Certainly not something I like to see. Why didn't they just take the $10 million or so that had tendered, and leave it at that for now? With 19 months to go before the bonds can be put to the company, why not let the stock price rise, as the fundamentals improve, and look at doing another exchange deal later this year? Who knows...if the stocks climbs to the mid single digit range (certainly possible), it might be a lot easier to get participation. But for now, with the stock drastically undervalued at $2.35, trying to do an exchange at this juncture seems poorly timed to me...and just shooting ourselves in the foot.
I agree. That's where Monarch is falling down. Classic "neophyte" failing. He's ignoring IMPORTANT statements and guidance from management, about HTCH's immediate future, that blatantly justify a higher stock price...because he is "wed" to seeing the company fail, and is convinced that "nothing matters," except that SSD's will be putting HDD's "out of business." Doesn't matter it things are growing in the high single digits through 2014 (or, apparently, BEYOND 2014). Rigid and doctrinaire will lose the game every time. Flexible, and open, thinking, is called for. Monarch is lacking that here.
Anytime someone is "wed" to company's failing, you know there is something wrong. I, on the other hand, feel that HTCH has plenty of time, and the stock is way too cheap, in the way it inappropriately discounts that time. Beyond that, there is intermediate to long term turnaround potential. And the notion that SSD is "destiny" for the storage industry is far from proven...simply from a cost perspective.
Anytime anyone tells you they "don't need to" listen to an investor presentation or a conference call, but are cocky about what is "without a doubt" going to happen, one naturally takes one they have to say with a grain of salt.
Monarch, who has, apparently, been quite successful, is clearly a victim of his own success. No one is "better," and that comes across loud and clear in his posts....dismissive and derisive, as always. Never learning anything from anyone. Or indicating he was wrong. Etc.
To blithely say that it doesn't matter if HDD unit sales growth in the high single percentages through 2014, as far as HTCH is concerned, is pure 100% hubris, and arrogance. Because if that happens, AND Hutch gains significant share of the whole pie, we all KNOW the stock is likely to be closer to $10 (or even $20), than zero.
>>Which brings up another problem I have with you -- your basic thesis for so many companies that they somehow have the potential to return to the profitability they enjoyed in years past.
Never something I assume in a "vaccuum." In HTCH's case, it is a POSSIBILITY, based simply upon their claim that they expect to be the LOWEST COST producer of suspension assemblies. If that is true (and the strategic imperatives they've been pursuing suggest they can and will get there), then WHY WOULDN'T they be able to gain significant market share back (including a lot more Seagate business), that would return them to old levels of profitability, or even record levels? It may not be the exact scenario, but the fact that they will be getting to a point, according to their own projections, where they will be breaking even on $280-300 M in annual revenue run rate (by fiscal Q2 of 2012)....and the company had $600++ M in annual revenue at its previous peak, IMPLIES the kind of operating leverage, and profit potential we could have, if they gain back significant share.
Your negativity is a huge drag. I like to look for LEVERAGED POSSIBILITY in the stock market, with minimal short term risk. You like to nay-say and hand-wring.
I'm not talking about sticking the stock in a drawer for 3 years and forgetting about it. I'll be watching things very closely, quarter to quarter, month to month, and even week to week. Right now, the risk/reward ratio here is extraordinary.
Ah, but that's the difference between a successful investor, and an unsuccessful one. If you kept up with my activity, rather than posting "the last thing you'd heard," you'd realize I got out of the bulk of my LEE position in the run up (most in the $2.40-3.05 range), when the Street initially thought they had a successful refi coming off. I started nibbling when it plunged, but decided to wheel about and sell everything I had left, a few weeks ago. (LEE's debt comes due only 9 months from now....versus HTCH's 19 months from now.)
There's no point in debating you on the rest of it. Your viewpoints are, to a large degree, skewed, and they betray a clear DESIRE to not only see HTCH fail, but the tone of your posts is clearly attempting to "help" them fail, which I find repugnant, and self-absorbed (as usual), on your part.
You continue to take a tone that you are the brightest guy in the room, and no one could possibly be more knowledgeable, or skillful then you.
Sometimes the market is wrong. That's what contrarianism is about. I think I know where this stock should be, and will be, based upon the guidance management has given, and the begining of an improving trend that has been evidenced.
Tell me this: Have you listened to the entire Noble Conference? Yes or no. If not, where is your credibility?
The problem I have with you is how you seem to think you know more than Mr. Market, when all you really know is that which is publicly available. You'd have greater credibility in my eyes if you showed greater respect for the wisdom/knowledge of the sellers. Also greater respect for consensus opinion.
As far as HTCH being a long term "option", please. Cash rich, low liability/burn companies may fit that description, but certainly not the leveraged, binary outcome cases like this one. HTCH is no more an option @ $2.35 than it was at any other point along its downward trajectory.
Which brings up another problem I have with you -- your basic thesis for so many companies that they somehow have the potential to return to the profitability they enjoyed in years past. For many industries, that's just flat out unrealistic. There will be no going back. The most investors in those industries can hope for is that the companies they're invested in will evolve into something entirely new before it's too late. That's certainly true for newspapers (e.g., your alleged "7th largest position" LEE) and in my judgment it's equally true here.
As for $4M per year in extra interest expense being no big deal, I don't think you realize that that $4M could easily spell the difference between a sustainable and unsustainable business. Which is understandable given your rosy growing revenue projections.
Again I say, show some respect for the current 8.5% note SELLERS.
Finally, I don't know when HTCH's precarious financial condition will start going critical, but it sure as heck won't be at the 11th hour if they don't get their liquidity issue solved. Long before then, existing customers could turn to other vendors. Suppliers could stop extending credit. Once management allows a snowball like that to get started, there might be no way of stopping it.
Clearly, they have to get something done, and do it soon. Market seems to be saying the $65 cash kicker won't be enough.
HTCH's callable 3.25% notes are currently trading @ 82% of par whereas the NON-callable 8.5% notes are trading @ 78% (yielding 11.6%).
Why would sellers of the callable notes be willing to accept an 18% haircut?
Because if you read the S-4 (I finally had time to read this page turner) regarding the new notes you will see that the 3.25 % convertible bonds are unsecured and are junior to the new 8.5% notes. So, if you are holding a 3.25 bond and you don't convert, the line ahead of you to get paid gets longer for every bond holder who does convert. As a 3.25% bondholder you MAY be able to throw HTI into bankruptcy by presenting your note for payment on Jan. 15, 2013, but if you do there won't be anything left for you after the secured and senior unsecured creditors get paid. By the way, this is also the strongest argument against bankruptcy - unless a material adverse event takes place (everything that has happened has already been factored in ) which would drastically change the landscape, the 3.25% bondholders will be better off to accept an exchange or continue to accept 3.25%. If they make a fuss and force a bankruptcy, they will end up getting nothing.