of internet businesses, including domain name registration, mobile telephony, and fiber internet service under the Ting brand. However, despite a diverse and profitable portfolio, Tucows stock price has languished, leaving investors scratching their heads.

Digging into the Q1 2024 transcript reveals a potential blind spot in the market's perception of Tucows. Elliot Noss, Tucows President and CEO, drops a bombshell observation: the market is essentially valuing Ting, their fiber internet business, at *zero*. He suggests that if Tucows were to simply hand over the keys to Ting's lenders, the stock price would likely surge.

This counterintuitive notion stems from the disconnect between the market's short-term focus and the long-term nature of fiber infrastructure. Fiber internet, with its promise of lightning-fast speeds and future-proof connectivity, is a generational investment. Building a successful fiber business requires significant capital, tireless effort, and unwavering patience. It's a slow burn, generating profits gradually over an extended period.

The market, obsessed with immediate returns and flashy narratives, struggles to comprehend the inherent value of long-term infrastructure plays. This shortsightedness creates a unique opportunity for the discerning investor, a chance to capitalize on a glaring market inefficiency.

Noss points to several key indicators that underscore the market's mispricing of Ting:

Strong and Growing Fiber Footprint: Ting boasts over 125,000 organically built addresses, with another 200,000 to be built in their current footprints, and well over 500,000 in existing partner markets. This robust footprint includes two major U.S. cities Colorado Springs and Memphis.

Industry-Leading Metrics: Ting enjoys an industry-leading take rate, remarkably low churn, and exceptional customer satisfaction. These crucial metrics form the bedrock of a sustainable and profitable ISP, positioning Ting for long-term success.

Validation of the Partner Model: The recent move by EQT and T-Mobile to acquire and split Lumos fiber assets into infrastructure and ISP components echoes the partner model that Tucows has championed since 2015. This landmark deal reinforces the viability and attractiveness of separating infrastructure ownership from ISP operations.

The market, however, chooses to ignore these crucial indicators, fixated on the short-term EBITDA losses generated by Ting's ongoing network expansion. This myopic view misses the forest for the trees. It fails to grasp the inherent value of Ting's growing footprint, robust metrics, and validated business model.

Tucows' current financial structure, with its significant debt tied to Ting's expansion, has obscured the true value of its underlying businesses. The market has lumped the entire company into a single basket, penalizing the stock price for Ting's short-term losses while overlooking the robust cash flow generated by Tucows Domains and Wavelo's impressive growth trajectory.

Could a strategic divestment of Ting unlock this hidden value? It's a provocative proposition, and one that Noss seems to be seriously considering. By separating Ting from the rest of the portfolio, Tucows could achieve two crucial objectives:

Highlight the Strength of the Core Businesses: Freeing Tucows Domains and Wavelo from the shadow of Ting's debt would allow the market to fully appreciate their inherent value the consistent cash flow generated by Domains and the high-growth potential of Wavelo. This could lead to a significant re-rating of the stock price, reflecting the sum of its profitable parts.

Optimize Capital Allocation for Ting: A divestiture could unlock the capital needed to accelerate Ting's network expansion. Partnering with infrastructure-focused investors would provide access to substantial capital pools, allowing Ting to capitalize on the burgeoning fiber market and solidify its position as a leading mid-market ISP.

Adjusted EBITDA Performance

The following table shows the Adjusted EBITDA for each of Tucows' business segments, as reported in the Q1 2024 and Q4 2023 transcripts.

This bold move, while counterintuitive, might be the key to unlocking the hidden value within Tucows. It could transform the market's perception of the company, revealing a portfolio of thriving internet businesses poised for long-term success.

"Fun Fact: Did you know that Tucows derives its name from the phrase 'The Ultimate Collection of Winsock Software'? The company's early focus on providing a comprehensive repository of software downloads foreshadowed its evolution into a diverse internet conglomerate."

While it's impossible to predict the exact outcome of any strategic maneuver, the evidence suggests that a divestiture of Ting could be a game-changer for Tucows. It's a compelling hypothesis, one that merits further investigation and careful consideration. Only time will tell if Tucows will take the plunge and set fire to the market's misperceptions, revealing a phoenix of hidden value rising from the ashes.