Tucows Inc (TCX) - Cashing in On Neo-Nazis, Child Porn, & A Hidden Lawsuit As Insiders Dump

COPPERFIELD RESEARCH
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Tucows Inc. (TCX):
Cashing in on Neo-Nazis, Child Porn, & A Hidden Lawsuit as Insiders Dump
This report exposes: Tucows three structurally broken business segments that have been masked
by acquisitions, including a domains business that openly enables and supports Neo-Nazism,
Pedophilia, and Bigotry; an undisclosed lawsuit that should imminently result in the loss of 11%
of the Company’s revenue producing domains; nine insiders who sold $21 million of stock while
hiding the fact its eNom subsidiary was being sued by its largest partner for breach of contract;
and a laundry list of accounting shenanigans and financial irregularities.
Fair Value: $20.00 per share, 70% downside
“If there wasn't such a demand for Lolita sites in the U.S., do you think the
Russians would be producing so much child porn material?”1
Elliott Noss, CEO of Tucows
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IMPORTANT Disclaimer – Please read this Disclaimer in its entirety before

continuing to read our research opinion. You should do your own research and due
diligence before making any investment decision with respect to securities covered
herein. We strive to present information accurately and cite the sources and
analysis that help form our opinion. As of the date this opinion is posted, the author
of this report has a short position in the company covered herein and stands to
realize gains in the event that the price of the stock declines. The author does not
provide any advanced warning of future reports to others. Following publication of
this report, the author may transact in the securities of the company, and may be
long, short, or neutral at any time hereafter regardless of our initial opinion. To the
best of our ability and belief, all information contained herein is accurate and
reliable, and has been obtained from public sources we believe to be accurate and
reliable. However, such information is presented “as is,” without warranty of any
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representations, express or implied, as to the timeliness or completeness of any
such information or with regard to the results to be obtained from its use. All
expressions of opinion are subject to change without notice and the author does not
undertake to update or supplement this report or any of the information contained
herein. This is not an offer to buy any security, nor shall any security be offered or
sold to any person, in any jurisdiction in which such offer would be unlawful under
the securities laws of such jurisdiction.
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Executive Summary
We believe Tucows’ business model and economics have been severely misrepresented by management
and are grossly misunderstood by shareholders. The history of this former Canadian penny stock is
littered with red flags, dubious accounting gimmicks that inflate EBITDA, financial reports that fail to
reconcile from one quarter to the next, and a promotional management team who recently resorted to
infomercials. Based on our deep dive forensic analysis, we believe Tucows intrinsic value is closer to
$20.00 per share, at best, or nearly 70% below its current trading price. And this price target generously
ignores material risks from Tucows’ UNDISCLOSED litigation with its largest domain reseller.
In late December, a Washington State Court ordered Tucows to transfer 3.2 million “.com” and “.net”
domain names to Namecheap, and an Appeals Court denied Tucows' motion for an emergency stay.2 As
such, Tucows stands to lose approximately 11% of its registered domains in a lawsuit that has not even
been disclosed to shareholders. We believe Tucows’ nondisclosure is a violation of SEC Regulation S-K
Item 103, which requires disclosure of pending litigation if the possibility exists that the litigation will
have a material effect on financial results. And make no mistake; the litigation Tucows’ management is
hiding is material – and THEY KNOW IT. In a Declaration Statement in support of a Bond Request,
David Woroch, EVP of Domains at Tucows, stated, “These circumstances present Tucows with a risk of
significant loss.”3
Worse than failing to disclose material litigation and business risk to investors,
Tucows has been reporting revenue and EBITDA from domains that should have
already been transferred. On that non-recurring revenue and EBITDA, and during
a period when materially adverse events were hidden, nine separate insiders sold
$21 million of stock, including both CFOs, and the Chairman of the Board who sold
100% of his stock during 2017.
[If you only read two sections of our report, we would point you to “Namecheap – Undisclosed Material
Liability” starts pg. 6 & 33, and “The Chairman Sells 100% of His Stock; Other Insiders Follow (With
MNPI?)” pg. 11 & 58].
Due entirely to acquisitions, Tucows has reported 69% revenue growth year-to-date. This “accelerating
revenue” has screened favorably with non-fundamental quant and momentum traders, who have driven
the stock up nearly 250%. In addition to quant buying, Tucows was added to the Russell 2000 Index last
summer around the same time a German investment manager became the largest shareholder. We wonder
how the German investor, whose founder publicly advocates Christian values, will react when they realize
Tucows’ has advocated economic relationships with websites supporting Neo-Nazism, Fascism, Bigotry,
and the SEXUAL ABUSE of CHILDREN (for example: www.Stormfront.org,
https://www.boymoment.com/, www.noblepowbehindthewire.com, http://www.thornwalker.com/ditch/,
www.nambla.org). And yes, there are many more we share.
The business fundamentals are almost as scary as the “morality” considerations are repugnant.
A careful analysis of Tucows’ public filings leads us to conclude the reported 69% revenue growth is
really a 4% organic decline. And that 4% organic decline should sink further considering Tucows could
lose 20% of eNom’s registered domains in 2018.
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How about good old fashioned accounting irregularities, misrepresentation of key performance metrics,
two Named Executive Officers, including the CFO, spontaneously resigning one week apart, and Senior
Compliance Officers who post inappropriate S&M-type pictures on social media or have second jobs as a
disc jockey? And all of this while Tucows’ three business segments are either (a) in structural decline, or
(b) pet projects that most likely fail to cover their cost of capital.
And we will go on….
We believe Tucows may be using a recently acquired 50% stake in a subsidiary joint venture called
NameJet to manipulate bidding on domain sales. Amid concerns about shill bidding,4 we believe it is odd
that Tucows provides no information on NameJet in any of its SEC filings since acquiring eNom. Go
ahead and Google “NameJet scam” and see how many hits come up. Based on public filings, we believe
this undisclosed subsidiary may have contributed $5 million of high margin revenue to eNom’s annual
results.5
This report exposes Tucows for what it is, highlighting the material business, perception, and
trading risk for investors. Further, this report opens a can of material regulatory and/or legal
worms considering management’s relentless stock sales while failing to disclose litigation and
negative business developments to shareholders.
Entering the tenth year of a bull market, goofiness is pervasive and many investors don’t care about
fundamentals as long as momentum is on their side. Tucows has had non-fundamental momentum on its
side but we believe that is about to change. We believe Tucows stock is one of the more asymmetric set-
ups we have seen in a long, long time. With Tucows’ dirty laundry finally starting to get exposed, we
believe a roundtrip is likely.
Below is a brief synopsis of the sections we cover in our first Tucows report, with the page numbers in
parentheses:
I. A Brief Introduction of Tucows and the eNom acquisition (pg 13)

Tucows has been public for twenty-one years. For most of Tucows’ first seventeen years of public life,
the provider of freeware and shareware had a market capitalization below $100 million, while toiling in
oblivion as a penny stock on the pink sheets and AMEX. After a 1:4 reverse stock split, three different
ticker symbols, and a market up-listing to NASDAQ (along with the help of European sponsors), Tucows
finally started a new narrative. Despite an enterprise value approaching $850 million, just two Canadian
boutiques follow Tucows, Echelon Wealth Partners and Cormark Securities.
The algorithmic and momentum buying began when Tucows acquired eNom from the Rightside Group
for $77.8 million. On the surface, this seemed like a shrewd financial transaction. Tucows stock ripped
33% higher in the two days following the announcement, and has increased by an additional 100% thanks
to quant funds and momentum investors. Because of the acquisition, Tucows has “reported” revenue
growth of 69%. But we believe Tucows’ reported revenue growth, is a scam. According to SEC filings,
organic growth of the combined businesses is NEGATIVE 4%, while its Domains business has collapsed
by 9%, before considering the imminent, and undisclosed, loss of 11% of its domains. Despite 69%
“reported” revenue growth, and a corresponding stock price that has increased by 250%, the 2017
earnings estimate of $1.70 is nine cents lower that the $1.79 analysts expected Tucows to earn back on
12/31/15, when the stock was $20 per share.
II. TGV – Who is the Largest Shareholder & Do They Know What They Own? (pg 16)
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Tucows largest shareholder is an investment manager based in Bonn, Germany called
Investmentaktiengesellschaft für langfristige Investoren TGV (“TGV”). TGV serves more than 200
families, including the firm’s founding father, Norman Rentrop, who publicly advocates for Christian
values and the Bible.6 His Family Foundation owns half of Bible TV, Europe’s first 24/7 Bible TV
channel.7 We do not believe these families would approve of TGV’s sub-advisors buying a Company with
accounting irregularities, undisclosed litigation, questionable insider trading, and openly enabling
Fascism, Neo-Nazism, and Pedophilia.
Two of TGV’s sub-advisor, MSA Capital8 and JMX Capital, appear to have violated Mr. Rentrop’s and
TGV’s core principles, as well as their own marketing literature. An Investor Letter from TGV, dated July
2017, as well as a 2016 letter for Teilgesellschaftsvermögen “Partners Fund,” highlights investment
principles that are inconsistent with Tucows.9 The two portfolio managers, who have less than seven
years of individual experience,10 have “coincidentally” been price insensitive buyers of Tucows stock for
the last year. In the third quarter alone, TGV purchased 390,331 shares, which represented 12% of the
volume that traded at the mid/offer for the ENTIRE quarter.
III. Tucows Three Businesses? More Like TwoDogs & One Structurally Broken Pig (pg 17)
1) Domains
Tucows’ Domains Business is in structural decline (organically), with pressure on ASPs, retention, and
profitability. “Tape reading” investment strategies have been misled by the 103.8% “reported” revenue
growth in the Domains business year-to-date. Based on Tucows SEC filings, it appears pro-forma
consolidated revenue actually declined by 9% year-to-date, which is a material degradation from flattish
organic growth in 2015 and 2016. Tucows admits that two distinct structural developments will continue
to erode margins, (1) customers moving domain management and transaction processing to their own
accreditations and in-house systems, and (2) General Data Protection Regulation (GDPR) in Europe. With
a hyper-competitive backdrop of at least 2100 competing registrars, Tucows’ registered domains declined
by 4.3% from 1Q’17 to 3Q’17.
2) Ting Mobile
Ting Mobile is one of 80 domestic, subscale MVNOs, offering low frills service plans. Ting has a
structural pricing disadvantage compared to other carriers and MVNOs. For two lines or more, Ting plans
are priced between a 15% to 173% premium to Sprint Unlimited plans. With severe pricing pressure from
other MVNOs and national carriers, Ting was forced to cut prices and gross margins collapsed by 860
basis points in the most recent quarter. With sequential organic subscriber growth falling below 3% in the
third quarter of 2017, Ting has resorted to the ill-conceived strategy of acquiring subscribers from failed
MVNOs. Despite offering a $35 credit to defunct RingPlus’ 85,000 subscribers, only 45,000 accounts
chose to migrate to Ting in 1Q’17, with just 6,000 remaining through 3Q’17. Said differently, of the
45,000 RingPlus subscribers that migrated to Ting Mobile in 1Q’17, nearly 85% churned off within eight
months.
3) Ting Internet
This pet project commenced in 2015 with the stated strategy of marrying Ting Mobile with fiber-to-the-
home (FTTH). Tucows presents highly deceptive assumptions in its investor materials, such as $2,500 to
connect a home, $1,000 of annual gross margin, and expected take-up of 20% of addresses passed in year
one. A close read of the footnotes reveals Tucows’ misleadingly excludes the $200 cost of the internet
box from their assumptions, as well as the estimated $400 of installation costs and truck rolls. Priced at
$89 per home, which is a premium to incumbents, revenue per year is expected to be $1,068 per
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residence. Tucows’ public marketing material claims that each subscriber will generate $1,000 of gross
profit per year, which implies an inconceivable 94% gross margin.
Analysis of the competitive environment and shortfall in penetration rates illustrates the absurdity of Ting
Internet’s forecasts. As of 3Q’17, Ting Internet had just 3,900 customers across three cities, with a total
addressable population of just 92,000 citizens. Ting Internet competes with larger, well established
incumbents in every market. At $89 per month, Ting Internet is the highest priced 1Gbps service offering
in every market – higher than Comcast Xfinity, Centurylink and AT&T, which are priced between $70
and $80 per month for 1Gbps of service.
IV. Namecheap – An Undisclosed Lawsuit with Material Ramifications (pg 33)

On August 30th and again on October 10th, 2017, Tucows was sued in Seattle Federal District Court and
King County Superior Court, respectively, for Breach of Contract by eNom’s largest reseller. In question
were 3.2 million domains, representing approximately 27% of eNom’s registered domains and 11% of
Tucows overall business. Tucows management has hidden this litigation from shareholders, which
appears to be a blatant violation of SEC Regulation S-K Item 103 (requires disclosure of pending
litigation if the possibility exists that the litigation will have a material effect on financial results). Make
no mistake; the litigation Tucows’ management is hiding is material – and THEY KNOW IT. In a
Declaration Statement in support of a Bond Request, David Woroch, EVP of Domains at Tucows, stated,
“These circumstances present Tucows with a risk of significant loss.”11
We believe Tucows nondisclosure of this lawsuit resulted in severe misrepresentation of its financial
results, competitive positioning, and business prospects. While management was hiding and
omitting material adverse information from shareholders, they were also reporting revenue and
EBITDA from domains that would have already transferred back to Namecheap had Tucows not
been in breach of contract. During this period of nondisclosure, seven different insiders, including
the Co-Chairmen of the Board and BOTH CFOs, sold more than $21 million of stock.
Namecheap was eNom’s largest reseller. Pursuant to the Master Agreement between eNom and
Namecheap, Namecheap could request eNom transfer Namecheap-managed customer domain names
back to Namecheap any time after December 31, 2016. In exchange for this transfer right, Namecheap
had agreed to an exclusivity period where eNom was the only registrar it would use for domain name
management. According to court records, Mr. Noss met with Namecheap’s CEO in January 2017 and
confirmed Tucows knew about Namecheap’s transfer rights, as well as the process which had commenced
to transfer Namecheap’s domain customers away from Tucows. THIS MATERIAL RISK WAS
OMITTED FROM PUBLIC DISCLOSURES.
Despite Namecheap receiving written confirmation from VeriSign that the transfer was permissible,
Tucows has refused to transfer the domains. On August 2, 2017, Tucows’ attorneys sent a letter to
Namecheap confessing they “have always understood that Namecheap intended to transfer the .COM and
.NET names to its own registrar credential,” however they still refused to comply with the transfer
because it “would wreak such havoc and confusion.”12
Namecheap sued Tucows, asking the Court for an injunction to force Tucows to comply with the transfer
in a timely manner.13 The King County Superior Court (WA) agreed and demanded that Tucows comply
with the transfer.14 On December 7, 2017, Tucows filed an emergency motion to stay the preliminary
injunction, two weeks after the same relief was denied by the trial court on November 22, 2017. Tucows’
request for a stay was denied, as was its appeal to the Washington State Court of Appeals, after (i) expert
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testimony was presented from former ICANN staffer Tina Dam, who said the transfer was appropriate,
and (ii) the Court determined that Namecheap was likely to prevail in the lawsuit.15
As such, it appears Tucows will imminently be forced to transfer 3.2 million domains to Namecheap.
While this will be a material business loss of revenue and registered domains, the legal, regulatory, and
reputational loss from withholding such material events from investors appears far greater.
We believe that by withholding disclosure of the Namecheap litigation from its SEC filings, earnings
calls, and public commentary, Tucows management violated Securities laws. Further, assuming Tucows
Board of Directors knew about the Namecheap litigation, we believe they would be complicit in
withholding material information from investors (and trading on it as we discuss later).
Source: King County Superior Court
V. Tucows’ Enablement of Neo-Nazism, Fascism, Child Pornography & Pedophilia (38)

Tucows acts as the domain registrar for numerous websites that were established to enable and support
racism, fascism, child pornography, and the abuse of children. Despite attracting media attention, Tucows
has blatantly refused to suspend these economic relationships. An investigative reporter from the
VTdigger discovered Tucows was hosting the website Stormfront, which was founded by a former Grand
Wizard of the Ku Klux Klan. Peers such as Network Solutions had refused service to Stormfront for
violating service terms, however, according to Mr. Noss, “To deny Stormfront access to Tucows’ domain
registration services would be the equivalent of a phone company cutting its service.”16
Mr. Noss has unfortunately also downplayed Tucows’ enablement of child pornography websites, stating
to the Ottawa Citizen, “If there wasn’t such a demand for Lolita sites in the U.S., do you think the
Russians would be producing so much child porn material?”17 And according to an investigative article
from the Ottawa Citizen on the Lolita problem, Tucows registered the URLs All-CP.com and
Underground-CP.com.”18 (Note: “CP” is pedophile parlance for child pornography)
A few examples of sites we believe Tucows knowingly19 hosts, include: North American Man/Boy Love
Association (NAMBLA), which is a pedophile and pederasty advocacy organization in the United States
whose mission is to abolish age-of-consent laws criminalizing adult sexual involvement with minors and
campaigns for the release of men who have been jailed for sexual contacts with minors;20 Noble Power
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Behind the Wire, which is run by a group classified as Neo-Nazis by the Southern Poverty Law Center;21
and BoyMoments.com, which is an online message board for “boylovers” to discuss sex with young boys.
Source: https://www.nambla.org/
Source: https://www.boymoment.com/
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Source: www.noblepowbehindthewire.com
VI. Tucows Compliance Appears Unqualified and Inexperienced (pg 46)

Tucows compliance team is responsible for complaint resolution. Paul Karkas is listed as the Compliance
Manager at Tucows. There is little available on Mr. Karkas despite 17 years serving a seemingly
prominent role at Tucows. He refers to himself as the “moral custodian of the internet” on his LinkedIn
page. We do not believe a moral custodian would post social media pictures of people naked in bed
wearing masks.22
Source: Paul Karkas social media
Sara Scruton, who is also known as Nina Flowers, is listed as the Senior Compliance Officer of Domain
Names (Tucows/eNom). Prior to Tucows, Ms. Scruton was an “Office Manager” in Toronto with
responsibilities that included, “Booking Flights and Hotels for Executives [and] Maintaining phone
systems and copiers.”23 According to public records, Ms. Scruton received a Recording Arts Management
Diploma for Music from Harris Institute for the Arts, which is described as “an accelerated twelve month
Diploma program featuring 62 courses that focus on the new music industry, from evolving technologies
and business models to entrepreneurial opportunities.”24 Ms. Scruton also works as a Toronto-based DJ,
who hosts an internet radio show on dogglounge.com, writes for kickmagazine.ca, along with DJ
management, bookings and promotions; Kick, Emperor Norton Records, Chicks Dig it, Women and
Techno, 7th City Recordings and Low Spirit and Converge Bookings.”25
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VII. Organic Growth Is Negative & Margins Are Declining (pg 49)
Pro-forma disclosures indicate year-to-date 2017 revenue would have declined by 3.7% had Tucows
owned eNom from the start of the year, which is starkly different optics than the +69.3% consolidated
growth Tucows has reported.
Reported Adjusted EBITDA of $25.9 million has only grown 13.8% year-to-date. Tucows management
claims $7 million of EBITDA has been lost due to fair value accounting on deferred revenue. However,
Mr. Noss’s reconciliation of this $7 million has been inconsistent and fails to reconcile with SEC filings.
Further, management’s calculation of the $7 million impact violates SEC guidelines by linking Adjusted
EBITDA to net change in deferred revenue. Nonetheless, giving Tucows full credit for the $7 million of
fictitious EBITDA add-backs produces pro forma EBITDA of $33.4 million year-to-date, which still
represents an absolute dollar decline of $0.5 million when compared with apples-to-apples pro forma
EBITDA in 2016.
For the first nine months of 2017, Tucows pre-tax income declined from $19.7 million to $13.9 million.
After adding eNom’s pro forma contribution in 2017, as well as 2016 (which management fails to do),
operating and pre-tax income would have declined year-over-year by $4.2 million and $6.3 million,
respectively. Despite adding over $100 million of revenue from the eNom acquisition, we calculate
absolute pre-tax pro forma profit dollars have declined by 23% while pro forma pre-tax margins have
declined by 240 basis points.26
VIII. Tucows Tactics to Artificially Inflate Revenue & EBITDA (pg 51)
Tucows repeatedly uses aggressive accounting tactics to inflate revenue and EBITDA. We document and
analyze four of management’s techniques.
1) Tucows overstated GAAP revenue by booking marketing credits as Sales and Marketing expenses
instead of contra revenue. Management restated historical revenue for 2014, 2015 and 1H’16 to
reallocate marketing credits. This “immaterial error” resulted in misstatements of 7% and 3% in
Portfolio Domains and Mobile Services, respectively.
2) Tucows inflated Adjusted EBITDA by adding back changes in deferred revenue & foreign exchange.
In response to guidance provided by the SEC, Tucows changed its computation of Adjusted EBITDA,
which revealed reported EBITDA in the two prior years had been overstated by 17% and 20%.
3) Tucows appears to have used realized FX gains in its Adjusted EBITDA calculation, with a pattern of
reporting different numbers in different venues. It appears Tucows had systematically inflated
headline numbers when reporting quarterly earnings only to change those numbers (lower) in annual
filings where quarterly discrepancies are difficult to assess.
4) While Tucows no longer adds-back realized FX gains, the Company continues to add-back the impact
of unrealized FX gains. We understand the rationale for this approach, but Tucows’ inconsistent
application resembles a cookie jar for overstating results. Twice in the last year, Tucows has
retrospectively increased Adjusted EBITDA numbers, with FX add-backs representing the variable
that is implicitly altered one quarter later.
IX. Management’s Economic Motivation to Inflate EBITDA (pg 56)

Tucows Compensation Committee has tied 100% of target incentive compensation to Adjusted EBITDA
for all but one Named Executive Officer (NEOs). We believe Tucows aggressive policies to inflate
EBITDA are motivated not only by misaligned compensation objectives, but also by a definition of
EBITDA that does not conform to SEC guidelines. According to note 2 of the Proxy’s Incentive Bonus
Program section, Tucows executive compensation is benchmarked against an EBITDA calculation that
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includes net change in deferred revenue. In its SEC filings, Tucows acknowledged this aggressive
Adjusted EBITDA definition does not conform to SEC guidelines, “In response to the clarification
guidance provided by the SEC Compliance & Disclosure Interpretations regarding Non-GAAP Measures,
updated on May 17, 2016, we revised our definition of adjusted EBITDA to eliminate the adjustment for
the effect of net deferred revenue.” Unsurprisingly, all of Tucows NEO’s achieved 100% of their
EBITDA targets in the prior year.
X. Tucows Chairman Sells 100% of His Stock; Nine Other Insiders Follow (With MNPI?)
(pg 58)
Based on litigation exhibits, the Tucows management team knew as early as January 20th, 2017 that
material business would be transferred to Namecheap. After this revelation, from February 10th through
December 15th, 2017, nine different Section 16 insiders (including both Co-Chairmen of the Board and
both CFOs) filed twenty-six different Form 4’s disclosing sales with the SEC. In total, insiders sold
401,960 shares for at least $21,269,138 of proceeds while management hid the pending adverse loss of
the Namecheap domains that would, in Tucows’ own words, “wreak havoc and confusion.”27 28
According to a Form 4 filed with the SEC on December 15, 2017, Tucows Co-Chairman of the Board
Rawleigh Ralls IV sold 100% of his stock. In total, we calculate that Mr. Ralls’ sold 318,719 shares
during the period in which we believe the nondisclosures occurred, netting at least $16,910,956 of
proceeds from 2017 stock sales.29 Joining Mr. Ralls, all five NEOs listed in Tucows’ proxy sold
meaningful stock over the last few years. Specifically, Messrs. Cooperman (CFO), Woroch (EVP of
Domains), and Goldstein (VP of Marketing & Sales) sold stock during the questionable nondisclosure
period in 2017. Earlier in 2017, two of the NEOs resigned abruptly, within one week of each other.
XI. Valuation (pg 61)

We use two methods to value Tucows: sum-of-parts and as a combined holding company. With extremely
generous assumptions, we believe Tucows’ fair value is around $20.00 per share.
The closest comparisons for Tucows Domain Services segment are GoDaddy (GDDY) and Web.com
Group (WEB). Both comps are substantially larger, with faster growth rates, and higher structural
margins. Giving Tucows’ Domains business an EV/EBITDA multiple of 9x, which is in-line with
Web.com, is generous. We also generously assume (i) Domains can maintain the current revenue run-rate,
despite organic pro forma revenue declining 9% year-to-date and the imminent loss of 3.2 million
Namecheap domains, (ii) Minimal operating expenses, and (iii) ZERO corporate allocations. Under these
assumptions, the Domains business would be valued at $223 million. Ting Mobile and Ting Internet are
subscale businesses that operate in highly commoditized, competitive markets with minimal barriers to
entry, and are dominated by incumbent behemoths that underprice Tucows. We believe these businesses
are write-offs, but nonetheless assign $50 million for the installed subscriber bases and asset salvage
values.
These generous assumptions yield an $18.86 target value per share when accounting for net debt.
Tucows can also be valued assuming 2018 consolidated pro forma revenue and EBITDA somehow
remain flat with 2017. Accounting for the plethora of accounting, business, and management issues
discussed herein, as well as high legal/regulatory uncertainty, and cash burn associated with Ting
initiatives, we believe a multiple of 8x EV/EBITDA is generous. This yields $23.17 per share.
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Source: TCX SEC filings, earnings calls, Bloomberg

(1) Based on 3Q17 annualized revenues
(2) Assuming flat organic growth from pro forma 2017 Revenues
XII. Appendix: Three Additional Misrepresentations of KPI’s and Biz Metrics (pg 64)
1. Management systematically overstates new registered domains in its earnings reports and quarterly
filings, only to lower those metrics in subsequent quarters in its 10Q filings. We believe a similar
shenanigan was used with FX add-backs to overstate current period Adjusted EBITDA. We document
how management has overstated the 2Q new registered domains since 2012 by an average of 9%.
2. Tucows misrepresented Ting Mobile’s business in 1Q’17 when it overstated organic subscriber
growth by 10%. Management subsequently corrected its “mistake” on the 2Q’17 call, yet the
corrected numbers fail to reconcile with the metrics Tucows provided in its 10Q.
3. We believe Tucows’ management created a strawman with a 3Q’16 one-time benefit, when
discussing its 14% miss of 3Q’17 consensus EBITDA. Management cited a difficult year-over-year
comparison due to $1 million of one-time benefits in 3Q’16 that did not recur in 3Q’17. However,
these benefits were never discussed nor disclosed in the prior year.
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I. A Brief Introduction of Tucows and the eNom acquisition
The story of Tucows began way back in 1993, as a provider of free software and shareware. The
company came public in 1996 and began providing e-mail services, and some domain names, particularly
family surnames (.smith for example). For many years, Tucows threw spaghetti against the wall, chasing
business models built on freeware, to software, to e-mail and video tutorials.
Despite a public offering twenty-one years ago, Tucows spent the majority of its public life bouncing
around between the American Stock Exchange and the Pink Sheets. With the exception of those glorious
few months in the dot.com bubble of 2000, Tucows market capitalization was below $100 million from
1996 until 2013 as the Company toiled in oblivion as a penny stock.
However, as the bull market gained steam post-2009, the wheels began turning as Tucows stock reached
the depths of $0.10 per share pre-reverse split. Like many penny stocks, in an effort to change its fortunes,
Tucows affected a 1:4 reverse stock split on 12/31/13 which coincided with an “uplisting” to the
NASDAQ from the AMEX. Along the way, the company’s ticker changed from INFO, to TCOW, and
finally to TCX, as the first ticker change failed to alter the narrative or the company’s loss-generating
historical associations.
Today, no U.S. analysts cover Tucows, despite an enterprise value approaching $850 million. The handful
of analysts that have covered Tucows in the past either went the way of the dodo or just dropped
coverage. Despite being a Canadian company based in Toronto, none of the Tier 1, or even Tier 2,
Canadian banks cover the stock. There are two Canadian boutiques following Tucows, Echelon Wealth
Partners and Cormark Securities. Amazingly, despite buy ratings on the majority of the names under
coverage, both of the analysts covering Tucows have “HOLD” ratings on the stock.
As we methodically document herein, Tucows acts, walks, and talks like a penny stock with a
management team that has demonstrated a culture of disregard for shareholder alignment. So what was
the catalyst, other than a frothy bull market for speculative promotional stories, to jumpstart the meteoric
rise in the stock?
Enter eNom, quant funds, and a misinformed German shareholder.
On January 20, 2017, Tucows announced the acquisition of eNom from the Rightside Group. On the
surface, this was a very shrewd financial acquisition. Tucows paid $77.8 million, net of working capital,
which represented a multiple of just 0.5x eNom’s 2016 revenues and 5.2x the expected $15 million of
run-rate EBITDA contribution.30 Until this report, investors were led to believe the acquisition doubled
Tucows domain names under management from 15 to 30 million, while basic math suggested the deal
was accretive by approximately $1 of annual pre-tax earnings per share. The acquisition was perceived as
an unequivocal positive, and Tucows stock price ripped higher by 33% in the two days following the
announcement day. It has tacked on another 100% since.
But the good news, at least fundamentally, ends there. As we discuss under the “Namecheap” section and
throughout this report, eNom is on the cusp of losing more than 20% of its registered domains. We
believe eNom will lose a comparable amount of revenue, which suggests the 5.2x EV/EBITDA multiple
was really 7.4x recurring EBITDA. This major revision has not played out YET as Tucows has breached
its contract with eNom.
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Additionally, the “financially accretive deal” turned Tucows into a no-growth (organically – more on this
later), low 20% gross margin business, with profitability collapsing and complexity increasing.
Considering 70% of Tucows business is in structural decline, and the other 30% is dead-on-arrival, we
believe the only future avenue for growth is acquisitions.
The market’s initial reaction to the eNom deal, without knowledge at the time of the imminent loss of
eNom’s largest reseller (which management still has not disclosed), was a “1 + 1 = 3” transaction.
Moreover, considering the additional share price increases over the last year, the market seems to be
pricing in a deal that was more like a “1 + 1 = 6” transaction. Consider that prior to the eNom acquisition,
Tucows had an enterprise value around $275 million. Today, its enterprise value is approximately $810
million with the only change in its capital structure or business being the $77.8 million acquisition of
eNom.
So what happened to cause such a dislocation?
For starters, the optics of Tucows financial results are highly misleading, as reported consolidated revenue
growth of 69% year-to-date screens as “hyper-growth” and “acceleration.” However, the actual organic
growth rate of the combined businesses is NEGATIVE 4%, which we present in the Section “Organic
Growth Is Negative & Margins Are Declining.” With the prominent rise in quant funds, momentum
investing, and passive equity screens, Tucows investor-base has unsurprisingly shifted towards quant
fund / momentum holders. Additionally, and as we discuss in the next section, Tucows largest investor is
a price indiscriminant German buyer who we would guess has no idea what they actually own.
But this self-fulfilling momentum will end as Tucows laps the eNom acquisition. The market has been
celebrating the “M&A” effect of “1 + 1 = 3” and anticipating the new “3” to move higher, perhaps to
“3.5” in 2018. Meanwhile, careful analysis of the underlying business reveals a “1 + 1 = 1.7” trend, as
irrefutably presented later. Shockingly, despite the 69% “reported” revenue growth and a corresponding
stock price that has increased by 250%, the 2017 earnings estimates ($1.70) are now below the estimates
immediately after the eNom acquisition ($2.04 on 1/30/17), where they sat prior to the eNom acquisition
($1.79 on 1/18/17), and below the 2017 estimates that were published in 2015 ($1.79 on 12/31/15), when
the stock was $20 per share.
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Source: Bloomberg. Red Line = 2017 Earnings Estimates
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II. TGV – Who is the Largest Shareholder & Do They Know What They Own?
Tucows’ largest shareholder is an investment management company based in Bonn, Germany called
Investmentaktiengesellschaft für langfristige Investoren TGV (“TGV”).31 Like many German institutions,
we would surmise TGV strives to stay out of the public spotlight and would abhor the negative publicity
associated with owning a Company that enabled Neo-Nazism and Fascism. Considering their investment
team and sub-advisors are based in Germany, we would imagine they are unaware of the promotional and
unethical aspects of Tucows. After this report exposes Tucows’ structurally unstable business model,
accounting shenanigans, dishonest investor communication, and unscrupulous corporate culture, we
believe the sub-advisors of TGV funds will recognize how inconsistent an investment in Tucows is with
their publicly stated philosophies.
TGV was originally founded by the family office of Norman Rentrop in 2008.32 Today, TGV serves more
than 200 families, most of which we would guess care deeply about their reputations. For example, the
firm’s founding father, Norman Rentrop, has publicly discussed how Christian values and the Bible
played a major influence on his life.33 And Mr. Rentrop’s Foundation still owns nearly half of the equity
in Bible TV, Germany's first Christian television channel, which has been broadcasting 24 hours/365 days
per year throughout Europe since 2002.34
Why is this relevant?
We believe TGV portfolio managers, specifically MSA Capital35 and JMX Capital (two TGV sub-
advisors) have violated Mr. Rentrop and TGV’s core principles, as well as their own public marketing
literature, by “investing” in Tucows stock. We assume TGV and its sub-advisors were unaware of the
issues we raise in this report.
We obtained an Investor Letter from TGV, dated July 2017, as well as an investor letter for
Teilgesellschaftsvermögen “Partners Fund” for the year 2016. The Fund uses Bonn-based sub-advisor
MSA Capital GmbH.
MSA Capital highlights the following investment principles in TGV’s shareholder letter as well as on its
own website:36
The core investment principles of the TGV Partners Fund have not changed and will not change in the
future. I recommend the following criteria when recommending potential investments:
1) Does the company have a reasonable business model?

2) Does the company have a lasting competitive advantage?
3) Does the management act rationally, with integrity, and do they consider the shareholders to be
partners?
4) Can we purchase the company’s stocks at a reasonable price?
It is worth noting that MSA’s Founder and Managing Partner Mathias Saggau echoes these core
philosophies on his website, promising, “I will not compromise on #3 and will never (knowingly) invest
in a company with a dishonest or incompetent management.”37
TGV also owns Tucows in its Truffle Fund, which is sub-advised by JMX Capital (technically JMX
Capital GmbH is the sub-advisor to Fiducia Treuhand AG which is the advisor of TGV Truffle).38 Like
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the TGV fund sub-advised by MSA Capital, we were able to obtain an investor letter from JMX Capital,
in which the investment requirements that make a “capital market truffle” are clearly defined:39
1) structural, hard to replicate competitive advantages

2) sufficient visibility regarding changes in business landscape
3) able and honest management teams
4) undervaluation by capital markets
We would encourage JMX, MSA, and TGV to focus on these purported criteria throughout our report.
With two worthless, sub-scale businesses and a domains business with 2100+ competitors, suffering
structural deteriorating while standing to lose 11% of its domains in 2018 from an eNom reseller that is
suing Tucows in litigation Tucows management has hidden from investors while selling a significant
amount of stock, we believe the criteria above probably do not apply to Tucows. Further, at 40x earnings,
17x declining pro forma EBITDA, with margin compression and pro forma revenue contraction,
“undervaluation” may also be a tough argument. But let’s not forget about points #3 that each sub-advisor
emphasizes (management “integrity” and “honesty”); we’ll let the contents herein address that criteria.
As independent sub-advisors, MSA and JMX have “coincidentally” been price insensitive buyers of
Tucows stock for the last year. In the third quarter alone, TGV purchased 390,331 shares, which
represented 12% of the volume that traded at the mid/offer in the ENTIRE quarter.
We believe portfolio management youth at GMX and MSA and geography may be the innocent
explanation for TGV’s involvement in Tucows. Mathias Saggau, who is the PM at MSA Capital, has less
than 7 years of experience as a public market investor.40 Jan-Hendrik Mohr is the Portfolio Manager and
Founder of JMX Capital GmbH. He is a self-proclaimed Buffet aficionado, which seems to be reflected in
his top holdings like Rolls Royce, Microsoft, Alphabet… and Tucows?!?!?!?41 According to Mr. Mohr’s
LinkedIn page, he has less than 6 years of professional investment experience.42 Additionally, we would
like to believe that Messrs. Saggau and Mohr, respectively based in Bonn and Hamburg, may have
struggled to analyze Tucows’ hyper-competitive, low margin, capital intensive, U.S.-centric MVNO and
Fiber businesses. We hope the new information in this report, much of which management failed to
disclose to investors in what would seemingly be securities law violations, will be helpful for TGV.
III. Tucows Three Businesses? More Like TwoDogs & One Structurally Broken Pig
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1) Domains (73% of revenue / 0% Organic Growth) - Structural Decline with Margin Pressure
The Domains business is promoted by Tucows management as its cash “cow,” representing 73% of
revenue. Mr. Noss has described the domains business as a reliable subscription business and investors
have bought the pitch hook, line, and sinker (recall the investment criteria from the two sub-advisors to
TGV). Unfortunately, a careful analysis of the facts shows how erroneous and irresponsible Mr. Noss has
been with his depiction of the business.
The facts irrefutably show that Tucows Domains Business is in structural decline (organically), with
immense pressure on ASP’s, retention, and profitability, and stands to lose 11% of its registered domains
in 2018 because of an eNom contractual commitment with Namecheap that management had hidden from
investors. Tucows’ very own disclosures reveal there are more than 2,100 competing registrars! Forensic
analysis of the Company’s disclosures reveals the domains business revenue is declining when
normalizing for acquisitions. Further, we believe two distinct developments, (1) customers moving
domain management and transaction processing to their own accreditations and in-house systems, and (2)
General Data Protection Regulation (GDPR) will increase secular headwinds and further pressure margins
in 2018. These negative pressures exist concomitant with major headline risk from Tucows’ refusal to cut
economic ties with hate-based organizations.
 When 103.8% Growth is Really a 9% Organic Decline:

Retail investors, quant funds, and other “tape reading” strategies have been misled by the 103.8%
“reported” revenue growth in the Domains business year-to-date. Pro-forma consolidated revenue growth
has actually declined 9% year-to-date.
Tucows acquired Melbourne IT, an international reseller channel, on April 1, 2016 for $6 million. This
was followed by the $78 million acqusition of eNom on January 20, 2017. While its SEC filings provide
pro forma revenues for the eNom acquisition, they do not explicitly adjust for Melbourne IT’s
contribution. However, the 2016 10K disclosed that the $4.1 million increase in wholesale domain
services revenues was “primarily driven” by the Melbourne IT acquisition.
Source: TCX 2016 10-K
On an organic basis, Tucows’ Domain Services revenue declined 0.9% in 2015 and increased just 1.2% in
2016 excluding the $4 million benefit from Melbourne IT. The 1.2% organic growth approximated the
0.6% decline in eNom’s standalone revenues in 2016 as disclosed in the 8K filed with the SEC on April
3, 2017 (which deteriorated from eNom’s 5.2% growth in 2015).
As shown below, the entities under the consolidated Tucows domain services umbrella grew just 2.6% in
2015, 0.2% in 2016, and through the first 9 months of 2017, domain services has DECLINED by 9%.
This is in stark contrast to the “reported” growth rate of 103.8% on which quant funds, newswires, and
TGV all seem to be mistakenly focused.
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Note that when TCX discloses pro forma revenues with eNom in its SEC filings, there are retrospective
adjustments to eNom’s historical revenue to account for ASC 805 (eNom deferred revenue adjusts to fair
value). Because we believe Mr. Noss has repeatedly misrepresented the “Adjusted” revenue in his public
remarks, which he admits is calculated on a methodology that does not adhere to SEC guidelines,43 we
utilize the SEC filings for an uncompromised perspective. This perspective provides an apples-to-apples
comparison of eNom’s historical and current period pro forma revenue adjusted for the ASC 805 effect.
As such, accurate revenue trends that do not require fake adjustments can be obtained from the pro forma
numbers reported in SEC filings. Below is the pro forma table for 2016 with adjustment and relevant
footnotes (Note – Historical Tucows is for all three segments, but Domains is reported independently in
all filings).
Source: TCX SEC form 8-K on 4/3/2017
 Two Material Secular headwinds:

Ignoring Mr. Noss’s disingenuous growth rate characterizations, what is clear is that Domain Services is
suffering an accelerating decline that has been masked by acquisitions and pro-forma misrepresentations.
There are two distinct drivers for the core erosion. While management has not addressed these issues on
earnings calls, there is sufficient disclosure in Tucows’ SEC filings and in a lawsuit with eNom’s largest
reseller to understand the drivers.
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Tucows’ SEC filings allude to two unrelated drivers behind the revenue erosion. The first secular
headwind relates to customers moving domain management and transaction processing to their own
accreditations and in-house systems:
Source: TCX 2016 10K
Source: TCX 3Q’17 10Q
To understand Domain Services’ structural challenges, it is important to grasp in simple terms what this
business does. The Internet has registries responsible for registering website addresses (domains) and
linking these websites with their corresponding IP addresses. This function is administered by the Internet
Corporation for Assigned Names and Numbers (ICANN). ICANN gives accreditations to “registrars”
who can then add a particular domain name to the registry. The registrar collects an annual fee from the
owner of the website (e.g. $10/year) and often attempts to sell value added services like hosting, email,
security, etc. When a domain is registered, the registry and ICANN will typically charge a fee for
registration. For example, VeriSign, the exclusive registry for “.com,” charges $7.85 for each “.com”
registration, while ICANN tacks on an additional $0.18 charge for each gTLD.44 Registrars such as
Tucows are hyper-competitive without moats to protect margin. As such, registrars like Tucows have
minimal ability to pass through pricing changes in such a competitive market and are forced to absorb
price increase in their already paltry 20% gross margin in Domain Services.
The second secular headwind on Domain Services is the impact of new gTLD Program. A generic Top-
Level Domain (gTLD) is a category of Top-Level Domains such as “.com” or “.net” or “.org.” Beginning
in 2012, ICANN launched the New gTLD Program, whereby these gTLDs expanded to include many
new variations, such as “.data” or “.radio” or “.doctor.” Approximately 1,300 new gTLDs have been
added compared to approximately 22 before ICANN’s New gTLD program. As Tucows carefully
discloses in its SEC filings, the flood of new gTLDs is structurally changing the environment and
economic pie for registrars because they need to predict the market’s preference for specific new gTLDs
and secure access before competitors do (as highlighted below).
Moreover, new gTLDs are creating meaningful opportunities for large volume customers, such as web
hosting companies and resellers like Namecheap, who had previously used third party registrars, to get
their own accreditations and internalize economics.
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Additionally, ICANN does not control the pricing of new gTLDs,45 which has resulted in price aggression
above historical norms.
We do not believe it is a coincidence that the degradation in the health of Tucows Domain Services
business has coincided with the rollout timeline of new gTLDs, as outlined in ICANN’s timeline below:
Source: https://newgtlds.icann.org/en/program-status/timelines
 2,100 Competitors Leads to Secular Declines in Registered Domains & Market Share Loss:
Considering the factors above, which contributed to the 9% pro forma consolidated revenue decline year-
to-date, it is fair to ask if these issues are just getting started. Perhaps the answer can be found in Tucows’
very own risk statements, where the low-barrier nature of the Domains Business is articulated:
Yes, there are over 2,100 active competitors Tucows has identified in the marketplace. In fact, ICANN
itself lists 2,520 accredited registrars on their website,46 of which 21 are in Canada with Tucows. How do
they compete with each other? PRICE!
With such intense competition, it should not be surprising that Tucows’ domain names under
management fell by 6.0% from the peak in 3Q’12 until 1Q’16 (shown below). The Melbourne IT
acquisition added acquired domains and the eNom portfolio was purchased before investors could see a
clean comparison post-Melbourne IT. Nonetheless, Tucows’ registered domains declined by 4.3% from
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1Q’17 to 3Q’17, which is a trend that should have a step-function lower with the pending loss of 3.2
million Namecheap domains.
Source: TCX SEC filings
Tucows is losing market share. According to VeriSign, worldwide domain name registrations have
experience moderate growth. As explained above, Tucows faces thousands of competitors who are
willing to compete aggressively on price, while also providing better customer service and cheaper
ancillary offerings.
Source: https://www.verisign.com/en_US/domain-names/dnib/domain-name-industry-brief-reports/
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With a 9.0% and 4.3% decline year-to-date in Tucows’ pro forma revenue and domains under
management, respectively, a responsible management team would transparently address the challenges
Domain Services is facing. Unfortunately, Elliott Noss is a promoter, who has created very real regulatory
and legal risks for Tucows. Conference calls are filled with cherry picked statistics that paint a picture of
a healthy business. The facts do not reconcile with Mr. Noss’s story:
“Looking at our Domains business, the integration of OpenSRS and eNom continues to go well…
Again, we had another good quarter for registrations in the OpenSRS business, which continued
to exceed our expectations for the first half of the year.”
-- TCX 2Q17 Earnings Call
“In terms of key metrics, Q3 was another strong quarter for the Domains business... We continue
to be pleased with its performance given the size of the business and the mature nature of the
industry.”
-- TCX 3Q17 Earnings Call
2) Ting Mobile (26% of revenue / 16% profitless organic growth) – A subscale model that is
fundamentally flawed
Tucows’ second business segment is a wireless re-seller business called Ting Mobile that uses the Sprint
Wireless network. Ting offers low frills service plans and utilizes social media to win customers. After
exhibiting moderate success adding subscribers in 2014 and 2015, Ting Mobile hit a wall with its
sequential organic subscriber growth falling below 3% in 3Q’17. Like the Domains Business, Ting has
resorted to acquiring blocks of “potential” subscribers from failed MVNO’s P-Tel and RingPlus.
We struggle to understand a bullish thesis for this business. Ting Mobile is a fundamentally flawed model
in a hyper-competitive MVNO industry that has existed for decades. Further, Ting Mobile is a subscale
model, with pricing disadvantages, and no line of sight towards critical mass considering organic
subscriber adds appears to be headed towards zero. With gross margins that collapsed in Q3’17 by 8.6%
year-over-year (46.2% to 37.6%), and customer lifetime of just 3 years, we see no endgame for Ting
Mobile.
 Ting Mobile has a structural pricing disadvantage, making it a high cost provider
Tucows pitch is that Ting Mobile is a low cost mobile service. While Ting advertises a plan for a little as
$6 per month, the fine print clarifies that $6 is the cost of one line with no usage. Assuming a wireless
subscriber actually wants to make phone calls or use texts and data, then the costs begin to add up
quickly.
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Source: https://ting.com/rates
A side-by-side comparison of Ting Mobile vs. Sprint, the underlying network Ting uses, clearly illustrates
Ting’s core competitive disadvantage. As shown below, Sprint charges $40/month for a single line with
unlimited talk, text, and 2GB data. Boost, which is Sprint’s own MVNO, offers 3GB of data at 4G
speeds, with unlimited talk and text for $35/month.
Source: https://www.sprint.com/en/shop/plans.html?INTNAV=TopNav:Shop:AllPlans;
https://www.boostmobile.com/?INTNAV=TopNav:SingleLine#!/shop/plans/monthly-phone-plans/
Comparing Ting Mobile’s pricing with Sprint “proper,” it becomes clear that Ting is in fact more
expensive, which makes sense considering Sprint owns the network Ting uses. The $40 per month that
buys 2GB of data and unlimited text and talk with Sprint, would only buy 500 minutes of voice and 1,000
texts per month from Ting Mobile. For anything but the skinniest of plans, Ting Mobile is priced at a
material premium to Sprint. For example, a consumer who buys 1,000 minutes of voice and 2,000 texts
per month from Sprint would pay 30% more for an identical offering from Ting Mobile. The gap widens
dramatically between Ting and Sprint as consumption increases. Compared to Boost, which is $5 cheaper
per month, the Ting price premium is even more substantial.
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Source: Ting Mobile, Sprint
The “hidden catch” in Ting’s pricing is data usage, where Ting charges $10 for each GB consumed over
2GB. With mobile subscribers increasingly focused on low cost data plans to compliment unlimited talk
and texts, it should not be a surprise that Ting Mobile recently cut the price of 1GB of data from $12 to
$10.47 With Sprint now offering an unlimited talk, text, and data for just $60/month on the first line,
$40/month for a second line, and the next three lines free, Ting Mobile does not have the capacity to
compete.
Source: https://www.sprint.com/en/shop/plans.html?INTNAV=TopNav:Shop:AllPlans
Based on Sprint’s Unlimited Freedom Plan above, Ting Mobile’s value proposition collapses when
compared side-by-side with Sprint. For example, in the pricing grid below, a Ting Mobile user consuming
500 minutes of voice, 500 texts and 4GB of data would pay $58/month, which is just a $2 discount to a
Sprint plan that is Unlimited (far left column with one line). For more than one line, the consumer pays
far more with Ting and receives far less.
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Source: Ting Mobile, Sprint
Perhaps Tucows would argue that Ting Mobile targets a low usage subscriber with no monthly contracts
or minimums beyond the $6 per device monthly fee. With Ting’s average service revenue per device
around $22 per month, the implied average monthly revenue for service is $16 per month. But this focus
on the ultra-low end consumer means Ting Mobile will be forced to engage in a race to the bottom.
FreedomPop offers a service plan that includes 200 minutes of voice, 500 texts and 500MB that is
absolutely free.48 This offer targets the low-end consumer with voice, text, and data offerings that would
exceed what a Ting Mobile subscriber would get for $16/month. In August, FreedomPop launched
another promotion that offers 1000 minutes + 1000 texts + 1GB per month for just $49/month (as shown
below). With this race to the bottom, it should not be surprising that Ting Mobile’s gross margins and
monthly service revenue have declined year-over-year.
Source: www.FreedomPop.com, Tucows SEC filings and quarterly earnings calls
 Ting Mobile organic subscriber metrics are decelerating

Illustrating the competitive challenges of operating a subscale MVNO, Ting Mobile’s organic subscriber
growth has experienced rapid deceleration, despite the tailwind that should exist from the law of very
small numbers. As of 3Q’17, Ting Mobile only had 171,000 subscribers, with an annual revenue run-rate
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of just $75 million. While comparing Ting Mobile’s addressable market as the 412 million combined
subscribers of AT&T, Verizon, Sprint and T-Mobile,49 may sound compelling, the decelerating growth
curve this early in Ting’s life suggests their strategy failed.
Ting Mobile’s organic year-over-year subscriber growth has decelerated from 60% growth to just 12% in
3Q’17 (just 3% QoQ), which is depicted below. It is worth noting that consolidated total subscriber
growth was boosted by Ting’s strategic decision to take subscribers from RingPlus, a failed MVNO, in
February 2017.
Source: Tucows SEC filings and quarterly earnings calls
What should be most concerning to Tucows stakeholders is that management’s irrational pricing
decisions and marketing strategies targeting subscriber growth have failed. As mentioned above, Ting
Mobile had an “opportunity” to onboard the subscribers from RingPlus in February 2017. Despite
offering a $35 credit to RingPlus’ 85,000 subscribers, only 45,000 accounts chose to migrate to Ting.
Illustrating the cut-throat, price competitive nature of the low-end MVNO market, only 6,000 RingPlus
subscribers remained with Ting at the end of 3Q’17. Said differently, of the 45,000 RingPlus
subscribers that migrated to Ting Mobile, nearly 85% had churned off within eight months!
With aggressive competition from standalone MVNO’s like FreedomPop, Republic Wireless, Rok
Mobile, Total Wireless, TPO Mobile, Page Plus, and Red Pocket, as well as captive MVNOs like Boost
Mobile (Sprint), Cricket Wireless (AT&T) and MetroPCS (T-Mobile), we believe Ting Mobile’s
decelerating subscriber growth will be accompanied by negative unit economics and/or irrational
spending to acquire subscribers. The latter concern was on display when Tucows launched an infomercial
on the Savings Shopping Network to stimulate subscriber growth.50 While the infomercial was
entertaining, its tactics of stacking money on a table is generally not associated with quality.
Unsurprisingly, the infomercial failed to improve lackluster subscriber trends.
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 No Visible Endgame for Ting Mobile

There are more than 80 MVNOs operating in the US and most resemble Ting Mobile’s subscale
operations. While MVNO’s fail consistently, there have been a few “success” stories like Leap Wireless
(now Cricket), which was acquired by AT&T. Unfortunately, public MVNO transactions have occurred
with low-to-mid single-digit EBITDA multiples (Tucows trades at 18x EV/EBITDA).
Source: SEC filings. Target EBITDA based on LTM Adjusted EBITDA as reported by each target.
Note: Leap Wireless EBITDA multiple excludes $204 million expected proceeds from divestiture of 700 MHz A block spectrum license in
Chicago at cost; MetroPCS transaction value excluded as it represented a reverse merger and included spectrum held by MetroPCS
With a toxic MVNO backdrop, the best outcome for Ting Mobile is aggressive customer acquisition
spending that offsets churn and service fee erosion. We expect margins to continue declining, and with no
obvious synergies between Tucows’ three business segments, Ting Mobile should be valued like
RingPlus – worthless.
3) Ting Internet - An uneconomical pet project with dubious metrics, and capital destruction
trying to compete against incumbents
 Chasing Gigabit Internet with a bad strategy and Dubious Assumptions

Three years ago, Tucows acquired 70% of Blue Ridge, an internet service provider in Charlottesville,
Virginia, for $3.6 million and an incremental $3 million for equipment. This acquisition commenced a
strategy to marry Ting Mobile with fiber-to-the-home (FTTH), which on paper may have made sense
when Ting Mobile’s prospects had not soured. Mr. Noss proclaimed that Tucows would deliver gigabit
fiber to residents of the city with a “shockingly human experience and fair, honest pricing that [Ting]
mobile subscribers have appreciated so much.”51 Tucows initial strategy was to build and operate a fiber
network in the city. And this commenced the dead-on-arrival strategy of flushing shareholder capital
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down the drain by supporting: A subscale service, competing against established incumbents while
pricing at a premium, despite no tangible differentiation. While Google was reconsidering the economics
and possibility of successfully building and operating fiber networks, Ting Internet was just getting
started. Around the same time the Blue Ridge acquisition closed, Tucows announced an agreement with
Westminster, Maryland to operate the fiber network built by the city in an MVNO-like capacity.
The facts and economic performance have diverged notably from Mr. Noss’s original promises. The first
subscribers went live in Charlottesville and Westminster in May and August 2015, respectively. In
October, Tucows announced plans to launch service in Holly Springs, North Carolina, which was
bypassed by Google Fiber’s launch in nearby cities. The agreement stipulated that Tucows would lease an
existing network, while investing approximately $2,500 of capex per subscriber to generate $1,000 of
expected gross profit per year.52 More on these metrics in a bit. The first Holly Springs customers were
connected in January 2017.
With Charlottesville and Westminster live, Mr. Noss exuded confidence about the fiber business
prospects on the 2Q’15 earnings call (August 2015), when he set a target for 20% first year adoption, with
50% take-rates within 5 years (emphasis added):
“At this point we are quite comfortable that Ting Internet has real, material, long term upside
potential, and importantly well bounded downside risk. We’re also getting more comfortable with
some of our core operating assumptions. We are benchmarking the cost of building and
connecting a home at roughly $2500 and the gross margin from connecting a home to be roughly
a $1000 per year. Those benchmarks assume a 20% take up rate in the first year and a 50%
take up rate over 5 years consistent with what a number of a fiber to home initiatives are
currently seeing. And these also assume the existence of a Ting TV service, which we do
continue to hope to be in market with by the end of this year or the first couple of quarters of
next year.”
These financial and operating benchmarks have been staples of every Ting Internet presentation over the
last few years.
Source: Tucows / Ting Internet
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Like so many things at Tucows, what Mr. Noss says is inconsistent with basic financial modeling and
facts. First, Tucows math is highly deceptive, which may help explain why penetration rates and revenue
per subscriber have failed so miserably to meet Mr. Noss’s promises. Tucows’ primary focus has been on
residential penetration. At $89 per home, which as we show below is a premium to what incumbents
charge, equates to approximately $1,068 of revenue per year. So how precisely will Tucows achieve a
94% gross margin ($1,000 GP/year) when the litany of costs to service residential subs are considered
(truck rolls anybody?)?
Could gross profit have assumed a significant contribution from the TV service that Mr. Noss said on the
2Q’15 earnings call would be available by the of 2015 or early 2016? We hope not because according to
an interview posted on YouTube in June 2017, Ting TV was still in development.53
A closer read of the small print footnotes underpinning Tucows payback assumptions and math, reveals
Tucows excludes the $200 cost of the internet box from their assumptions, as well as installation costs
and truck rolls, which could reach an additional $400 according to Tucows. Regardless of how the math is
sliced, an analysis of the competitive environment and early shortfall in penetration rates illustrates the
absurdity of Ting Internet’s forecasts.
 Three years and $26 million later, Ting Internet is a pet project burning cash
Since spending $6 million to acquire Blue Ridge and related equipment, we believe Tucows has burned
approximately $20 million of additional capex on its FTTH initiatives.54 What exactly have shareholders
gained, aside from a story for this $26 million?
We can see the returns from Ting Internet in the reported revenue line “Other Network Access Services.”
As seen below, this segment has been flattish around $1 million per quarter for nearly three years. This
pet project has been consuming $3+ million of capex per quarter, or 30%+ of corporate EBITDA, to
generate $1 million of unprofitable quarterly revenue. Mr. Noss confessed during the 3Q’17 earnings call
(which was not volunteered, but came out via the Q&A), Ting Internet will continue to be a cash drain
until there is scale – and as we discuss below – it ain’t happening:
“Q: Hey, I just want to also talk about fixed [Internet] as well. So I want to make sure I am
clear in terms of the operating cash flow that you are targeting here, so I think I heard I guess or
at least this overall sounded like you guys are expecting to be on target in terms of generating
positive cash flow, I guess, late-2018 as a sort of at a high level. Is that correct?
A: That's looking give or take a couple of few months on either side that's looking when it's about
to turn. We are seeing enough visibility in particularly those markets that I mentioned. And then
it's really going to be a question of how fast we are ramping up elsewhere.”
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Source: TCX SEC filings
 Ting Internet is following the failed model of Ting Mobile & the metrics appear crooked
Despite Mr. Noss’s grandiose 2Q’15 promises, and Westminster and Charlottesville offering live service
for 2.5 years, Ting Internet’s metrics are abysmal. As of 3Q’17, Ting Internet had just 3,900 customers in
cities with a total population of 92,000. These metrics are even more disturbing when considering Ting
Internet took over existing fiber networks in Westminster and part of Holly Springs that were already
built.
There also appears to be little in the way of organic progress, which could explain Ting Internet’s
irrational failed bid to acquire Burlington Telecom at 10x EBITDA.55 On the 3Q’16 earnings call
(11/9/16), Tucows disclosed that Ting Internet had passed 10,000 homes in Charlottesville, which would
be joined by 3,000 homes passed in Westminster by 3Q’17.
“Our network in Charlottesville now passes over 10,000 potential customers and we will
continue to expand aggressively through 2017. In Westminster, where the city is building the
network, the next wave of construction is underway. So I've said we're only at about 300
serviceable addresses right now in Westminster. The city projects another 2,700 addresses
finished by this time next year.”
Assuming Westminster city added 3,000 connections, this implies Tucows has only added an additional
100 homes since 3Q’16. This does not seem possible considering Holly Springs went live in January
2017. This raises three troubling questions, none of which have investor-friendly outcomes:
1) If you have only added 100 homes since 3Q’16, where has the $12 million of capex gone in the
last year?
2) Why have you not been more upfront with investors about this stalled build out?
3) Assuming the build outs are progressing as planned, is Tucows purposefully understating
the number of homes passed to overstate the take-rate?
Regardless of the answers to the questions above, we believe Ting Internet’s failure thus far is because its
entire strategic model is absurd. Despite Tucows arguing they are addressing small, underserved cities,
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Ting is competing with larger, well established incumbents in every market. A closer look at the pricing
models in each market illustrates the same disturbing trend seen with Ting Mobile. At $89 per month,
Ting Internet is the highest priced 1Gbps service offering – higher than Comcast Xfinity, Centurylink and
AT&T, which are priced between $70 to $80 per month for 1Gbps service. Further, each market has
competitive offerings for 25-50Mbps that are priced as much as 50% below the 1Gbps services.
Source: https://ting.com/internet/, www.broadbandnow.com, www.xfinity.com, www.centurylink.com, www.wikipedia.com, TCX 3Q17 earnings
Ting’s dysfunctional pricing strategy is a function of its inferior size and scale. Juggernauts like Comcast
have better economies of scale in laying fiber, marketing to consumers, and providing customer service
and technical support than a couple project managers from Canada who show up with shovel in hand to
“disrupt” these incumbents. If Google failed to make fiber work, can anybody reasonably expect Tucows
to succeed?
The economics and business model for Ting Internet are incomprehensibly bad. The problem for
shareholders is that Tucows Domains Business is structurally declining, which means management needs
a story to tell. While this pet project should be shuddered, we believe Tucows’ efforts to acquire
Burlington at 10x+ EBITDA are indicative of their desire to “double down.”
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IV. Namecheap – An Undisclosed Lawsuit with Material Ramifications
On August 30th, 2017, Tucows was sued for Breach of Contract by eNom’s largest reseller, who
represented approximately 27% of eNom’s registered domains and 11% of Tucows overall business for
Breach of Contract. Tucows management has hidden this litigation from shareholders, despite its
materiality. In late December, a Washington State court ordered Tucows to transfer 3.2 million “.com”
and “.net” domain names to Namecheap and an appeals court denied Tucows’ motion for an emergency
stay.56
We believe Tucows nondisclosure of this lawsuit resulted in severe misrepresentation of its financial
results, competitive positioning, and business prospects. While management was hiding and
omitting material adverse information from shareholders, they were also reporting revenue and
EBITDA from domains that would have already transferred back to Namecheap had Tucows not
been in breach of contract. During this period of nondisclosure, nine different insiders, including
the Co-Chairmen of the Board and BOTH CFOs, sold more than $21 million of stock.
We believe by withholding disclosure of the Namecheap litigation from its SEC filings, earnings calls,
and public commentary, Tucows management violated Securities laws and opened up meaningful
regulatory and/or legal risk. Further, if Tucows Board of Directors knew about Namecheap, they would
be complicit in withholding material information from investors. If the Board was unaware of the
Namecheap litigation, then we would surmise an internal investigation will commence and appropriate
actions will be announced to market participants.
On August 30, 2017, Namecheap, eNom’s largest reseller, sued Tucows and eNom in Seattle Federal
District Court for breach of contract. Due to a concern about diversity jurisdiction, the lawsuit was re-
filed on October 10th in King County Superior Court against Tucows and eNom, asserting breach of
contract claims and seeking damages as well as specific performance. We would note that the docket is
not accessible online or via Pacer, which may have been Tucows’ justification for hiding this material
disclosure from investors.
According to the litigation, Namecheap acted as a reseller for eNom for many years. As a reseller,
Namecheap registered and managed millions of domains in various TLDs on the eNom platform under
the Namecheap name. Namecheap has paid substantial fees to eNom in connection with the registration,
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transfer and renewal of those domains. Approximately 4,000,000 Namecheap managed domains, or
approximately 30% of eNom’s total domains, were on the eNom platform when Rightside sold it to
Tucows.
We obtained a redacted copy of eNom’s Master Agreement with Namecheap, dated July 31, 2015. In the
Agreement, Namecheap agreed to one year of exclusively using eNom’s platform to register, transfer, and
renew the VeriSign Domains (.COM, .NET), Afilias domains (.ORG), Rightside gTLDs, and all gTLDs
on the Rightside Platform for 14 months. In exchange for this period of exclusivity, Namecheap received
the right to transfer the Enumerated Domains to its own platform with three month’s notice.
Source: NAMECHEAP INC., ENOM INCORPORATED, UNITED TLD HOLDCO, LTD. MASTER AGREEMENT (7/31/15)
Pursuant to the Master Agreement, after Namecheap’s exclusivity period expired, they could request
eNom transfer Namecheap-managed customer domain names residing on the eNom platform and/or
registry credential as long as the transfer complied with all applicable ICANN and registry rules,
regulations and processes. This request could occur any time after December 31, 2016, which marked the
end of the exclusivity period.
In January 2017, Namecheap’s CEO, Richard Kirkendall, met with Mr. Noss in Las Vegas. Mr. Noss
explicitly confirmed Tucows’ prior awareness of Namecheap’s transfer rights under the Master
Agreement. Mr. Noss told Mr. Kirkendall that Tucows had accounted for the “imminent loss” of the
Namecheap-managed domains in negotiating the acquisition price with eNom. THIS MATERIAL
ADVERSE DEVELOPMENT (LOSS OF DOMAINS) WAS OMITTED FROM PUBLIC
DISCLOSURES.
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In June 2016, prior to being acquired by Tucows, eNom affirmed that it would honor the domain transfers
to Namecheap. Between December 1, 2016 and January 12, 2017, eNom transferred about 500,000
domains to Namecheap (.vegas, .biz, and .US). However, despite Mr. Noss’s promise to honor the Master
Agreement, and Namecheap’s request that Tucows transfer the 3.2 million remaining domain names on
eNom’s platform to Namecheap’s registrar credentials, Tucows has since refused to transfer the
domains. In doing so, Tucows reported financial results for 2Q’17 and 3Q’17 that included revenue and
domains that were poised to disappear. This was never disclosed when the results were reported.
The litigation documents show Tucows initially refused the domain transfer because they believed it
would violate VeriSign’s policies for “Bulk Transfer After Partial Portfolio Acquisition”, or BTAPPA.
But according to a letter in the lawsuit, VeriSign obtained ICANN approval to offer VeriSign’s BTAPPA
service on or about December 9, 2009. Further VeriSign confirmed in writing that Namecheap’s
acquisition of the transfer rights for the VeriSign Domains was permissible for the BTAPPA service. And
on July 21, 2017, VeriSign also expressly provided Namecheap with authorization to execute the transfer
Notice.
Despite authorization from VeriSign, Tucows again refused the transfer. On August 2, 2017, Tucows’
attorneys sent a letter to Namecheap refusing to honor the Master Agreement and sign the BTAPPA
transfer. Tucows argued this time that the transfer “would wreak such havoc and confusion” that there is
no way that such transfer could “comply with all applicable ICANN and registry, rules, regulations and
processes.”
After receiving the letter from Tucows attorneys refusing to comply, Namecheap sued Tucows at the end
of August. Reading the legal docket, it becomes clear that Tucows has done everything possible to delay
the inevitable transfer. Incredibly, despite the legal momentum against them and Tucows admission that
they will ultimately lose the domains, Tucows has continued to hide these material facts from investors.
On December 7, 2017, Tucows filed an emergency motion to stay a preliminary injunction, two weeks
after the same relief was denied by the trial court on November 22, 2017. Namecheap argued the deadline
for doing the transfer was the end of 2017 and asked the Court for an injunction to force Tucows to
comply in a timely manner.57 The Court agreed and demanded that Tucows comply with the transfer.58
Tucows subsequently requested the Washington State Court of Appeals to stay the order. The Appeals
Court denied Tucows request two weeks ago (12/18/17) for an emergency stay after (i) considering expert
testimony from former ICANN staffer Tina Dam who said the BTAPPA was appropriate for this
circumstance, and (ii) determining Namecheap was likely to prevail in the lawsuit anyways.59
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It appears Tucows will finally be required to honor the Master Agreement and transfer 3.2 million
domains to Namecheap. While this will be a material loss of revenue and registered domains, we believe
the legal, regulatory, and reputational loss from withholding such material events from investors is far
greater. This rings especially true considering a letter from Tucows’ attorneys at Morgan Lewis
acknowledged the material loss was “always understood.”
Source: Letter from Tucows counsel Morgan Lewis to Namecheap’s counsel
We believe what will make matters even worse for Tucows in a Class Action lawsuit will be the fact
financial results have been reported that include material revenue, EBITDA, and domains registered from
the breached Namecheap contract. As Namecheap highlighted in its Complaint, these benefits were
valuable and we believe Tucows had an obligation to disclose this uncertainty (emphasis added):
Source: Namecheap Complaint, King Court
Without the Namecheap domains, we believe Tucows would have missed 3Q’17 consensus by an even
wider margin. Worse still, insiders have unscrupulously sold significant amounts of stock while in
possession of the materially negative information. Now, with 3.2 million domains leaving their portfolio,
2018 will have a substantial hole that Mr. Noss will undoubtedly try to fill through acquisitions.
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V. Tucows’ Enablement of Neo-Nazism, Fascism, Child Pornography and Pedophilia
Tucows acts as a gateway to the Internet. Unlike its peers who have refused service to hate-based
organizations, or web sites that explicitly target unethical activities,60 Tucows has quietly embraced a
dangerous “turn-a-blind-eye for profit” philosophy. We believe Tucows’ tacit support for immoral
websites creates immense risk for the Company and institutional shareholders, like TGV, who have
publicly marketed funds that claim to limit investments to ethical companies.
We have found numerous websites that pay Tucows as their domain registrar, that have content and
initiatives targeting racism, fascism, child pornography, and the outright abuse and rape of children.
Despite bringing these sites to the attention of Tucows and its compliance team (more on them later),
Tucows has blatantly refused to suspend these economic relationships.
During its efforts to acquire Burlington Telecom, Morgan True of the VT Digger, exposed Mr. Noss’ and
Tucows for their open support of Neo-Nazi website Stormfront.61 After Google and GoDaddy dropped
white supremacists sites like Dailystormer, many of these hate groups migrated to Tucows, where the
terms appear more lax, with a management teams that supports a more liberal stance on hatred.62
According to Mr. Noss, “Domain registration services are akin to provisioning a network where common
carriage should apply, and it’s important that such platforms are neutral to content as a matter of policy.
To deny Stormfront access to Tucows’ domain registration services would be the equivalent of a phone
company cutting its service, or a municipality telling them they can’t use public roadways.” Tucows
insistence that its role in the internet should be nonjudgmental seems hard to justify when reviewing some
of their economic relationships.
Stormfront (www.Stormfront.org) was established in 1996 by Don Black, a former Grand Wizard of the
Ku Klux Klan. After the atrocities in Charlottesville, North Carolina, Stormfront’s host at the time,
Network Solutions, shutdown the website on August 25, 2017. In an attempt to keep Stormfront from
reemerging, Network Solutions went so far as to initially prohibit the website from being updated,
transferred or deleted.
www.stormfront.org
A search of the web registrar today reveals Tucows as the new host:
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As Tucows’ support for these illicit sites spread, a potential waterfall of negative publicity risk ensued. In
response, Tucows posted a blog on December 15, 2017, (“Why Tucows Doesn’t Take Down Domains for
Website Content Issues”)63, which attempted to justify their support for illegal and/or immoral content.
The two primary reasons Tucows provided for supporting websites that spread hate-based messages are:
1. It resolves nothing with transgressive website content. Forced transfers only push domains pointing
to problematic website content elsewhere, which is both unfair to our competitors and devoid of
actual resolution.
2. Multiple domains from multiple registrars may be pointed at a single website, limiting the efficacy of
suspending any one single domain. If a domain is suspended, a replacement domain may be
registered, pointed, propagated, and socialized in minutes, leading to an endless game of whack-a-
mole.
Paraphrasing Tucows rationale as we see it: If Tucows suspends a website, the content owners will simply
go elsewhere. This perverse logic is akin to stating if you rent a home to an individual who sells drugs,
engenders race- or religious-based hatred, or rallies support for pedophilia, it would not make sense to
kick that person out of the home because they would go to another home, that somebody else rented, and
practice their misdeeds there…
It is one thing to provide a misguided justification for the open internet, and it is something totally
different to mock the child pornography epidemic. In an exposé by The Ottawa Citizen, titled, “The Lolita
problem: Child Pornography is booming, thanks to the Internet -- and the unwitting support of corporate
America,”64 the authors examined the booming business of websites featuring nude photos of children
from as young as three years old to their mid-teens (known as “older models”). Consistent with our own
diligence, Tucows was highlighted as a willful enabling participant of these child pornography sites.
Emblematic of the dismissive approach we believe Tucows has taken, Mr. Noss dismissed Tucows role in
enabling child pornography, while simultaneously belittling the scope of the problem (emphasis added).
“Another domain registry company, Tucows, defends the registration of Lolita sites as an issue of supply
and demand and claims that registration companies don’t contribute to child pornography. ‘If there
wasn’t such a demand for Lolita sites in the U.S., do you think the Russians would be producing so
much child porn material?’ says Elliott Noss, president and CEO of Tucows… Tucows has registered
the URLs All-CP.com and Underground-CP.com.” (Note: “CP” is pedophile parlance for child
pornography)
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In fact, over the course of just a few hours, we were able to find dozens of websites hosted by Tucows
that promoted racism, bigotry, and pedophilia. Worse still Tucows cannot claim these economic
relationships are “oversights.” We were able to find multiple online complaints, blogs, tweets, and other
references to these sites that TCX has effectively ignored.
A few of the more repugnant, amoral cites are listed below along with their Registrar (eNom or Tucows):
 North American Man/Boy Love Association (NAMBLA) - www.Nambla.org

NAMBLA is a pedophile and pederasty advocacy organization in the United States. Their mission is
to abolish age-of-consent laws criminalizing adult sexual involvement with minors and campaigns for the
release of men who have been jailed for sexual contacts with minors that did not involve coercion.65
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 BoyMoment.com - https://www.boymoment.com/
BoyMoments.com (BM.com) is an online message board for “boylovers” which provides a forum to
discuss sex with minor boys.
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 Christian Boylove Forum - https://www.cblf.org/
 Enchanted Island Online - https://www.enchanted-island.online/
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In addition to sites to discuss sex with children, Tucows has become the registrar of choice for hate-based
sites. In addition to Stormfront, other easy to find examples include:
 Thornwalker.com - http://www.thornwalker.com/ditch/.
This site is run by WTM Enterprises which is classified as a White Nationalist Organization by the
Southern Poverty Law Center (SPLC).
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 Noble Power Behind the Wire - www.noblepowbehindthewire.com.

This site is run by the owners of Noble Breed Kindred (http://noblebreedkindred.com/), which is
classified as a Neo-Nazi site by SPLC.
 Aryan Nations -
https://www.amfirstbooks.com/IntroPages/ToolBarTopics/Articles/Featured_Authors/Holappa,_Henr
ik/Documents;_Works_by_Others/20070107_Aryan_Nations.html
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Tucows has not only failed to actively stop illicit sites, but as evidenced by Mr. Noss’s remarks, Tucows
has purposefully prioritized economic profit over morality by defending Tucows’ role. We believe it is
spineless for a registrar to suggest they have no responsibility for content they enable. Stormfront, who
Network Solutions said incited violence when refusing to provide them service, came back online with
Tucows just in time for users to coordinate meet-ups at a white supremacist conference in Tennessee last
weekend.66
There is no escaping the reality that investors in Tucows implicitly support a Company that has chosen to
enable unethical and illicit organizations. As many of the fundamental issues we outline herein come to
light, we believe investors may suddenly use “ethics” as a convenient reason to sell Tucows stock.
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VI. Tucows Compliance Appears Unqualified and Inexperienced
Tucows compliance team is responsible for complaint resolution. Complaints can be filed for inaccurate
Whois information, illegal or malicious activity or content, or against domain providers.67 Considering
Tucows’ compliance team has taken a questionable approach to defining a) illegal or malicious content,
and b) what their role is in removing such content, we believe the quality of compliance leaders is critical.
Based on our diligence, Tucows lax compliance could be explained by leadership who has demonstrated
poor judgment on social media and possesses questionable experience.
Paul Karkas is listed as the Compliance Manager at Tucows in multiple lawsuits. While there is little
available on Mr. Karkas, despite 17 years of serving a seemingly critical role at Tucows, he refers to
himself as the “moral custodian of the internet” on his LinkedIn page.
Mr. Karkas may be a skilled Compliance officer. Nonetheless, we believe it is exceptionally rare and
unprofessional for somebody in his position to post social media pictures of people naked in bed wearing
masks.68
Source: Paul Karkas social media
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As Chief Compliance Officer of Tucows Inc, Mr. Karkas’s role should not be trivialized. However,
considering the primary compliance and reputational risks reside in the domain business, we believe
investor attention should be on the qualifications and experience of Tucows/eNom’s Senior Compliance
Officer.
Enter Sara Scruton, aka Nina Flowers, who is listed as the Senior Compliance Officer of Domain Names
(Tucows/eNom). We would note that her LinkedIn photograph and title seem very professional.
Source: https://www.linkedin.com/in/sarascruton/
We do not believe Ms. Scruton possesses the necessary experience or commitment to be a Senior
Compliance Officer at a controversial domain registrar. Prior to Tucows, Ms. Scruton was an “Office
Manager,” in Toronto with responsibilities that included “Booking Flights and Hotels for Executives” and
“Maintaining phone systems and copiers.”69 She does not appear to have any prior compliance
experience. According to public records, Ms. Scruton received a Recording Arts Management Diploma
for Music from Harris Institute for the Arts, which is described as “The Arts Management Program
(AMP) is an accelerated twelve month Diploma program featuring 62 courses that focus on the new
music industry, from evolving technologies and business models to entrepreneurial opportunities.”70
These observations are not meant to be condescending towards admin jobs or the music profession, but
instead to highlight what we believe to be a woeful deficiency in compliance.
As Senior Compliance Officer for a registrar with 30 million domains (soon headed to 27 million
domains after the undisclosed Namecheap litigation), we would expect Ms. Scruton to have her hands
full. Incredibly, she appears to have time to work as a Toronto-based DJ, knows as Nina Flowers, who
among other time consuming commitments, hosts an internet radio show on dogglounge.com, writes for
kickmagazine.ca, along with dj management, bookings and promotions; Kick, Emperor Norton Records,
Chicks Dig it, Women and Techno, 7th City Recordings and Low Spirit and Converge Bookings.”71
You can see eNom/Tucows’ Chief Compliance Officer, pictured below as Nina Flowers, in action here
(https://www.youtube.com/watch?v=GSjjb1igXEU)
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VII. Organic Growth Is Negative & Margins Are Declining
We believe the structural erosion in all three of Tucows’ business segments is accelerating. As evidenced
by a disastrous 3Q’17, Tucows’ pro forma revenue growth, as well as all major profitability metrics
(EBITDA, EBIT, and pre-tax margins) are in decline
 Negative Revenue Growth

As discussed earlier, the so-called cash cow Domains business has declined by approximately 9% year-to-
date. Yet looking squarely at the headlines, Tucows reported revenue is up 69.3% year-to-date, which is a
steep acceleration from the 10.6% growth reported in 2016. This is of course the “headline” number that
retail investors and factor-driven quant funds see. However, assuming Tucows had owned eNom
throughout the comparison periods, revenue actually contracted by 3.7% year-to-date.
In its quarterly SEC filings, Tucows is required to disclose pro forma results that reflect eNom as if it had
been owned since the start of the year, as opposed to the January 20th acquisition close date. This pro-
forma disclosure shows a clean apples-to-apples comparison. As seen below, reported pro forma revenue
would have been $243.3 million through three quarters of 2017, had Tucows owned eNom from the start
of the year. Similarly, revenue for the same period of 2016 would have been $252.5 million. As seen
below, the aggregate revenue from TCX + eNom declined year-over-year by 3.7% for the first nine
months of 2017, which is a far more sobering picture than the optics of 69.3% growth.
Source: TCX 3Q17 10-Q
There is a similar disturbing trend of declining EBITDA when reported numbers are adjusted to include
eNom for both periods. Tucows management claims that year-to-date EBITDA has been impacted by $7
million from eNom deferred revenue accounting. Note, we will save a discussion on how management
has misrepresented this figure for a later date. For this analysis though, we give Tucows full credit for the
$7 million of squirrely EBITDA add-backs. When adding back eNom’s pre-acquisition EBITDA at a
10% margin, as publicly discussed by Tucows management,72 we find the most favorable outcome would
be pro forma EBITDA year-to-date of $33.4 million. Giving Tucows credit for the fictitious $7 million in
“lost” EBITDA year-to-date, Tucows pro forma EBITDA of $33.4 million would still represent a $0.5
million, or 1.7%, decline from the apples-to-apples $33.9 million of EBITDA in 2016.
As eNom(1) eNom(2) Pro Forma

Reported Pre-Acquisition Rev Rec Impact with eNom
($ millions) 1Q-3Q16 1Q-3Q17 1Q-3Q16 1Q-3Q17 1Q-3Q16 1Q-3Q17 1Q-3Q16 1Q-3Q17
EBITDA $22.8 $25.9 $11.2 $0.4 - $7.0 $33.9 $33.4

Growth Y/Y 13.8% -1.7%
Source: TCX SEC filings and earnings calls
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(1) eNom pre-acquisition add-back calculated based on eNom standalone revenues for the period implied by reported pro forma
combined revenues and assuming 10% eNom EBITDA margin, consistent with management commentary for $15 million eNom
EBITDA in 2016 and $155.8 million standalone reported revenues.
(2) We give eNom full credit for the $7 million of revenue recognition add-back from impact of acquired deferred revenue
accounting reported on 3Q17 earnings call.
 Declining Profit Margins

In structurally challenged businesses, margin contraction and revenue erosion go hand-in-hand. In the
case of Tucows, we believe the combination has been caused by (i) competitive price cuts that reduce
high margin revenue, (ii) lower fixed cost coverage from lower revenue, and (iii) higher variable spending
driven by the need to “do something.” When properly adjusting Tucows’ financial results for the eNom
acquisition, this pattern is clear, with pre-tax margin pressure further exacerbated by the financing
expense from the eNom acquisition.
For the first nine months of 2017, Tucows reported pre-tax income declined from $19.7 million to $13.9
million. Management is quick to point out the bogus $7 million eNom deferred revenue accounting
impact, which if included, would appear to result in a $1.2 million increase in pre-tax income. But this is
an inaccurate and misleading approach. To compare apples-to-apples, eNom’s pro forma contribution to
2016 must also be added back. Considering management’s public commentary, eNom’s 2016 operating
income (estimated at $7.8 million) must also be added back to reported 2016 results to keep the year-
over-year comparisons consistent. Even including management’s inaccurate $7 million adjustment in
2017, operating and pre-tax income would still be down $4.2 million and $6.3 million respectively. Said
another way, Tucows pro forma pre-tax margin has declined by 240 basis points from the comparable pro
forma period last year. Despite adding over $100 million of revenue from the eNom acquisition, absolute
pro forma profit dollars and margins are declining.
As eNom(1) eNom(2) Pro Forma

Reported Pre-Acquisition Rev Rec Impact with eNom
($ millions) 1Q-3Q16 1Q-3Q17 1Q-3Q16 1Q-3Q17 1Q-3Q16 1Q-3Q17 1Q-3Q16 1Q-3Q17
Operating Income $20.4 $16.7 $7.8 $0.3 - $7.0 $28.2 $24.0

Operating Margin 14.5% 7.0% 11.2% 9.6%
Pro Forma Margin Change -1.6%
Pre-Tax Income $19.7 $13.9 $7.8 $0.3 - $7.0 $27.5 $21.2

Pre-Tax Margin 14.0% 5.8% 10.9% 8.5%
Pro Forma Margin Change -2.4%
Source: TCX SEC filings and earnings calls
(1) eNom pre-acquisition add-back calculated based on eNom standalone revenues for the period implied by reported pro forma
combined revenues and assuming 7% eNom operating margin, consistent with management commentary for $15 million eNom
EBITDA in 2016 and $3.9 million reported D&A.
(2) eNom $7 million revenue recognition add-back based on impact of acquired deferred revenue accounting reported on 3Q17
earnings call.
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VIII. Tucows Tactics to Artificially Inflate Revenue & EBITDA
We have identified and documented aggressive reporting techniques and accounting shenanigans Tucows
has implemented that inflates revenue and EBITDA. As discussed in a later segment, Tucows motivation
for inflating the true economics of the business appears to be for financial gain through incentive
compensation and stock sales. We would note that less than two months after the eNom acquisition, long-
time CFO Michael Cooperman abruptly submitted his resignation to the Board with just two weeks of
notice. He was replaced by an internal candidate who had been at Tucows approximately one year. Both
CFOs have sold stock in 2017.
1) Tucows was inflating revenue with “marketing credits”… until they were caught
Prior to 3Q’16, Tucows was overstating GAAP revenue by booking marketing credits as a Sales and
Marketing expense. These expenses should have been booked as contra revenue, which would have
resulted in an accurate depiction of revenue. Beginning in 3Q’16, Tucows was required to restate
historical revenue for 2014, 2015 and 1H’16 to reallocate “marketing credits” as contra revenue. SEC
filing extracts below show the relevant disclosure as well as numbers before and after.
Source: TCX 2015 10-K, 2016 10-K and 3Q’16 10-Q
Had Tucows simply made accurate and transparent corrections to an innocent mistake of booking revenue
for free service, we would not waste time highlighting this episode. However, a closer analysis into the
numbers reveals Tucows pattern of misrepresentation and inconsistent reporting, extended to “the fix” as
well.
i) What Tucows classified as an “immaterial error” appears to be material in certain segments. As

shown below, Tucows inaccurate accounting represented an error of 7% within Portfolio Domain
Services and 3% within of Mobile Services.
ii) What began as an accounting process “mistake” in only Mobile Services in 2014 (as seen by the
0% change in 2014 for every other segment), had somehow spread to every single revenue
segment by 1H’16. That this tactic was used to overstate revenue in new segments over time
suggests to us management systematically rolled out its improper marketing treatment.
iii) Tucows SEC disclosures specifically stated the restatements were to Revenue and Sales &
Marketing. However, beginning in 2015, Cost of Goods Sold was adjusted as well.
iv) If the restatement was solely intended to move improperly booked sales and marketing expense to
contra revenue, then we find it perplexing that “Other Services” (primarily Ting Internet) within
Total Network Access restated COGS lower by 6.7% in 2015, with no subsequent adjustment (as
shown below) to Other Service Revenue. Could Tucows have been booking expenses in its
venture project (Ting Internet) to overstate the margin profile of one of its other segments?
50
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Source: 2015 10-K, 2016 10-K, 3Q16 10-Q, 3Q17 10-Q
2) Tucows Inflated Adjusted EBITDA with Deferred Revenue & FX add-backs the SEC Opposed
Prior to 1H’16 Tucows management was inflating Adjusted EBITDA and margins by adding back
deferred revenue changes and realized gains from FX contracts. In response to guidance provided by the
SEC, Tucows changed its computation of Adjusted EBITDA in 3Q’16. These material alterations had the
net effect of inflating 2014 and 2015 Adjusted EBITDA by $2.1 million and $4.2 million, respectively.
This materially misrepresented results by 17% and 20%, in 2014 and 2015, respectively.
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Source: TCX 2015 10-K and 2016 10-K
3) Reporting inconsistencies in the treatment of FX appear to systematically overstate earnings results

that get revised lower in SEC filings
Examining Tucows usage of realized FX gains in its Adjusted EBITDA calculation shows a pattern of the
same numbers being reported differently depending on the presentation venue. These obvious mismatches
lead us to believe Tucows was systematically inflating headline numbers when reporting quarterly
earnings and then changing those numbers (lower) in annual filings where the quarterly discrepancies are
difficult to assess.
The table below is busy, as it lists Tucows reported quarterly and annual FX impact, as well as Adjusted
EBITDA, from three different sources: (1) the earnings 8K, (2) the earnings PDF published on the TCX
IR website, and (3) the 10K/10Q filings (4Q numbers are calculated by subtracting known quarterly
results from the annual result filed in the 10K).
There are two striking observations that defy logic and point towards a scheme to consistently overstate
Adjusted EBITDA in Earnings press releases.
i) The 8K released by Tucows for quarterly earnings reports discloses Adjusted EBITDA
(without giving detailed calculations) that is consistently ~ 2% higher than the same metric
disclosed in the PDF file. The 10Qs match the 8K EBITDA figures, while the calculated FX
impact accounts for the exact difference between the 10Q / 8K EBITDA and the PDF
EBITDA.
ii) However, for annual reports and metrics, Tucows 10K EBITDA numbers actually match the
earnings PDF numbers (not the 8K). However, when calculating implied EBITDA numbers
for 4Q’14 and 4Q’15, there are 3 conflicting EBITDA numbers Tucows reports. Looking at
52
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4Q’15 EBITDA for example, Tucows’ 8K, PDF, and 10K all (implied) show different
EBITDA numbers for the same period: $6.313 million, $6.183 million, and $5.838 million.
The same pattern exists in 2014.
Source: TCX 10-K, 10-Q filings for 2014-2015, earnings 8-K filings, financial results published on www.tucows.com/investors/financials/
4) Reported EBITDA inconsistencies have continued unabated in 2016 and 2017
While Tucows stopped its nonsensical policy of adding-back realized FX gains in 1Q’16, the Company
continues to add-back unrealized FX impacts. We understand the rationale for this approach, however we
believe Tucows management has not been consistent in its application and these add-backs have been
used as a proverbial cookie jar. Twice in the last year, Tucows has retrospectively increased Adjusted
EBITDA numbers (3Q’16 and 3Q’17), with FX add-backs representing the variable that has been
changed one quarter AFTER being reported.
When Tucows reports second quarter results, like all companies, it also provides results year-to-date.
Incredibly, when Tucows reported its third quarter, in both 2016 and 2017, the previously reported results
for 1H’16 and 1H’17 (13.925M and 16.536M respectively), were inexplicably managed higher. Implied
1H’16 and 1H’17 results can be calculated by simply subtracting the reported third quarter from the YTD
results reported in the same release (in this case 9 months less 3Q). The implied first half results should
not change materially from when Tucows reported the June quarter to when they reported the September
quarter. However, in both case EBITDA changed, and the change was HIGHER.
We believe the vehicle Tucows management has used that accounts for the inconsistencies is the FX add-
back. This technique would be extremely hard to discern without detailed models, which we would guess
neither of the Canadian sell-side analysts, nor quant-based investors maintain.
Source: TCX 10-Q filings for 2Q’16, 3Q’16, 2Q’17, 3Q’17
53
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54
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IX. Management’s Economic Motivation to Inflate EBITDA
Creating aligned incentives is an important consideration when determining executive compensation.

Tucows Compensation Committee has tied 100% of target incentive compensation to Adjusted EBITDA
Performance for all but one Named Executive Officer (NEOs). As such, we believe Tucows’ shenanigans
and aggressive policies to inflate EBITDA may be partially driven by misaligned compensation
objectives.
Source – 2017 Proxy
In general, tying performance compensation to appropriate financial metrics creates sound alignment
between shareholders and executives. However, it is surprising to see performance compensation tied to
EBITDA calculations the SEC deemed impermissible because of concerns about misrepresentation. Yet
that is precisely what Tucows Comp. Committee has done.
According to note 2 of the Proxy’s Incentive Bonus Program section, Tucows executive compensation is
benchmarked against an EBITDA calculation that includes net deferred revenue, “which comprises the
change in deferred revenue net of prepaid domain name registry fees.”
Source – 2017 Proxy
In its 2Q’16 10Q, Tucows acknowledged that this aggressive Adjusted EBITDA definition did not
conform to SEC guidelines, “In response to the clarification guidance provided by the SEC Compliance &
Disclosure Interpretations regarding Non-GAAP Measures, updated on May 17, 2016, we revised our
definition of adjusted EBITDA to eliminate the adjustment for the effect of net deferred revenue”
55
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Source – Tucows 2Q’16 10Q
We believe Tucows executives are being compensated for a definition of EBITDA that does not reflect
EBITDA which accrues to shareholders. Despite abandoning this aggressive EBITDA calculation in 2016
for their financial presentations, Tucows’ Compensation Committee maintained the highly misleading
“add back” definition that inflates EBITDA for 2017 compensation benchmarks. Mr. Noss’s inconsistent
application and discussion of EBITDA, which includes at times highlighting pre-2016 definitions,
suggests the Company continues to play fast and loose with its numbers as the hypothetical EBITDA
figures are not grounded to basic accounting definitions.
Unsurprisingly, all of Tucows NEO’s achieved 100% of their EBITDA targets in the prior year.
56
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X. Tucows Chairman Sells 100% of His Stock; Nine Other Insiders Follow (With MNPI?)
Based on documents in the Namecheap lawsuit, it appears Elliot Noss and the Tucows management team
knew as early as January 20th, 2017 that Tucows would lose more than 3.2 million domains, or 11% of
total domains. As discussed throughout this report, Tucows has withheld disclosing this material liability
and lawsuit to investors, while recognizing revenue and EBITDA from Namecheap domains that were
only under the Tucows umbrella because Tucows had breached the Master Agreement contract.73
How significant were the insider sales and how much money did they make?
From February 10th through December 15th, 2017, nine different Section 16
insiders (including both Co-Chairmen of the Board and both CFOs) filed
twenty-six different Form 4’s disclosing insider sales with the SEC.
In total, insiders sold 401,960 shares for at least $21,269,138 of proceeds while
management hid the imminent adverse loss of the Namecheap domains from
shareholders, and failed to disclose ongoing material litigation that Tucows
itself claimed could “wreak havoc and confusion.”74 75
No insider has been more aggressive and consistent in selling stock than Rawleigh Ralls IV, Tucows Co-
Chairman since 2012. In fact, as disclosed by his Form 4 filed with the SEC on December 15, 2017, Mr.
Ralls has now sold 100% of his stock. And to be clear, Mr. Ralls’ open market sales were not
insignificant considering Form 4 filings show he beneficially owned more than 900,000 shares in 2014.
Source: SEC Form 4 filings, https://ezinsider.washingtonservice.com/CompanyActivity.aspx

Note: adjusted for 1-for-4 stock split on 12/31/2013
While the absolute number of shares sold by Mr. Ralls are startling, his pace of sales during the period in
which we believe management withheld material information appears problematic.
57
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A little over one year ago, on September 6, 2016, Mr. Ralls disclosed the sale of 50,000 shares on
September 1, 2016, which reduced his family’s disclosed beneficial ownership to 336,947 shares.
Source: Form 4 filed 9/6/16
Since filing the Form 4 above on September 6, 2016, Mr. Ralls has sold every single share that he
beneficially owned. Inclusive of 318,719 shares sold from February 10, 2017 through December 15,
2017, during which time we believe material adverse information was withheld from shareholders, Mr.
Ralls sales netted him at least $16,910,956 of proceeds.76
58
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Source: Form 4 filed 12/18/17
Finally, we would note that all five NEOs named in Tucows’ 2017 proxy sold meaningful stock over the
last few years, with Messrs. Cooperman, Woroch, and Goldstein selling stock during the questionable
period in 2017. We would also note that two of the NEOs resigned abruptly, and within one week of each
(Mr. Cooperman on 4/1/17 and Mr. Schafer on 3/24/17).
Source: Definitive Proxy Statement filed with the SEC on 7/25/17
59
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XI. Valuation
We have endeavored to take an intellectually honest approach to valuing Tucows, while recognizing there
is a monumental disconnect currently because of management’s unethical disclosures, the optics of
acquired growth, and momentum strategies that are agnostic to fundamentals. As such, we have provided
two methodologies: sum-of-parts and as a combined holding company.
Considering the Domain Registration business is the only viable segment at Tucows, a brief discussion
explaining our approach is warranted.
The closest publicly traded comps for Domain Services are GoDaddy (GDDY) and Web.com Group
(WEB). An objective analysis unquestionably concludes Tucows is an inferior model, with lower (aka
negative) growth, weaker margins, and a corporate culture that should command a meaningful discount to
its peers.
GoDaddy is the largest domain registrar with 72.9 million domains under management as of 3Q’17,77 or
approximately 22% market share. GoDaddy manages 158% more domains than Tucows, and unlike
Tucows’ 9% organic revenue contraction, GoDaddy’s domains grew 3% organically.78 As far as its
financial profile, GoDaddy’s $271.5 million of Domain segment revenue in 3Q’17 (47% of its total
revenue) is 338% larger than Tucows. Further still, GoDaddy derives approximately 67% more revenue
per domain than Tucows ($15 vs. $9). GoDaddy is also far more profitable, with a 26% EBITDA margin
at the corporate level, compared to a gross margin for Tucows Domains business of just 20%. Finally,
when contemplating multiples, we believe GoDaddy’s dominance, combined with a stronger financial
model and operational execution, will enable ongoing market share gains from the likes of Tucows as the
industry continues to commoditize.
We previously wrote about Web.com on October 30, 2013. Within two years of our report, the stock
declined by 40% as many of the issues we identified came to fruition. For comparison purposes, we
believe the risks in owning Tucows stock are substantially greater than investors undertook at any point in
Web.com. While Web.com is smaller than GoDaddy, they are still nearly twice as large as Tucows with
excellent profitability (EBITDA margins around 26%). Like Tucows, Web.com has struggled with
organic growth, although their (0.5%) organic revenue decline is substantially better than Tucows’ (9%)
decline.
Source: GDDY, WEB SEC filings, Bloomberg

(1) GDDY Pro Forma Revenue Growth reflects growth in “Domains” segment and 2017 YTD growth is calculated based on reported pro forma
revenue for HEG acquisition, attributing 33% of HEG’s historical revenue to its Domains segment. WEB’s Pro Forma Revenue Growth is
adjusting for the Yodle acquisition, as reported by WEB’s 3Q17 10-Q.
To value Tucows’ Domain Services segment, we make some assumptions for revenue and EBITDA
margins (shown below). In 2Q’17 and 3Q’17, Tucows’ Domain business generated $62.8 million and
$62.0 million of revenue (both were full quarters with eNom). For our analysis, we have generously
assumed Tucows can maintain a run-rate of between $240 and $250 million of revenue, despite reporting
an organic pro forma revenue decline of 9% year-to-date. In the sensitivity matrix below, we have
included $280 million to illustrate how Tucows would still be absurdly valued even with wildly
unrealistic scenarios. We would also note that we have not penalized Tucows for the imminent loss of the
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3.2 million Namecheap domains, which could reduce revenue by at as much as $30 million annually.
While we believe a realistic assumption is for revenue to decline to $200 million per year, our sum-of-the-
parts base case assumes the status quo.
To determine EBITDA, we would note that Tucows reported declining consolidated EBITDA margins of
12.3% and 11.0% in 2Q’17 and 3Q’17, respectively. While Tucows does not disclose segment EBITDA
margins (nor would we trust them if they did), Tucows does disclose segment gross margins. In 2Q’17
and 3Q’17, the Domains segment reported gross margins of 19.9% and 18.6%, respectively. If we assume
minimal operating expenses around $7 million per quarter for items such as customer support,
sales/marketing, and technology, and we assume ZERO corporate allocations, we believe EBITDA
margin would come in around 10% (ignoring the 9% decline YTD and the imminent loss of Namecheap
domains, but adding some GDPR margin pressure). For a sum-of-the-parts analysis, we generously give
Tucows a 9x EV/EBITDA multiple, which is in-line with Web.com. This values the Domains business at
$223 million of value.
Turning to Ting Mobile and Ting Internet, there is simply no standalone value for either. Both businesses
are subscale, operate in highly commoditized, competitive markets that possess no barriers to entry, and
are dominated by incumbent behemoths that underprice Tucows. With no realistic scenario of earning
their cost of capital, we believe these businesses are write-offs. Nonetheless, we generously assume $50
million could be realized for the installed subscriber base and asset salvage value. Tucows had net PP&E
of $22.2 million as of 3Q’17, which includes assets other than Ting Mobile and Ting Internet. As such,
we believe a premium to the entire company’s asset value is generous. In the analysis below, we have
assigned $50 million of value to Ting Mobile and Ting Internet ($25 million each).
As shown below, these assumptions yield an $18.86 target value per share when accounting for net debt.
As a cross-check, we also looked at Tucows as a holding company, assuming 2018 pro forma revenue and
EBITDA are somehow held flat with approximately $330 million in 2017. Accounting for the plethora of
accounting, business, and management issues discussed herein, as well as high legal/regulatory
uncertainty, and cash burn associated with Ting initiatives, we believe a multiple of 8x EV/EBITDA is
generous. This yields $23.17 per share, as shown below.
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Source: TCX SEC filings, earnings calls, Bloomberg

(1) Based on 3Q17 annualized revenues
(2) Assuming flat organic growth from pro forma 2017 Revenues
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XII. Appendix: Three Additional Misrepresentations of KPI’s and Biz Metrics
1. Management systematically overstates domain name registration

Registration of new domain names, transfers from other registrars, and renewals of existing registrations
are an important metric for the Domain Services business. In fact, management has disclosed this metric
as a primary “Key Business Metric” in SEC filings:
Source: TCX 2Q13 10-Q
It is therefore disturbing that Tucows repeatedly overstates new registered domains in its earnings reports
and quarterly filings, only to lower those metrics in subsequent quarters in 10Q filings. We believe a
similar shenanigan was used with FX add-backs to overstate current period Adjusted EBITDA.
We have meticulously tracked management’s games, which can be found in the table below. In the
column “reported 1Q,” we list the number of new domain name registrations management disclosed when
reporting 1Q for each year. The second column, “Reported 2Q,” lists the new registrations management
reported at the time the second quarter of each year was announced. When reporting the second quarter
for each year, Tucows management also provides the first half total new registrations, which is the
column “Reported 1H.” By subtracting “reported 2Q” from “Reported 1H,” we can calculate for the
implied 1Q registrations, which should obviously match the new registrations provided when 1Q was
reported. This has not been the case. As seen in column “Overstatement 1Q,” we show the difference
between new registrations reported when releasing 1Q and the implied 1Q new registrations when
reporting 2Q. As you can see below, management has consistently overstated new registrations when
reporting 1Q, only to revise them lower a quarter later.
The same exercise can be applied to 2Q reported vs. 2Q implied with 3Q earnings reports. Without fail,
domain name registrations always appear better at the time of earnings reports, only to be lowered
IMPLICITLY when subsequent reporting occurs and investors are no longer focused on past quarters.
Since 2012, management has overstated the 2Q new registered domains by an average of 9%!
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Source: TCX 10-Q filings 1Q12 thru 3Q17
2. Tucows misrepresented Ting Mobile’s Organic Growth in 1Q’17

In the first quarter of 2017, Tucows used a promotional offer to onboard customers to Ting Mobile from
RingPlus, a failing MVNO. On the 1Q’17 earnings call, management stated Ting Mobile added 5,500
organic subscribers:
“Ting mobile had a solid quarter of organic growth. We added 5,500 accounts and 12,000 devices
outside of the RingPlus deal that I mentioned on the last call.” - TCX 1Q’17 Earnings Call
The disclosure on the earnings call was consistent with the math from the first quarter 10Q that disclosed
an increase in the quarter of 24,000 total subscribers, of which 18,500 came from RingPlus (24,000 total
adds – 18,500 RingPlus = 5,500 organic):
Source: TCX 1Q’17 10-Q
Once again, Tucows management team overstated a current period reporting metric only to later revise it
lower in future quarters. Only in this case, Tucows was caught, which forced management to correct their
misrepresentation on the 2Q’17 earnings call. The overstatement was 10%.
“We originally talked about 5,500 organic adds last quarter. After digging into the data a little
deeper, it appeared the more accurate number would be 5,000 in Q1.” - TCX 2Q’17 Earnings Call
Like most lies, we believe admitting to one, but not others, results in a cascading effect of inconsistencies.
While management was correcting their misstatement about 5,500 organic 1Q’17 adds, they reiterated
RingPlus added 18,500 subscribers at the end of 1Q’17 (emphasis added):
“Now an update on that RingPlus base. Again, we initially migrated over 45,000 accounts. 22,000 of
those initially accepted our terms of service, gave us a valid credit card and set up an account. 3,500
had departed even before the end of Q1, leaving us with 18,500. - TCX 2Q’17 Earnings Call
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If total reported subscribers grew from 151,000 at year-end 2016 (reported in the 2016 10K), to 175,000
at the end of 1Q’17 (reported in the 10Q), then Ting Mobile added 24,000 subscribers in 1Q’17. If
RingPlus accounted for 18,500 subscribers in 1Q’17, which is what management stated on the 1Q’17 call
and again on the 2Q’17 call, that would still imply 5,500 organic adds in 1Q’17 (24,000 – 18,500 =
5,500). Yet, management claimed they made an error and organic sub adds were 5,000 in 1Q1’7, not
5,500….
So we believe either i) Tucows management is totally inept at basic math, or ii) reported subscriber
numbers were overstated in the 10Q and have not been recast, or iii) management is making it up as they
go along.
In a vacuum, this inconsistency would be immaterial. However, it fits a much broader pattern of highly
questionable, retrospective tweaks to results, which almost always flatter metrics when reported, only to
reduce those previously reported metrics later without proper disclosure or explanation.
3. Tucows management either fabricated or witheld disclosing 3Q’16 benefits, when making excuses
for missing 3Q’17 consensus by 14%
Tucows reported Adjusted EBITDA of $9.4 million in 3Q’17, which missed the prevailing consensus
estimate of $11.0 million by 14%. Management cited a difficult year-over-year comparison due to $1
million of one-time benefits in 3Q’16 that did not recur in 3Q’17. Specifically, management alluded to a
$0.7 million benefit in 3Q’16 from favorable timing between when Ting Mobile received price breaks and
when those price breaks were passed on to customers (emphasis added):
“I should also mention that the year-over-year comparison suffers from a quarter of outsized Ting
Mobile margin in Q3 2016. As we reported at the time, we received price breaks from our carrier
partners early in that quarter before passing on that price break to our customers by the end of that
quarter. That price break has reduced churn while maintaining strength in gross adds. That's the
inflated, but -- it briefly inflated profit margin in Q3 2016 and did crop up EBITDA. Q3 last year also
benefited from the reversal of overachievement bonus accrual that was not repeated this year.
Together, these added nearly $1 million to EBITDA last year…[In] the third quarter of 2016 we
reversed an overachievement bonus accrual of $0.3 million, which was not repeated in the third
quarter of 2017.” - TCX 3Q’17 Earnings Call
Management stated “As we reported at the time,” when referencing some purported disclosure about one-
time benefits on the 3Q’16 call. The problem is management shared nothing about these supposed one-
time benefits when they reported 3Q’16. This narrative was NOT part of the 3Q’16 call, and it is
dangerous for management to suggest this was highlighted at the time. What management did claim when
reporting 3Q’16 was “record performance,” which Mr. Noss attributed to “significant operating leverage”
in the business (emphasis added).
“The third quarter again saw record performances across each of our key financial metrics. Net
income and adjusted EBITDA were up 50% and 48% respectively, as a result of the significant
operating leverage in our business…Ting Mobile business remains strong with low cost per
acquisition and growing base, margins slightly over 50% and monthly churns that should average out
to around 2.5% for the year…gross margin for network access increased by 2.5 million or 36% to
$9.6 million from $7.1 million for the third quarter of last year, with the increase driven entirely by
Ting Mobile…” - TCX 3Q’16 Earnings Call
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If there were one-time benefits that reduced churn and inflated profits in 3Q’16, why did management fail
to disclose these benefits as “one-time” on the conference call as they claimed? This is of course a
rhetorical question.
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1
The Ottawa Citizen January 20, 2002 Sunday Final EDITION; The Lolita problem: Child Pornography is
booming, thanks to the Internet -- and the unwitting support of corporate America
2
https://domainnamewire.com/2017/12/21/court-orders-tucows-transfer-3-2-million-domains-namecheap/
3
Amended Declaration of David Woroch in Support of Defendant’s Bond Request, Case No. 17-2-26522-5
4
http://domainnamewire.com/2017/07/19/namejet-sellers-center-shill-bidding-questions/
5
Rightside Group 2015 10K
6
https://de.wikipedia.org/wiki/Bibel_TV
7
https://www.bibeltv.de/bibel-tv/ueber-uns/bibel-tv-portraits/norman-rentrop/
8
http://msa-capital.de/?page_id=190&lang=en
9
http://msa-capital.de/
10
LinkedIn profiles
11
Amended Declaration of David Woroch in Support of Defendant’s Bond Request, Case No. 17-2-26522-5
12
13
14
Ibid
15
Ibid
16
https://vtdigger.org/2017/10/06/parent-company-burlington-telecom-bidder-registers-neo-nazi-site/
17
18
Ibid
19
Sites were brought to the attention of Tucows in a blog post, to which they responded on December 15, 2017 with
a blog post of their own
20
Holmes, Ronald M.; Stephen T. Holmes (2002). Current perspectives on sex crimes. SAGE. p. 165
21
https://www.splcenter.org/fighting-hate/intelligence-report/2017/active-hate-groups-2016
22
https://www.linkedin.com/in/paulkarkas/
23
https://www.linkedin.com/in/sarascruton/
24
http://www.harrisinstitute.com/
25
http://www.ninaflower.com/?page_id=2
26
(1) eNom pre-acquisition add-back calculated based on eNom standalone revenues for the period implied by
reported pro forma combined revenues and assuming 7% eNom operating margin, consistent with management
commentary for $15 million eNom EBITDA in 2016 and $3.9 million reported D&A.
(2) eNom $7 million revenue recognition add-back based on impact of acquired deferred revenue accounting
reported on 3Q17 earnings call.
27
Letter from Tucows attorneys as disclosed in the Namecheap litigation arguing why Tucows refused to transfer
the domains to Namecheap
28
Note that when there were multiple prices listed in Form 4’s, we used the lowest reported price in our calculations
that would show the lowest possible amount for insider sale proceeds. The actual proceeds were most likely in
excess of what we state.
29
Form 4’s filed with the SEC. Note that when there were multiple prices listed in Form 4’s, we used the lowest
reported price in our calculations that would show the lowest possible amount for insider sale proceeds. The actual
proceeds were most likely in excess of what we state.
30
$15 million eNom first full year EBITDA estimate based on CEO comments on 4Q16 earnings call
31
https://langfrist.de/
32
Ibid
33
https://de.wikipedia.org/wiki/Bibel_TV
34
https://www.bibeltv.de/bibel-tv/ueber-uns/bibel-tv-portraits/norman-rentrop/
35
36
http://msa-capital.de/
37
38
http://langfrist.de/teilgesellschaftsvermoegen-informationen.html
39
http://jmxcapital.com/?page_id=543
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40
https://www.linkedin.com/in/dr-mathias-saggau-1186223b/
41
JMX 1H17 Investor Letter
42
https://www.linkedin.com/company/629398/
43
Q1’17 Earnings Call
44
https://www.sec.gov/Archives/edgar/data/909494/000143774917003986/tcx20161231_10k.htm
45
https://www.sec.gov/Archives/edgar/data/909494/000143774917003986/tcx20161231_10k.htm
46
https://www.icann.org/registrar-reports/accredited-list.html
47
https://ting.com/blog/ting-drops-data-prices-to-10-gb-beyond-the-first-gig/
48
https://www.freedompop.com/
49
Source: 3q 2017 SEC filings for T, VZ, S, TMUS
50
https://ting.com/tingontv?lpn=tingontv
51
https://ting.com/blog/hey-remember-that-time-you-asked-us-to-fix-home-internet-access-too/
52
Disclosed by TCX CEO on TCX 3Q15 Earnings Call
53
https://www.youtube.com/watch?v=_K4DRL6q7uo
54
We estimate no more than $1 million per year of capex on non-FTTH initiatives, which is consistent with capex
levels from 2011-14 (“pre-FTTH” years)
55
http://www.burlingtonfreepress.com/story/news/2017/11/27/could-end-tonight-city-councilors-plan-vote-final-bt-
buyer/858853001/
56
57
58
Ibid
59
Ibid
60
https://www.vox.com/policy-and-politics/2017/8/14/16143820/godaddy-and-google-wont-host-daily-stormer-
domain
61
https://vtdigger.org/2017/10/06/parent-company-burlington-telecom-bidder-registers-neo-nazi-site/
62
https://www.npr.org/sections/thetwo-way/2017/08/14/543360434/white-supremacist-site-is-banned-by-go-daddy-
after-virginia-rally
63
http://www.tucows.com/why-tucows-doesnt-take-down-domains-for-website-content-issues/
64
65
Holmes, Ronald M.; Stephen T. Holmes (2002). Current perspectives on sex crimes. SAGE. p. 165
66
https://www.huffingtonpost.com/entry/nazis-are-back-online_us_59d40719e4b06226e3f46941
67
https://www.tucowsdomains.com/help/file-a-complaint/
68
https://www.linkedin.com/in/paulkarkas/
69
https://www.linkedin.com/in/sarascruton/
70
http://www.harrisinstitute.com/
71
http://www.ninaflower.com/?page_id=2
72
Based on $15 million first full year Adjusted EBITA guidance for eNom confirmed by TCX management on
4Q16 earnings call and $155.8 million eNom revenues in 2016, as reported on 4/3/2017 SEC form 8-K
73
According to Namecheap Complaint & an Order by King Superior Court for Tucows to transfer the domains
74
Letter from Tucows attorneys as disclosed in the Namecheap litigation arguing why Tucows refused to transfer
the domains to Namecheap
75
Note that when there were multiple prices listed in Form 4’s, we used the lowest reported price in our calculations
that would show the lowest possible amount for insider sale proceeds. The actual proceeds were most likely in
excess of what we state.
76
Form 4’s filed with the SEC. Note that when there were multiple prices listed in Form 4’s, we used the lowest
reported price in our calculations that would show the lowest possible amount for insider sale proceeds. The actual
proceeds were most likely in excess of what we state.
77
https://www.sec.gov/Archives/edgar/data/1609711/000160971117000249/gddy10q-20170930xq3.htm
78
https://www.sec.gov/Archives/edgar/data/1609711/000160971117000042/gddy-
12312016x10k.htm#sDEEB2FC07A125D7BA748286C1FC81E65
68

Tucows Inc (TCX) - Cashing in On Neo-Nazis, Child Porn, & A Hidden Lawsuit As Insiders Dump

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Tucows Inc (TCX) - Cashing in On Neo-Nazis, Child Porn, & A Hidden Lawsuit As Insiders Dump

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COPPERFIELD RESEARCH

Tucows Inc. (TCX):

Cashing in on Neo-Nazis, Child Porn, & A Hidden Lawsuit as Insiders Dump

Fair Value: $20.00 per share, 70% downside

Elliott Noss, CEO of Tucows

IMPORTANT Disclaimer – Please read this Disclaimer in its entirety before

And we will go on….

I. A Brief Introduction of Tucows and the eNom acquisition (pg 13)

IV. Namecheap – An Undisclosed Lawsuit with Material Ramifications (pg 33)

Source: King County Superior Court

V. Tucows’ Enablement of Neo-Nazism, Fascism, Child Pornography & Pedophilia (38)

VI. Tucows Compliance Appears Unqualified and Inexperienced (pg 46)

Source: Paul Karkas social media

IX. Management’s Economic Motivation to Inflate EBITDA (pg 56)

XI. Valuation (pg 61)

Source: TCX SEC filings, earnings calls, Bloomberg

Enter eNom, quant funds, and a misinformed German shareholder.

So what happened to cause such a dislocation?

Source: Bloomberg. Red Line = 2017 Earnings Estimates

Why is this relevant?

1) Does the company have a reasonable business model?

1) structural, hard to replicate competitive advantages

 When 103.8% Growth is Really a 9% Organic Decline:

Source: TCX 2016 10-K

Source: TCX SEC form 8-K on 4/3/2017

 Two Material Secular headwinds:

Source: TCX 2016 10K

Source: TCX 3Q’17 10Q

Source: TCX 2016 10-K

Source: TCX 2016 10-K

Source: TCX 2016 10-K

Source: TCX SEC filings

Source: Ting Mobile, Sprint

Source: Ting Mobile, Sprint

Source: www.FreedomPop.com, Tucows SEC filings and quarterly earnings calls

 Ting Mobile organic subscriber metrics are decelerating

Source: Tucows SEC filings and quarterly earnings calls

 No Visible Endgame for Ting Mobile

 Chasing Gigabit Internet with a bad strategy and Dubious Assumptions

Source: Tucows / Ting Internet

Source: TCX SEC filings

Source: https://ting.com/internet/, www.broadbandnow.com, www.xfinity.com, www.centurylink.com, www.wikipedia.com, TCX 3Q17 earnings

Source: King County Superior Court

Source: King County Superior Court

Source: King County Superior Court

Source: Letter from Tucows counsel Morgan Lewis to Namecheap’s counsel

Source: Namecheap Complaint, King Court

 North American Man/Boy Love Association (NAMBLA) - www.Nambla.org

 Christian Boylove Forum - https://www.cblf.org/

 Enchanted Island Online - https://www.enchanted-island.online/

 Noble Power Behind the Wire - www.noblepowbehindthewire.com.

Source: Paul Karkas social media

 Negative Revenue Growth

Source: TCX 3Q17 10-Q

As eNom(1) eNom(2) Pro Forma

EBITDA $22.8 $25.9 $11.2 $0.4 - $7.0 $33.9 $33.4

 Declining Profit Margins

As eNom(1) eNom(2) Pro Forma

Operating Income $20.4 $16.7 $7.8 $0.3 - $7.0 $28.2 $24.0

Pre-Tax Income $19.7 $13.9 $7.8 $0.3 - $7.0 $27.5 $21.2

Source: TCX 2015 10-K, 2016 10-K and 3Q’16 10-Q

i) What Tucows classified as an “immaterial error” appears to be material in certain segments. As

Source: 2015 10-K, 2016 10-K, 3Q16 10-Q, 3Q17 10-Q

Source: TCX 2015 10-K and 2016 10-K

3) Reporting inconsistencies in the treatment of FX appear to systematically overstate earnings results

4) Reported EBITDA inconsistencies have continued unabated in 2016 and 2017