I've been bearish about the stock since the big gap down and posted here.
But if P&G has decided to stick with the deal with DMND, it means something concrete.
So it seems to me this is a good gamble on the extreme weakness - the SEC will not halt the trading, which is another positive for new buyers who have the patience and a good stretagy before the amendments to the financials are filed.
It is the stock market, and you must adapt quickly as new info continue to emerge, which will always change my thinking!
Now, the problem is still there - the SEC and the DOJ haven't spoken yet. And they may not agree with the audit committee's finding, and that could put the company into Chapter 11 status with their final verdict.
We still don't have enough data to know where the stock will end up just yet.
It's time to join the shorts on those fake spikes.
The reality is that the company will be very likely forced to change how expenses are accounted for and the impact will probably be significant.
You have to admit - shorts have been winning this battle.
Basically, as a public company, you really can't manipulate the costs by "creating" new rules on your own. And that's probably what DMND has done with the business model in paying the walnut farmers.
In this topic, I listed three worst case scenarios.
After considering the fact that two of the largest shareholders have sold out, and some others may be in the process of doing so, I reviewed my earlier thinking, and now am leaning towards the number (2) scenario to play out.
That is, the way the company handles the payments to the walnut farmers in the current business model may be in fact found by the government as "faulty" at best, and thus banned. At worst, the payment/accounting system in place could be considered a cheating scheme to hide certain aspects of the revenues.
I think the company would be forced to change its accounting and payment systems, and, as such, it would result in restating the revenues all the way back to where it started such practice.
I can't predict what kind of penalties the company would face as a result, or how much it would impact its earnings. But if this scenario play out, it wouldn't be pretty to the bottom line of the company. And the stock would crash all the way back to single digit.
I sold out my long position from $27, as posted earlier. There're much better and safer trades than this battleground.
For the short term, it is all about short squeeze every day. Until a positive report from the audit committee, the trading won't have any leg.
Buy only when the stock is pressured hard.
One question I keep asking is what BAC knew that I don't that made BAC to set a PT at $30.
In at $31.6, out at $34.
Just quick trades for now.
I have no idea what those shorts and the big shareholders are up to. One thing is clear to me now is that the big buyers over $50 have been all burned hard. So, there isn't any incentive to chase it, not until the SEC probe concluded without any major problem.
One thing I fear is the CEO's approach to growth - acquisitions were done too fast and to close in between. In that regard, it does remind me of how Worldcom become one of the biggest telecom company in the 90's. It was not exactly real "growth", in case with Worldcom.
Anyhow, I'm only holding a very small position from $27. But I'm trading it every day.
Btw, the $50 mln figure was really a "borrowed" number, since nobody really knows what was the exact total amount.
From the WSJ, "at least one of the improper payments is estimated at $50 million." Thus, one must assume that the payments were not just limited to one group of farmers.
The real questions should be what the SEC is doing with the investigation, and why it is even involved at all in the first place.