Mark Cuban is no dummy. In fact, he appears to be a very wise businessman. But, looking at what he did, I am having trouble understanding the logic. He sold 714,000 shares in the open market for $2.33 a share. Then he turned around and bought series B shares that convert to 714,000 shares of common stock at a price of $3.33. What am I missing?
Another question, which I doubt anyone can answer, is why did the stock not tank the day Cuban sold 714K shares? This stock trades fewer than 200K a day, and he SOLD more than 3 times that amount. In fact, not only did the stock not tank, but according to the chart, it appears that it never closed below the $2.33 sell price after that day.
Last question. I noticed on their income statement that they had gross margins of about 47% last year, but they lost 6 million in the year. Is that a sign of a poorly run company or more the results of a company experiencing growing pains?
I don't c any short or near term catalysts for a bullish move. I'd like to be wrong but, it seems like we get to relive last year financially. Maybe a pop in advertising cud do it or reports that we r bringing new customers to offset the loss in low end customers. Even if guidance is light -- no impact 4 months. So..... somione help me understand yhe upside catalyst here and therfor why I shud buy today.
Dave, do you see this move as a bullish signal? Maybe the fund that was short has decided that the company is turning around and they wanted an easy way to unwind their short position?Cuban gets the tax break that you mentioned and also gets shares at $3.33, knowing it is going much higher? Or am I just hanging on a hope and prayer. btw, I sold half my stake in RSH after their credit rating was downgraded.
1) That he allowed some outfit holding preferreds and a concommitant short to close their position in an non-market-moving manner. The counter-party smiles and Mark might save some taxes, or at least come out as-is.
2)Because it was tit-fot-tat: there was a buyer of X shares and a seller of X shares; they just did the deal between themselves and it went through the market. Market-moving buys or sells are when there is unequal pressure. In this case, pressure was equal on both sides, because all was agreed before the trade crossed the wire. It was about taxation; it was not about anything else.
3) Of course it is a poorly-run company. That's why we own it at this silly-low price: we expect it will be bought by someone who can figure out how to run it decently, and they will pay well above the current price to get the opportunity to do so................Dave
1. Why did Cuban do it? A: Easy, he moved up in the capital structure, gets a dividend and still retains the upside through convertibility. Unlike the arb group, he's not in a hedge position -- he's long the economics of the business
2. Don't confuse earnings with cash flow. In 2007 LNET acquired OnCommand. In merger accounting you identify the parts of value and assign them the balance sheet accounts with the remaining portion above the identifiable purchase price being assigned to goodwill. LNET has had substantial depreciation charges related to this acquisition which has made earnings negative over the past few years. Cash flow, however has been highly positive. The real question investors must answer is what is normalized CAPEX relative to depreciation.
BTW, I think I've also seen you over at the Radio Shack board. I grabbed some of those shares, looking for a pop, and in a classic "shoot first and ask questions later" style, did some diligence afterward, which lead me to to dump my shares two days later.
I'm still looking at it (not that I'll touch it anytime soon), but one interesting point came up yesterday:
RSH has a new Chief Merchandising Officer. This is the guy in charge of figuring out how, and where, your product is displayed in the store. Where was his previous job? Lodgenet. I'm serious. So, I have two questions. First, why would Lodgenet want to hire anyone who knows merchandising? And my second question is, why would Radio Shack want to hire, as their top Merchandising guy, someone whose last job had utterly nothing to do with merchandising?
The guy must interview well. And both organizations must have problems at the top..........Dave