The prices for the call options are high because of something called put/call parity.
Suppose the price of the stock is $70.
Put-call parity tells you that, absent a dividend payment, the put and the call should sell at roughly the same price.
If the call were $2 and the put were $1, then people could buy the stock and the put and simultaneously sell the call and lock in a $1 profit.
So, because Ackman has needed to buy huge numbers of puts, he has caused their price to increase. Paradoxically as a result he has called the price of the calls also to rise.
It is all very simple when you logic it out.
Ackman's big problem is that options are wasting assets. He is now paying a huge amount of time value premium on options that are likely to go to zero, letting his fund holders experience again the kind of lsoses they had in his little adventure with Target.
Ackman. What an idiot.
ETP's share price is approximately the same level it sold for in EARLY 2008, before the Lehman Crash market. That is about 5.5 years. It has steadily paid its distribution through thick and thin since.
The company has dramatically transformed itself, however, during that time, significantly improving its business mix.
This is utter nonsense and represents a simplistic view of the world.
Both the stores and the college textbook business are quite profitable and generate considerable cash flow.
The Nook business is very unprofitable at the present time.
There are several possibilities:
1) The Nook business will be sold to one of the part owners or a third party and BKS will get some cash for it while at the same time the income statement and cash flow statement change dramatically in a favorable manner, or
2) They shut down the Nook business and take a writeoff and the income statement and cash flow statement change in a dramatically positive manner, or
3) The Nook business improves its performance and the losses and cash drain are reduced to an acceptable level that does not threaten the company's financial condition.
AS for going bankrupt:
BKS has (according to my Bloomberg terminal), a total of $7.5 million in long-term debt, and no short-term debt. it also has $80 million in cash on hand.
The company owns many of its retail locations. Since there is no debt on the balance sheet, it means the properties they own are not even mortgaged.
Bankruptcy is NOT in the cards, and those who are buying down here for a trade will be rewarded when the next set of "Nook rumors" hit the street, err...the wires....errr the internet. Well, whatever stuff hits these days.
It seems to me that it is nearly time for the BoD of SPA to consider the institution of a very modest quarterly cash dividend.
A $0.10 annual dividend, paid quarterly, would represent a minor drain on financial resources otherwise needed for growth.
it would represent a useful form of "signalling" about the health of the company's future.
It would open the stock up to an additional class of investors that can own only dividend-paying shares.
It would put the company on a path to some day join teh S&P dividend achievers that are able to accomplish ongoing annual increases in their dividend payouts.
The only reason not to take this step would be if the M&A activities planned are so large that the company needs every penny or if the company's credit facilities bar the payout of a cash dividend.
The time for this move may not be today, but it is coming not too far down the road.
Butter - Good post.
That's a fair number of shares, and I applaud you for having an actual investment rationale as opposed to many on this type of board who are just pumpers or dumpers or perhaps pre-adolescent children.
I do see alot more digital signage, but it remains unclear to me just how well they are doing. Of course, they really put themselves out on a limb with their comments in the most recent conference call about the upcoming quarter's results,, and presumably they had the orders/backlog/shipment plan to back it up.
I wonder if they can get to Non-GAAP profitability for the full FY without actually also reaching GAAP profitability for the quarter? If they were to achieve GAAP profitability for the quarter that would be a big deal.
Still, their execution, even in this strong market segment, seems to have been quite uneven, and they have really run their cash position and working capital balance down pretty far over the last couple of years compared to where it used to be.
When you said "we" in your post, I presume that you meant "we" as in "investors" as opposed to "we" as in employees/officers of the company. Generally I refer to the company as "they" in these forums.
Maybe you should try buying the stock when it has a sell-off instead ofter it has a huge rally?
Remember: Buy Low, Sell High. Even Mr. Ed the Talking Horse coulda remembered that one.