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Black Diamond, Inc. Message Board

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  • bob_afet bob_afet Jun 8, 2010 1:00 PM Flag

    healthy retreat on developing story

    this is going to be a bit of a longer hold than I first expected. The friday report did not give a very clear understanding of the growth we can expect to see at these companies. Unfortunately it appears we will need to wait and see if WK and RS can expand margins and implement merger synergies between the two companies. (I think the first thing we can see cut is the reseach budget)The one postive that came out of this is that it would appear we have relatively solid alignment of interest given that WK and RS sold gregory for half stock and the other half in 5% interest notes - so In reality their entire stake in gregory is still tied to that original investment and now ours. However, anyone whose original value thesis rested in WK's option expiration dates will have found themselves very upset when he simply extended their dates by 5+ years.

    next 30 day prediction I expect to see this stock hit 5.50 a share - maybe lower. Original investors got in on a value philosophy that money can be put to work at reasonable multiples and there would be instant upside. Those same investors are now feeling extremely nervous / upset that WK took their money and bought two businesses for 13 and 18 times 2009 TTM earnings with no clear indication that enough growth exist to justify such valuations.

    As for me, I think I will stick around. I am interested to see what WK has in store. Although WK clearly has little regard for my interests here I have respect for his ability to create value.

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    • Thanks for the post Bob, I concur with your last statement. As I am only recently here the term original investors has little meaning for me. This should fly like a super-cub buffeted by any kind of wind or disturbance. It would seem crucial that the new ownership/management team acts decisively and with dispatch
      in carrying out their stated strategy. The qualitative question
      for me is which companies/product-lines do you amalgamat

      Is the idea to be a head NV, a johnson outdoors, a shimano, or a jarden , or petzl. I believe if they are careful and discriminating they will do alright. glta

      • 1 Reply to balsamtower
      • I too am a recent investor. I got in when it was trading below $5 primarily under an alignment of interest thesis and value play.

        This thing has morphed significantly from a value play (I bet there are investors out there thinking the cash is worth more...) but given the upped ante in alignment of interest I believe there is a real plan here. I think the most logical value creation will come through their distribution networks which are in varying geographic markets. Gregory has two major customers that make up nearly all their sales my bet is they sell BD stuff into their channels and vis-versa.

    • Bob:

      Just a couple of comments:

      I don't think that most investors and hopefully some institutional investors once this trades on the nasdaq come Friday, that they look at the 2009 earnings. Let's face it; 2009 was a very crappy year for many companies, period.

      The market will be looking at what the prospects for BDE will be in 2011 and beyond. My hunch is that the economy will be better in 2011 then it was in 2009.

      The other issue; keep in mind Kanders will, IMHO, take care of # 1 ( Kanders ) first. However, since he now will own even more stock, then how on earth is he going to get ahead if the stock declines. His new annual salary of 175k is significantly lower than it was while he was the lone leader at the old CLRS in Stamford. NO - IMHO, Kanders will see to it that BDE will become more profitable and thus increase the value of his stock and by extension for us as well.

      As an aside, yes I did notice that he extended the duration of those stock options that were to expire in Dec 2012. A bit odd ... I thought.

      • 1 Reply to tex7779
      • My issue though is that despite a crappy 2009, indication for pro forma earnings based on q1 2010 earnings does not show growth that justifies the purchase price (if you annualize q1 2010 it looks real nice but keep in mind q1 is winter season so its half of the 60% they get in winter aka its 30% of the expected year's earnings). And while BD may have decent growth I haven't heard any comments on Gregory growth which we paid around 18x for which is a much higher multiple than what we paid for BD.

 
BDE
8.73+0.12(+1.39%)Aug 27 4:00 PMEDT

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