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Krispy Kreme Doughnuts, Inc. Message Board

  • mr_sixfigures mr_sixfigures Oct 1, 2005 10:22 PM Flag

    Why does di_vur want KKD to fail?

    Any ideas? Anybody?

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    • There are at least two things that you probably don't know. The debt load at this point is roughly $150M, which means KKD is paying at least $15M just in interest, this is likely to go higher and higher (debt increasing, interest rates increasing). We are talking about 25 cents per share just in interest.

      REQUEST LINK TO THE RATE OF INTEREST.
      ALSO, LEST WE NOT FORGET THAT CAP EX WILL BE REDUCED DRAMATICALLY B/C OF MINIMAL NEW STORE OPENINGS. THIS WILL INCREASE CASH FLOW IN THE SHORT TERM.
      AND BY THE WAY, HOW IS THE DEBT INCREASING? WE HAVE NO INDICATION THAT THEY HAVE BORROWED MORE FROM CURRENT FACILITIES OR ADDED ADD'L FACILITIES.

      ALSO, I'VE HEARD ALOT ABOUT THIS MUMBO JUMBO ABOUT A 'HONEYMOON PERIOD'. REQUEST LINK TO THE DATA THAT SUPPORTS THIS CONJECTURE. EVEN IF TRUE BY THE DATA, THIS IS CERTAINLY AND TREND THAT CAN BE REVERSED BY BETTER OPERATIONS/ MARKETING. REMEMBER, BOTH NOW AND IN FUTURE, WE WILL HAVE DIFFERENT MGR'S IN CHARGE OF OPERATIONS.

      Well, here you do sound clueless. Read a bunch of articles that came before the new loan was arranged. They were estimating that KKD would need to close about 100 non-profitable stores. How many have they actually closed? What is the advantage of going bk when you want to get out of lease contracts??

      CLUELESS IS LISTENING TO A BUNCH OF 'REPORTERS'. IF THEY KNEW HOW TO RUN A BUSINESS THEY'D BE CEO'S AND COO'S, NOT REPORTERS. I HAVEN'T SEEN A SHRED OF EVIDENCE THAT KKD HAS ANY INTENTION OF CLOSING 100 STORES. YOUR TALKING 1/3 OF THEIR STORES ... THATS OBSCENE.

      THE BOTTOM LINE IS THAT NO ONE KNOWS THIS BUSINESS AS WELL AS THE MGR'S. PUBLIC STATEMENTS FROM COOP HAVE ALL BEEN POSITIVE. IN ADDITION, THE SUCCESS FEE IS A POSITIVE INDICATOR. HOW MANY OF US HAVE USED INSIDER BUYING AND SELLING AS AN INDICATOR (GRANTED ONLY ONE OF MANY) OF A STOCKS POSITIVE OR NEGATIVE FUTURE??

    • on the upside kkd has no multiple to earnings
      since they have never had any that they
      can prove;

      as for growth they are doing there best to stop the bleeding in store closings and putting
      their franchisee' out of business;

      if kkd survives a bk filing it will be with
      squeaky clean financials that will do little to
      value kkd over a penny stock;

      the ultimate value of a share off kkd will
      be based on current net asset value,
      proven history of good business execution,
      stellar management with a strong background in the food business and a plan to take kkd into the black with a "written" business plan,
      timely and exact financials (good or bad).

      many argue that a few hundred people lined up to spend a $5.00 spot on a box of doughnuts
      and a cup of java is proof of kkd's
      financial strength...it's true kkd can sell
      their way into the black as soon as kkd
      gives us some measurement of their
      net financial position.

      after all how does one manage what you can't
      measure?

    • All rather academic to me. If you hold on to a near worthless or worthless stock in your portfolio, you broker won't report the gain. Don't tell Uncle and Uncle won't know.

    • "first off, they have been losing money only for a few qtrs in a row. many posters insinuate that they are a perenially money loser which just isnt true. even though we dont have up to date financials, the sc report shed light on the adjustments. 2001-2004 will still be profitable years after the restatement."

      There are at least two things that you probably don't know. The debt load at this point is roughly $150M, which means KKD is paying at least $15M just in interest, this is likely to go higher and higher (debt increasing, interest rates increasing). We are talking about 25 cents per share just in interest.

      And perhaps the most important issue, if you look at new stores, the peak of the buildup was in 2004. If you knew about KKD store cycles, you would know that the stores go through a honeymoon period (about 1 year), and from there is a slide until about the 3th or 4th year, when sales begin to stabilize and *grow* again. So, for the most part, 2004 and part of 2005 have been the end of the honeymoon period for close to a hundred stores, and we are entering the slide. Of course, KKD still has 300+ stores, but the point is that a big percentage are now entering muddy terrain.

      "think about bk from this perspective. what would mgt or the company gain from bk. unlike airlines or auto makers, there are no legacy costs to eliminate, there are no contracts to renegotiate in their favor. the only way they file bk is if they run into another cash crunch again and they have no choice. "

      Well, here you do sound clueless. Read a bunch of articles that came before the new loan was arranged. They were estimating that KKD would need to close about 100 non-profitable stores. How many have they actually closed? What is the advantage of going bk when you want to get out of lease contracts??

    • their all substantive mung. your just upset b/c pointed out the faultiness of your logic of deferring taxes on a shorted stock. you point out in your last post that you cannot defer taxes on a worthless stock indefinately, which proves my point.

      now you certainly can defer them if the stock goes nowhere, but why tie up available funds on a stock that goes nowhere for tax purposes only. and i dont think anyone on this board thinks this stock will stagnate for too long. its either going bk or going up.

    • <But if the stock goes bankrupts and become essentially worthless (pennies or even less per share)and I never cover), I never have to pay a dime in taxes.>

      Wrong. The gain must be recognized when the stock becomes worthless. But it is better to defer the tax bill for as long as possible in order to have interest free use of the money.

    • Valueinvestor07, could you point me to something substantive you've ever posted that related to KKD? I must have missed it.

    • thanx for the education. although i have a few points.

      correct, i have never shorted a stock, nor do i ever intend to short a stock. so this is merely academic.

      even w/ my limited shorting knowledge. im not buying all of your points and i have questions about others.

      my understanding is that when you short a stock, you get cash instantly ONLY b/c you are selling the stock. it is not necessarily profits from a stock decline. therefore, any 'profits' would be unrealized until the stock is 'bought' back. this point is in contradiction to paragraph 3 of your post. again, being a short novice, i will welcome any add'l points here that i am missing.

      in regards to paragraph 4 example. the day you short, you should get a deposit of $370,000 for selling the stock. correct? or am i missing something. i ASSUME (i realize i may be making an ass of myself by assuming) that there are some sort of rules pertaining to your use of the stock sale proceeds, since you will potentially have to return the shares at some point. anyway, your example doesn't seem right based upon my understanding (which admittedly may be incorrect).

      in regards to paragraph 5, i go back to my point about future expectations and past performance. what i mean is ... however much i may have made or lost on a stock in the past SHOULD BE irrelevant to a future decision. therefore, in your example, kudos for making money, but your decision SHOULD be what is my expected return considering the probability of success/ failure versus an alternative investment considering its corresponding probability of success/ failure.

      my point is that using the 'im playing w/ the house's money' is an illogical argument. of course, taxes would play a role in the decision-making in a sense that you would adjust your expected return/loss if realization is a factor.

      in regard to paragraph 6 (taxes). i do buy the fact that you can defer the taxes for sometime. but in most cases, after bk, the stock is 'cancelled'. i dont know this for a fact, but i find it hard to believe that the irs would consider stock cancellation as allowing you to continue to 'hold' a worthless stock indefinately. i welcome comments from our tax lawyers, as i am not. if my assumption is correct then your deferral in the event of stock cancellation would be limited to months or a year or so at most.

      my other point was this ... ok so you have gains, but until you cover, those funds are tied up and you are unable to make an alternative investment with them. tax consequences in and of themselves is not a reason not to make a future investment. it is a consideration, but its not the end all be all.

      also, if the stock goes from $50 to 6, you've made major dollars. if it goes down another dollar to $5, you've have not made major dollars.

    • I am not short nor long. I took my losses many months ago.

      See prev post of up to a year ago.

      I still respect anyone who makes any arguement without namecalling and uses logic.

    • Perhaps I should not have used the phrase "essentially worthless." As long as the stock is still listed (on the pink sheets, for instance) and is still traded (or tradeable), you don't have to cover. Think about it: if KKD trades on the pink sheets for .037 per share, which is 0.1% ($380) of the hypothetical investment in my previous post, can the IRS make me or any ones else buy or sell? Ever? Of course not! I can hold out in the "hope" (ha!) that the stock price will recover.

      This issue has been hashed out in detail in previous posts by Mungerian and others. Take a look.

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