Bear: 'no one will buy XRTX and I don't see any tech M&A for the next two years'
(Bull: Lenovo and IBM server? How about Whamcloud? Gluster? DataDirect Networks? Baker St? Hello??
Bear: '$800 million revenues and the company would not hemorrhage any more'
(Bull: To anyone who has read their financials, at no point was XRTX hemorrhaging anything. At the current run rate XRTX is earning close to $2/share if you net out Clusterstor R&D expenses. That's why Baker St initially wanted them to stop Clusterstor. As it is they are developing the future of storage and still maintaining a cash neutral position. But at anytime XRTX could discontinue Clusterstor and go back to an eps of about $2.)
Bear: "they would need 500 new clients to replace Netapp"
(Bull: 500?!?! One good one could do it over time but more likely a few good Tier 1's. And it looks to me like they are well on their way)
Bear: 'the earnings call will produce terrible news and a likely cash crunch'
(Bull: See my post: "It was a good call" April 4th. $93 million cash,HDDs,margins etc)
Bear: 'XRTX claimed before last C.C. that they will be growing 25% in each QTR starting by the second QTR'?
(Bull: Still waiting for any evidence on that one.)
Bear: XRTX is laying off and MSFT is cutting cloud prices
(Bull: these are actually both good from an XRTX shareholder perspective. Cloud prices will continue to decrease as HDD cost/GB has and will always decrease.)
Bear: Tech(and XRTX) is going to get hard and soon.
(Bull: Yes that can happen to tech's this time of year and why people trade.)
Bull wins, the Bull is a 50%+ ownership of share(s) by the top institutional holders who limited risk/shares and BS went all in. So BS is in a position to force management to make the changes necessary to make them a discount buyout target. So you can be assured that even if the premium is only 48% to today's closing price, those who own 1M+ shares will take it. Without the "non float" shares of BS this stock would crash and burn. BS knew this, so as long as their in control, stock will just drift based on low volume.
The bear trade as discussed was a roll of the dice, if one like david chooses to risk a 100% loss, its his foolish money. There are 100+ companies out there one could of risked a short position in for a 80% less risk factor and actually made money and bought value.
There are two ending to this story, BS fails or wins, if they win they make a lot of money, if they fail then they destroy the company because no one is going to buy 23M+- shares and if BS had to unload position, the stock would be at 5.60 after the carnage and I would buy the company for 8.60 a share and put it on my VISA card.
It's all or nothing and why we have ethics, if BS fails they destroy the company by virtue of having to unload. But that is the risk we discussed, we could convince the institutions not to vote, force BS to unload by driving the price down to 5.60, load up the float and win big.
IMO...the risk are high for both, but bulls win because who wouldn't want to buy a quality company and management in the biggest sector "cloud" for a huge discount? If you don't believe it, think 3par in 2010, a bidding war for an unknown company by two gorilla's in the tech industry(Dell/HPQ) and the huge premium originally offered was doubled after the bidding war ended.
Well said I think Soule. And I like the data storage M&A 3Par example too. XRTX is now aggressively taking business from DataDirect because they have the goods. No ifs, ands or buts about it. DataDirect recently made overtures to the market(eg flurry of PR's/financial articles and interviews)toward an IPO presumably valuing it at $1Billion+. If DataDirect does go public, I think it inescapable there will be serious speculation for same regarding XRTX.