Not a bad couple of months for my followers of DECK. Sell DECK and enjoy the almost double. Buy CROX. Nice new line of products.
Cover cover cover
Sketchers blows out earnings. Sketchers was not the most searched term. Deckers was. Hmmm. Can we say that Deckers will majorly blow out earnings? All signs point to YES! Cover cover cover. Cover cover cover. Cover cover cover!!!
Sentiment: Strong Buy
DECK ain't selling. Economy is back and about to erupt. Everyone in Washington DC is wearing UGGS. It was the number one searched term due to Brady and Beiber's endorsement. VFC reports next week. Shorts probably biting nails wondering if VFC mentions a buy out offer. Could bring in other bidders. As economy recovers here and overseas, UGGs will recover. The quality and comfort of the boots are why women buy them.
Sentiment: Strong Buy
Everyone is wearing UGGs. Most searched site for holidays. UGGS taking off in China. No pre-announcement of bad results. Any offer of buyout sends shorts scrambling like rats. Huge short interest. Buy back program. Excellent balance sheet. The shorts are screwed on this one.
Wanxiang should scrap asset sale, A123 spin off government business and sell to someone other than Wanxiang, liquify A123 with cash necessary to get out of bankruptcy intact, take 45% stake in A123 for preferred shares (see Sirius XM / Liberty deal), and then when A123 becomes profitable, utilize the NOLs against profit, which makes Wanxiang's shares that much more profitable. Profit higher when not taxed = more valuable shares. Then after NOLs exhausted, buy out A123 non-gov business. Otherwise, valuable NOLs totally shot, A123 shareholders sue, customers frustrated and leave, and company has bankruptcy label. Get this thing out of bankruptcy.
WANXIANG. SEE BELOW. TAKE 49% INTEREST IN NON GOV BUSINESS. NOW THAT CFIUS HAS APPROVED YOUR PURCHASE, DO THE FOLLOWING TO TAKE ADVANTAGE OF NET OPERATING LOSSES, TERMINATE THE BANKRUPTCY PROCESS, KEEP A123 INTACT, REDUCE POSSIBILITY OF CUSTOMER DEFECTION AND SHAREHOLDER LAWSUITS.
Net Operating Losses are a valuable asset, that should never be ignored. In the case of Sirius XM Radio, it is perhaps their most valuable asset. The company has billions in NOL’s that can be used going forward to offset the profitable years that many investors hope will be transpiring soon. Typically, a company buying another entity that has NOL’s will put a high value on them because of the tax benefits. The IRS has taken some of the wind out of NOL values by enacting rules that take away NOL’s with changes of control. This is part of the reason the agreement between Sirius XM and Liberty limits Liberty’s stake to 49.9% of the company. The NOl’s can be carried for 20 years. Most believe that Sirius XM will be able to use most of those in a much shorter time-frame.
So given this information, how are Sirius XM’s NOL’s valuable to Liberty? Many have thought that the only way Liberty can monetize their preferred shares is to convert them to common, or take over Sirius XM. What most fail to realize is that Liberty has another avenue at their disposal. Liberty’s preferred shares represent a 40% stake in Sirius XM. Those preferred shares belong to Liberty, and they are free to do what they want with them. In fact, Liberty could use those shares at some point down the road to buy something else altogether. Stock deals are also tax friendly. Investors in Sirius XM will remember that the merger between Sirius and XM was an ALL STOCK deal for the purpose of avoiding tax implications.
Liberty could stand pat on a 49.9% ownership stake, and let Sirius XM generate substantial profits that will be offset by the NOL’s Sirius XM carries. If Sirius XM becomes “very profitable”, as Liberty’s Greg Maffei stated back in January, the stock price of Sirius XM will rise, and by extension, the value of Liberty’s preferred shares will as well. If Liberty’s stake becomes worth more billions, they will have more billions worth of preferred stock to work with in a totally unrelated deal, and as we know, stock deals are tax friendly deals.
In essence, Liberty has an avenue to monetize their investment into Sirius XM that most people have not considered, and that avenue could take years to play out, as Sirius XM finishes absorbing their NOL’s through the course of their business. It is important that investors understand all of the avenues that Liberty has with regard to their stake in Sirius XM. For those hoping Sirius XM will buy back those shares…remember, as the value of Sirius XM grows, so will the value of that preferred stake. In addition, the company needs to be profitable in order to initiate a share buyback program. Paying down their debt, improving the balance sheet, and operating a profitable satellite radio business are
256 million last year alone. They lost money in prior years as well that can be utilized by Wanxiang. If Wanxiang did an acquisition of A123, as opposed to asset purchase, they could utilize the NOLs against Wanxaing's future profits. Look at Sirius Satellite Radio articles on NOLs to see what an excellent asset that they are for an acquirer. Voluntary bankruptcies under Chapter 11 can be restructured even after asset sale. Additionally, getting the bankruptcy process over as soon as possible is the best thing for the company, morale of employees and customers, and reduces the strong likelihood of a share holder lawsuit.
By only purchasing assets, Wanxiang is losing the use of A123's best asset, Net Operating Losses. Best thing to do is outright purchase of A123's non-government business or re-look at previous offer of investment into A123's non-government business for large stake. That way, Wanxiang preserves Net Operating Losses. To lose this asset is malpractice by Wanxiang's advisers. Its a win win for Wanxiang and existing shareholders. Now CFIUS has agreed to allow Wanxiang to buy the non government business, Wanxiang is free to offer the previous offer, get this company out of bankruptcy, get this company's name back and get it operational without the bankruptcy overlay. Atleast look into it!
Wanxiang. make offer to completely buy a123's non-government business out of bankruptcy. you will be able to take advantage of net operating losses like liberty media did with sirius satellite radio. you can write off net operating losses against your gains if you buy a123 out of bankruptcy.