When Hott announced a special one dollar dividend, the stock traded at $7.90.
Currently, Hott fetches 4.92 a share. A huge 37 percent drop in the stock. So, special dividends are like reverse splits, they destroy shareholder value. Just watch, BEBE will trade for 3 per share by Nov, 2010.
My preference would be for Bebe to use the $80 million to buyback 12 million shares at the current low stock price than pay a dividend.
I do expect the stock price to spike up to between $7.50 to $8.50 per share with this announcement, but I don't think the stock will drop back below the $6.50+/- per share low that it has been bouncing along for the past couple months.
It is finally good to see them pull the plug on the old Bebe Sport / PH8. It was a money losing operation and a big distraction for management. I believe on one of the past conference call they indicated it was going to lose about $.08 per share on an operating basis this year.
It will be veiwed as very positive to dump this under performing business and focus on the turning around the core Bebe brand.
With this repositioning, my bet is the company will eventually put itself up for sale.
Yes, but look at what happened to HOTT immediately after the announcement.
BEBE is in no way a stock with value. I would bet against it any day. Throw a stone on your screen (of course make sure you don't break it) and you'll hit a ticker with better value. But the question is what happens from now until July 21.
Can it give you some protection tot he downside with the potential to pocket some?