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Skullcandy, Inc. (SKUL) Message Board

  • redheadinvestor@ymail.com redheadinvestor Mar 12, 2013 10:23 AM Flag

    If SKUL really uses borrowed cash to buy back shares

    then management is terminally stupid - I would never invest.

    SKUL needs every $ of cash available to execute its turnaround plan.

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    • Well ... the one upside of SKUL is that *except* for the writeoffs associated with the turn around, they're earning money hand over fist. I don't know whether being highly profitable is enough to outweigh all the negatives on this loser, but they do have that small silver lining.

    • Depends on the degree and length of their turnaround plan. If they estimate a profit by 3Q, then the cash drag is minimal and it makes sense for them to buy shares back now before the stock price rebounds...very accretive to earnings at these prices.

      I didn't get the sense from the call there was a serious cash investment for the "reset", but rather a refocus on marketing (better utilizing existing celebs) and packaging. The CFO signaled SG&A would not escalate throughout the year.

    • If your stock is trading at BV, you have cash and project income, then you buy back stock. It's a no brainer for any company. Uncertainty arises from the market when this doesn't occur, which suggests the company executives are uncertain about future projections and don't have enough confidence to pull the trigger.

      • 2 Replies to chaz16669
      • redheadinvestor@ymail.com redheadinvestor Mar 12, 2013 10:01 PM Flag

        1. Dead, dead wrong even in theory (I'm sorry, no two ways about it). 2. Dead wrong in SKUL case in practice, since SKUL meets none of your requirements. SKUL trades for about 1.4X net tangible assets - it's a long way from 1X - and it doesn't project income, it projects a loss. SKUL also has other uses planned for its cash.

      • Absolutely w/r/t market sentiment.

        On the other hand, *if* management of some hypothetical company *were* serious about buying back shares as cheaply as possible then uncertainty and market disdain for the stock would be their ally. Not saying this is happening with SKUL, just pointing out that there *is* a trading weakness to be exploited in this "any bad news means dump all your shares" mentality.

    • Depends on how they use them. Its a saving account just like when you put money in your account or gold in your safe. They can withdraw shares and use them like money or sell them for cash. Just another thing that doesn't show up in the charts. Volume shows the selling is over, bad news is in, this stock is going up long term!

 
SKUL
7.230.00(0.00%)Jul 24 4:00 PMEDT

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