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Cache Inc. Message Board

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  • ranni.malmsteen ranni.malmsteen Jan 19, 2010 2:47 AM Flag

    Sell company or Replace management!

    Message part 3/3: (stock market performance and management team)

    “jtmaimi: I agree with you about chasing competitors that are doing well now. It is too late now that there stock prices are up 4 to 5 fold since the March lows. I guess some deserved this kind of appreciation and others do not. I’m just surprised that Cache was not rewarded much for the prudent steps they have taken.”

    I feel exactly same way; this kind of underperformance has been huge disappointment for me. If we look 2, 3, 5 year track record, Caché is worst in class. Of course soap is ready when you see that company’s management is ready to modify their performance metrics (to gift more compensation). They have forgotten most important reasons why people own marketable securities. Marketability must presuppose not only a place where they can be sold but also an opportunity to sell them at a FAIR price. This is reasonable requirement and they have failed to deliver it.

    If we look performance under current CEO (since Jan. 08), we are still -55% underwater. I think he cannot (shouldn’t) be satisfied either this kind of performance.

    “jtmaimi: I bought 25k shares last year for an average price of around $2. I’m holding them for a while to see what happens. I think this company could be bought out by another company for much higher prices. It would make sense economically. It is a very good candidate in my opinion.”

    I agree, company would be good takeover target for bigger company or acquired by private equity guys. They would easily pay many times more than today’s $ 30m enterprise value. If that’s the case, like I believe, it means management hasn’t done their job too well. This depressed market price indicated that company is worth more without current management. Your written subject “Sell company or Replace management!” is rational proposition.

    I have considered why we haven’t heard any activity in takeover or buying side. Two reasons comes my mind. Poison pill which they have in place and other is major owner/founder who may be unwilling to sale; maybe we have still too concentrated ownership structure. Without these I think this would be already acquired, if we keep in mind how this has traded enough long time about prices what they have cash on books.

    All that said, I still think if management is really starting to take actions to create value for shareholders, they would be able to extract lot more value from stock market than private markets where deals are today generally closed somewhat moderate prices.

    The reasons I believe stock market would be still be better place owners of Caché, even we have traded cash prices already way too long time.

    * Relatively illiquid stock
    * Growing sales trend (after shrinking enough)
    * Lots of “rocket fuel” on books

    These can be “sick” combination, like history has proven. ;)

    ps: Lets keep writing occasionally, when new information or something comes to mind. Thanks!

 
CACH
0.6235-0.0065(-1.03%)Oct 30 3:59 PMEDT

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