Quick, I know there are many characters who post these kind of sad stories to jeer the longs of any company that has fallen to oblivion. They get a sort of sick entertainment by doing so. Perhaps that is why you are not getting much sympathy that you might expect here. Since you have been at it for 2 months, maybe you are telling the truth. I can't guarantee anything like Southi, but there is a decent chance that you can breakeven (or even make a small profit!) on a short squeeze, especially if they get more than the street expects for their schools or if there is a merger/buyout or if they keep operating as a 10 campus FP school after the sale or if the DE becomes more lenient due to political and public pressure. Finally, there are 24M short shares that might actually save you when all is said and done. See my earlier posts. I don't believe in pumping and try to look at things based on facts or technical indicators. 97 cents may feel like the sky right now but on Wall street, it is just another 80 cents! My personal target is 85 cents.
Here's the update on the top 10 holders after the bad news (when everyone thought they are going BK) but before the deal with the DE (which pretty much eliminated BK risk). Net 2MM shares added in 2Q14 and 25MM shares held by the top 10. Remember that over 100MM shares traded between the release of the news on 6/19/14 and 6/30/14. If they didn't sell then, chances are, they are still holding after the deal with the DE. Coincidentally, that amount is equal to the shorted shares as of 7/31/14. The squeeze could be dramatic since retail has already sold and these big boys will not let go for cheap IMO...
Owner Name Date Shared Held Change (Shares) Change (%) Value (in 1,000s)
SHAH CAPITAL MANAGEMENT 06/30/2014 8,277,040 2,302,466 38.54 1,299
DIMENSIONAL FUND ADVISORS LP 06/30/2014 3,323,518 (83,855) (2.46) 522
FMR LLC 06/30/2014 3,069,800 (530,200) (14.73) 482
VANGUARD GROUP INC 06/30/2014 2,440,764 25,820 1.07 383
CREDIT SUISSE AG/ 06/30/2014 2,220,537 1,287,240 137.92 349
NANTAHALA CAPITAL MANAGEMENT, LLC 06/30/2014 1,400,000 1,400,000 New 220
BARCLAYS GLOBAL INVESTORS UK HOLDINGS LTD 06/30/2014 1,364,484 (759,154) (35.75) 214
EUCLIDEAN TECHNOLOGIES MANAGEMENT, LLC 06/30/2014 1,103,439 (1,590,174) (59.04) 173
RUANE, CUNNIFF & GOLDFARB INC 06/30/2014 1,000,000 0 0.00 157
CALIFORNIA PUBLIC EMPLOYEES RETIREMENT SYSTEM 06/30/2014 998,777 0 0.00 157
Unless management saw an opportunity that will yield more than 22% to the bottom line if they act right now with the extra funding. And in that case, it was a leverage move. In any case, this should be trading at 40 cents and not a penny. Not sure what's going on here.
I understand not wanting to dilute shares by 33% and hence going this route. But the royalties in perpetuity is quite steep at 22%. I understand they are a customer as well but not sure why they agreed to that, especially if revenues are climbing exponentially. Also, if they are profitable, why take on the additional financing? But the hacking today of 40% when the company was already grossly undervalued is crazy. Buying at a penny...
While we are talking hypothetical and totally discounting the rumor, why will EDMC need money to propose a merger? They can simply issue stock in the new company, which will be the aggregate of the revised COCO valuation and EDMC. Also, unlike telecom, the govt would want consolidation in this space so that they can watch the fewer institutions like a hawk. They will just require both EDMC and COCO to remedy any outstanding data requests and to fix any non-compliance as part of the merger approval.
Not that I place much importance on merger rumors, but even if they just try to merge as equals, what will COCO's valuation be? If you go by revenue and assume that EDMC is fairly valued at $1.60/share, COCO should then be valued at $1.40/share. This is just one of the many scenarios that could play out between now and December. If most of the retail has sold, who is going to sell to balance the demand from short covering, and that too 24M shares? It's a dangerous game to play when you think your opponent is down and you turn your back on him in the 12th round to soak in the applause......
In company news, Education Management Corp ( EDMC ) was sharply higher Friday amid renewed Internet chatter the for-profit educator could be looking to merge in today's tough market environment for the sector and increased regulatory scrutiny.
In particular, some investors today were on Internet chat boards for EDMC citing a SE Group report from earlier this week speculating the company and Corinthian Colleges ( COCO ) could likely merge.
COCO this week said it received a grand jury subpoena seeking records including student-loan defaults and job placements. The for-profit chain last month said it was putting 85 locations up for sale as it tries to remain above water.
EDMC shares were up slightly more than 23% in late Friday trade at $1.57 apiece. The stock slid to an all-time low of $1.12 last Tuesday, Aug. 12. COCO was down nearly 11% shortly before the close today at 15 cents a share.
You believe that blonde in Sierra World Equity Review? She has called a few correctly before but it is just a guess at this time. No point getting anyone excited about it. How can they even be allowed to merge when there is this huge albatross around each institution's neck? EDMC is running today for some reason though..
That is possible too. But I am not too greedy (like the shorts from the dollar range are right now) and will most probably be looking for the next candidate at that time...
jd, I am biased of course but I wouldn't hold such a large position if I thought they will go BK before the sale. I can't predict the near term, but I see 40s first (where I'll sell half) and then 80s (sell the rest) before the final valuation is decided by the market. I will not be holding past Dec. So I expect to see those targets in the next 4-5 months. But to be complete in my analysis of the situation, I need to consider a BK situation as well if the DE withholds funds again for some inexplicable reason. In that case, I plan to double up in the single digits and exit at breakeven in the ensuing short covering to the teens...
An investment (or a gamble if you want to call it that) in COCO does not have to be seen as a value proposition based on how much they will get for their schools after debt repayment. It is hard to guess as the estimates have a wide range. The discount due to the tarnished image is subjective and buyers know if they don't buy, someone else will and enjoy the economy of scale. But that is besides the point.
The huge short position in of itself is enough to take this to 48 cents at least. That is where it went on the first bounce, after the news of the financial woes. Turns out, only 4MM shares covered in the first round and a lot of ammo (24M) is still left. The banks have $140M at stake here. The govt has invested billions over the years. There are over 70K student and 12k employees. The govt is not going to let the company die and destroy so many people's lives in the process. The Republican's will be all over the administration like flies on #$%$. The DE will keep using the withdrawal of Title IV funding as a threat to make sure COCO submits the required paperwork they have been asking for a year, even if it won't provide the incriminating evidence they so desperately seek. However, they won't exercise it since they know the company is in dire straits without it and cannot complete the sale in an orderly fashion under the independent monitor's supervision. The banks will remain mum and wait it out as well, waiving any covenants that are being violated to get their money back or a large equity stake in the new, more nimble company.
As long as the US Govt and the banks want an orderly sale to happen, there is no worry to COCO, other than it will be a smaller fraction of itself in the future. And COCO is operating business-as-usual in the meantime. As someone said, COCO might actually be better off (profitable) by being forcefully downsized. The math says 107-85-12 = 10.
Speaking of attacking, I think you haven't spared a soul on this board. Quite amazing that you can't even reflect on that simple fact. Anyway, I look forward to the "massive spikes" in the stock price as you cover. BTW, I like the Ackman example. He is doing great with his HLF short. LOL.
OK, so you admit you are a short for a long time. However, something does not jive here. If you were so smart to see this years ago, shouldn't you be declaring victory now, take your enormous profits and go enjoy it at some beach resort or look for another FPE candidate to short next? The problems you describe with COCO applies to the FPE sector in general, more or less, and the DE has started investigating others as well. I know things stink at COCO right now but hello? - it is currently trading at 18 cents for a reason! The fact that you are here every day, trying to convince others that this will go to zero, makes me wonder if you really shorted in the dollar(s) range, where a few more pennies is not going to make that much of a difference to your short profits. It's like me taunting and insulting yous, saying that this will go to a buck when it is at 85 cents and I bought at 19.6 cents.
Is your ego so big that you don't mind risking some or a lot of your profits when the sale is announced or if the company continues to operate as a smaller school? Better still, why not re-short, if and when it hits a buck if you think the euphoria is created by retail schmoes like me? I think you will most probably regret not taking your profits and riding into the sunset and instead fighting with "little minions" here over a few pennies. Haven't you seen the price action of BK, near BK companies in the past? They always run a few 100%, especially if they have a large short position, no matter how crazy it may seem. Heck, many companies clearly state that their shares will be worthless/canceled and they still run 400% on short covering! COCO is not acting like a company ready to close its doors. They are filing with the SEC, still recruiting new students and defending their actions respectfully with the DE. Like they say, bulls and bears make money. Pigs get slaughtered. I am done with my platform speech for you. Over and out...
Let's just stop the bottom talk. Who knows? I rather talk about the top. It will make 18 cents look like a real steal - that much I can say :)....
I did see the bad math as well but just wrote it off as an oversight by the reporting media though it was repeated a few times. I was going to say they could at least operate as a 10 campus company but it did not seem to make sense after hearing about the doom and gloom. But you are right. Math is either right or wrong, nothing in the middle.
I see a distinct parallel to DOLNQ. They had more assets than liabilities too but management wanted to steal from the shareholders and take it's only viable subsidiary private while leaving nothing for shareholders (canceling shares). The news caused a drop from 8.5 cents to 2.3 cents. It based there for a while and then fell inexplicably to 1.2 cents on low volume, only to rise back to 15 cents on no news, no short covering and despite the company insisting that shares will be canceled. COCO has a lot more going for it obviously and is trading at exactly 10 x DOLNQ's price pattern. Does that mean $1.50 is in the cards? Maybe but I'll take 85 cents.
jd, if you are honest about that, then thanks for the wishes. I was referring to comments from you today like "what if other states block funding like Calif? All the rest likely to follow" or "somebody is unloading a ton" or "actually I'm not so sure after reading this news if I'll ever get in. Very very risky...". Sounds like bashing to any averagely intelligent person. No need to defend your comments. Feel free to say what you want. But to do it and say you want to buy as well is disingenuous in my opinion