OK Nik good solutions. 17.033 million shares at todays close would be $574,012,100.00. And that would only buy 12.5% of the company. Chump change to Goldman but still a lot of money. Pension fund managers would prefer the leader Best Buy. Leveraged buy out won't work because assets and cash flow don't exceed the cost of the buyout. Specially since interest rates have risen. Lack of Radio Crap assets prevent a leveraged buyout. Circuit City buying? What with? Stock at $15 a pop? And why would CC want to buy Radio Crap? You say cash, but remember last quarter Radio Crap generated 37 million of free cash and Day spent 45 million buying Radio Crap stock. And the only reason cash is increasing is because Day is cutting expenses at the expense of sales and inventory. If Radio Crap stays in business, it must buy inventory. All retailers must have inventory to be a retailer. Radio Crap stores are low on inventory - this hurts sales. Analyze the balance sheet and last quarters 10-Q. The cash improvement over same quarter 2006 was significant. But remember 2006 was a disastor year. Day joined Radio Crap and began writing off inventory and closing stores. Taking all the hits in 2006 so the 2007 numbers look good. But I say again, Day has nothing but brought the EPS back to low average and has done so at the cost of killing growth, and at the cost of revenues and same store sales. Watch the 2nd quarter results. Revenues will be down and same store sales will be negative - again. Many people have said it before and I will repeat - Day can't grow the company by cutting expenses. Cell phone revenues were to be the prior CEO's savior - they weren't. Radio Crap can't compete with competitors on any high ticket items. So batteries and accessories are Radio Craps bread and butter. The numbers don't work. They didn't work for Best Buy, they didn't work for Circuit City, and they won't work for Radio Crap. Have a safe and happy Holiday.
"If you owned Goldman and your basis was $26, what would you do?"
I would sell the shares to a consultant who would have had a dirty arrangement with a small consortium of pension fund managers (gotta keep the Goldman name pristine). After the consultant had a signed sales contract with the pension fund managers I (Goldman) would then short RSH. Or, I would try and peddle the entire RSH equity in a LBO that was back by others. Nice, clean exit for Goldman- and they would make banking/ consulting fees of a few hundred million to boot. Finally, I would sell RSH to CC to where CC would gain much needed cash (from RSH). Of course CC would go BK two years ater but Goldman would make a killing and Day would have cashed out also. A company named LVLT has done a simalr thing for over 5 years- bought bad company's at high prices to gain cash and/or prvent LVLT itself from violating loan covenants.
Nik - Thats the hook. You, me, and Goldman always follow the same unwritten stock market rule - FIND A GREATER FOOL. You, me, and Goldman only make money by buying/selling at a better price than we paid. If you owned Goldman and your basis was $26, what would you do?
This is likely the report I caught the last few words on CNBC this AM........ thought, but couldn't be certain, it said this outfit had reported it held a 5% passive stake in RSH Stock....... kept looking at the DOW and Yahoo, but didn't see anything else till this Post....... of course, the timing of the initiation of this "passive" stake is of some importance...... if that can be determined?.....
The big questin is where did Shaw but the shares... Open market, private transaction from Goldman or Fidelity? It would be great if it was a private transaction from Goldman. Goldman needs to be removed from a long RSH position.