How to Trade SOPA: See Who Is Safe

Today, websites including Wikipedia and Reddit are protesting government efforts to increase censorship. In an effort to make their voices heard, citizens across the United States are doing everything they can to protect free speech on the internet.

Everyone has heard about the Stop Online Piracy Act and its ramifications on the online community if it passed Congress. Benzinga was one of the first news sources to cover the possibilities of SOPA legislation. Benzinga also discussed another type of IT company that may not be affected severely by SOPA. However, there are still SOPA-derived risks, in terms of operational growth and sustenance, when it comes down to all IT companies.

Until now.

Benzinga may have found one of the very, very few companies that has an incredibly high probability of not really suffering from SOPA.

Our thesis relies primarily on a company's business model: most publicly traded, internet-based companies are heavily involved with search engine activity and the flow of internet traffic. One business model that is essentially not affected is an internet service provider. For the most part, large, dedicated internet service providers are not publicly traded, making investments in the industry nearly impossible. However, there is Boingo.

Boingo Wireless WIFI is a small-cap company that specializes as a mobile internet service provider. If you have ever traveled on a plane that offers Wifi services, there is a good chance that Boingo was the internet provider. Boingo also hosts Wifi locations in shopping malls, hotels, sports arenas, and restaurants. Considering its singular business model, it does not seem likely that Boingo will suffer from SOPA.

Our thesis primarily relies on the total number of internet users. If SOPA ultimately decreases the amount of internet users and activity in the United States - as far as Boingo is concerned - then every internet related company will be affected to some point. However, we do not believe that SOPA will have that affect. It seems that content sharing and data aggregation abilities on the internet will be affected the most, preventing many companies from doing their business. However, the internet traffic that previously served these functions will probably just shift to other facets of the online experience. For this reason, it seems that users will continue to use the internet in a traditional manner. This means that Boingo's customers will, for the most part, continue to use the Wifi service with the same frequency and volume.

Boingo's historical performance seems to show a growth story that investors look for. Revenues increased over every quarter, but the company has managed to keep operating expenses at manageable level. This resulted in a fairly steady income stream. Moreover, the company has managed to bolster its cash position over the quarters. Primarily due to net income and changes in working capital, Boingo has managed to increase operational cash flow. It has also increased capital expenditures over time, which may mean that it is continuously expanding itself. Lastly, the company has started to issue equity - due to its public offering - and has issued a dividend as well.

Investors may be interested in Boingo to hedge themselves against the possibilities arising from SOPA. It may also seem like a lucrative proposition for investors looking for investment in mobile internet services. Investors should learn more about Boingo's exposure, its exact product offerings, and where its management wants to take it in the future.