An arm’s length transaction is one where the buyer and seller act independently, with each party pursuing their own best financial interest, without any relationship or control influencing the agreed price.
In the domain industry, this means both parties negotiate a domain’s selling price freely, based on market forces, without undue influence, shared ownership, or other type of coercion.
Which brings us to the sale of the domain Profit.com for 1.1 million Euro, as extracted from a recent UDRP.
The domain belonged to entrepreneur Tasos Papanastasiou, who sold it to Darqube Ltd. It would have been a simple exchange of money for a domain, except that the transfer of the domain name to Darqube Ltd was part of the investment round and Tasos Papanastasiou became an investor and one of the shareholders of Darqube Ltd.
As such, the domain sale was not an arm’s-length transaction because it occurred as part of an investment round in which Papanastasiou became a shareholder in the acquiring company. An arm’s-length deal would require that both sides acted independently, with no overlapping interests or expectation of mutual gain beyond the exchange price.
In the case of Profit.com, the domain’s transfer was tied to an equity arrangement: The seller gained an ongoing financial stake in the buyer’s success, eliminating the independence required for a true market-based sale.
Despite the fact that the transaction and its financials were disclosed in legal proceedings and may represent a fair internal valuation for investment purposes, it cannot be treated as the domain’s standalone market value.
The transaction effectively blended cash, equity, and strategic alignment, making it a related party or capital contribution-in-kind event rather than a pure domain sale.
With thanks to domain investor and financial expert, George Kirikos, who flagged down the exchange and contributed to its analysis with valuable information on its behind-the-scenes activities. 👍🏻
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