Are you kidding? "Just when the stock gets interesting????" Are you for real.. VRX shares are up from nothing to $140 all on the back of a debt fueled, balance sheet destroying acquisition program with all sorts of funny accounting. Gos read the balance sheet and then come back to everyone. Make sure you check out the company's stockholder equity and all the massive earnings they generate (or should I say losses). This think is just some massive pump job. VRX buys all these #$%$ companies that no one want and that would sell at ten times earnings, but then through accounting gimmicks makes it seem like they are growing 40-50% a year. So the market gives a 40 p/e to something that should get a p/e of 10.
I have commented many times on this board about VRX being a financial rig job. It is so obvious. But, like Enron, Worldcom and all the other debt load, acquisition driven companies in the past, VRX will go down in flames eventually. Just not sure when and from what price. But one thing I know. The end price for hares will be much much lower than today's price.
The Consumer Finance Board's lawsuit against ESI is pathetic. And finally ESI has come out swinging. When it is the Department of Education, ESI has to walk on eggshells as the DOE fully regulates the company and the industry. Bit the Consumer Bureau is just some kind of pathetic lapdog for the short sellers. And after 18 months of investigation, all they could come up with is some ridiculous claim that for 6 months in the economic crash ESI extended credit to students to attend school. Did the students really think that they were not going to have to this back or that if they didn't pay it back that they would be able to continue to go to school. I know of no educational institution in the United States that will allow you to attend without paying the required tuition each year or semester. And if you don't pay half way through, too bad.
How about the auto industry? You can go buy a car for zero down, interest free loan for the first year. Hmmmm. What happens when you miss that first interest payment after the first year? They take your car away so fast. Is that predatory lending? Of course not. It is a completely deadbeat customer who deserves to get the shaft. Too bad that ESI can not take away the degrees that students get and then don't pay for. If I were ESI, I would not even acknowledge to any employer or other educational institution that these deadbeat students ever attend the school. If the student does not pay, then why should ESI be responsible for doing anything on behalf of the student, such as sending out transcripts or confirming attendance to potential employers.
This whole thing is a joke and a put up job by the short sellers. ESI has written down millions in loans to students that now have an education and then decided not to pay for it. And now the Consumer Board wants to sue ESI over all of this.
I read the complaint too and it was juvenile. The whole thing is patently ridiculous. And charging customers high interest rates on loans when they have poor credits. I was surprised that ESI was not charging students credit card type rates of 30% on these short term loans. 65-70% of customers did not pay back their loans. An interest rate of 200% would have allowed the company to break even on the total loan balance extended to customers. And this is predatory lending? Lend and get hit with 70% default rate? Predatory? What is predatory is that the customers got their educations and then walked from paying for it.
Obama can not put these guys out of business. The reason why is that people want and need to get educated. Companies need trained technicians. The demand for nursing is going to go through the roof with the aging population. Computer specialists are needed more than ever. And so on. Criminal justice stuff is off the boil. The drafting profession hit the skids with the housing crisis but now housing is coming back. Overall, the demand for education is enormous. The costs of providing it have now been brought down dramatically at ESI, but much less so at other schools, especially the not for profits.
The problem is not education in general. The problem is the overall cost of education (which ESI has addressed) and the #$%$ job market as Obama has done nothing to promote job growth and job initiatives. His Obamacare program has put a stop to any job hiring for sure.
This is the best news ever. The end of all this baloney with the government is at the end. Let the consumer board proceed with its ridiculous lawsuit. What are they going to say in court? Well, ESI extended credit (ie loans) to students who could not afford to pay for classes to get a skill, vocation, education. Then when the students took all the courses and graduated, the students didn't pay ESI back and defaulted on what they promised to pay. Now, ESI has had to write down millions in these loans from deadbeats who walked away with their educations for free. And the government is going to sue over that?
It is like the credit card companies charging 29% interest on loan balances. The deadbeats buy all sorts of wide screen TV's, take vacations, etc and then walk from the credit card balance. Credit card companies then have to take the hit and write the #$%$ down. No wonder why credit card interest rates are nearly 30% on outstanding balances.
Just another case where consumers buy stuff of value (ie and education) and then walk from their obligations. Obama would rather have these bozos spend the rest of their lives unemployed, working in the fast food checkout counter, or dealing drugs.
Getting an education is without question the best investment the average person can make. The long term payoff is enormous. Short term may be tough, but it is well worth it given the ugly alternatives.
The consumer bureaus has played its hand and it is a really weak one. How is ESI supposed to compensate consumers for its "alleged" bad behavior when something like 70% of students got their educations and then refused to pay for it. What is there to pay back to consumers? They got their educations for free. ESI has basically written down all these loans to zero and considers them noncollectable.
I was baffled by the huge earnings numbers that someone posted and then I re-posted. I decided to take a closer look. The numbers are not as good as I indicated, but they are good. The original poster forgot to adjust the year-end writedown for taxes. Adjusting for the writedown, ESI earned about $1.05 in the fourth quarter, a good number. The company's forecast is for earnings of $3.00 to $3.60 in 2014, but this includes another writedown (30-50 mill). Adjusting for this, the 2014 earnings will come in at $3.80 - $4.07. This is fantastic in that analysts were at $2.50 just a month ago or so. Core earnings are at the $4 rate, and new student enrollments are stabilizing. Costs are under control. Debt has been reduced to $50 million from $150 million just three quarters ago. Stockholders equity is up to $203 million from $84 million in June 2012 (it was low then because of all the share buybacks). Cash on the balance sheet is $218 million. Shares at $28 are a complete steal.
The investigations into ESI are a joke. The company is so overly regulated. This company has been in business over 60 years and gets audited by the US Dept of Education all the time. The SEC has also investigated everything there and come up with nothing. The attorney generals and Cifra will come up with nothing too. Cifra has already been looking at them for 14 months and have zero.
Regarding stock buybacks, the problem is two fold. Given the attacks againt the company and the industry, ESI has had to tighte the bolts so to speak: reduce its modest debt, cut costs due to weaker enrollments, make good on student loan guarantees, and build its stockholder's equity position back up, while maintaining a decent cash balance. These things have all been done to strengthen the company. Its stockholders equity has tripled. Cash has stayed at high levels. Student loan guarantee obligations are being paid down. This has reduced available cash for buybacks.
Are these "core" earnings numbers for real!!! Without the $60 million reserve for the old student loan program, the earnings for the quarter would have been $2.00 and the year's eps at $5.50!!!!! And the stock in at $28????? Wow, what a buy. $2.00 in quarterly earnings shows that ESI has earnings power of $8 per share in any year, if not much more. Shares should be in the high $40's, low $50's at worst. That adjusted $5.50 eps number for 2013 is way ahead of the company forecast. Anyone short this stock should have their head examined.
Re your comment regarding JCP...this below says it all.....except from Steve Jobs a couple of years ago at a major technology conference....
Apple CEO Steve Jobs has just walked on stage at the All Things D conference and within a few moments revealed what many thought but weren’t sure of…
Exactly how bad a state was Apple ten years ago when Jobs took over?
In Jobs’ own words:
“We were 90 days from going bankrupt.”
From that to surpassing Microsoft as the world’s largest technology company in phenomenal by any standard.
I have always been curious about how there never seem to be any legitimate short squeezes anymore where borrowed stock gets called in. I had a buddy who works at a large bank in their stock loan are tell me that the would never ever execute a "buy in" on their large clients. I could never see how he could ever make his clients such a guarantee and I should have asked him.
So here is my question. If Someone shorts me a stock and I buy it, under the rules, the seller (shortie) must deliver the shares to me. So, three days later on settlement, I am in possession of the stock (which the shortie has clearly borrowed from someone else). But what happens if I own the stock in my margin account, which then lets my broker loan out those very shares to be shorted by someone else if they so choose. So, could not those same shares that were borrowed and shorted to me then be loaned out again to another short who delivers them to another buyer"? In effect, by this method, 100 shares of stock could be loaned out thousands of times. If this is the case, it is not too difficult to understand how there could be a small number of "borrowed and delivered shares" creating a massive short position. Maybe their is some cusip number record that prevents the same shares being loaned out more than once.
I am scratching my head why JCP shares are down 40% in a month. Why? Is the company any worse off sine that clown Ackman sold his shares? I would say that the company is far better since Ackman left the board. Sure there is work to do to correct for all the idiotic mistakes Ackman pushed on the company. But new management has this company on the mend. There is no way JCP is too far gone. Sears was a basket case for many years before the dope Lampert took over and instead of correcting Sear's problems by investing in the stores and staying current, he just bled the business dry like a vampire. As such, Sears ended up too far gone. But I do not feel that this is JCP's fate at all. The customers will return. The customers have not been gone that long and the customer memories of this tough experience with the change in JCP stores that Ackman/Johnson implemented will fade and will be replaced by new experiences. JCP management has seen the Sears debacle and know what they have to do. The JCP Board of Directors is all on board too.
I am a professional. I think that shares bottomed the other day. news was great re JCP. The key thing here is that this company is a turnaround. That is what to stay focused on. Is the current management doing the thing necessary and correct to turn JCP around. I say yes without question.
1. Stabilizing the liquidity situation.
2. Focusing back on the core traditional customers.
3. Unloading under-performing stores where there is no decent chance of profitable improvement.
4. Selling excess real estate.
5. Providing Wall Street with ongoing periodic updates as to progress.
What more can one ask for, except a dirt cheap stock price that could easily go to $16 - $20. Just look at HPQ if you have any questions ($11 to $29) - and the turnaround there is still in progress.
Trick here is to decipher the short seller manipulation and noise from the reality.
The fact that JCP has already bounced back in 2 days from that ridiculous drop tells it all. Back up da truck. Buy as much as you can within the constraints of risk and diversification.
The primary short seller hedge funds all collude together. They build up big positions and then attack from different angles with each player taking their own angle to push down a stock price. One of the most notable approaches for these short sellers is to attack on "good news" if possible. IF they can drive a stock down on good news, that baffles the longs, makes them uneasy as if the shares don't go up on good news, what happens when there is bad news. I have seen this play out time and time again.
However, many times the shorts get it totally wrong...eg HLF. Today's short disaster is GMCR. This is a widely touted short and today the pain is massive. Short interest is 30% and stock is up 30%. Market cap is about the same as JCP. So, whatever the shorts were able to manipulate on JCP, they just gave back and got screwed on GMCR.
Let's face it. Any on-line business reporting great numbers gets a huge valuation. Just go look at AMZN, GOOG, TWTR, FB, and the countless other internet stories out there. JCP's internet business is probably grossly undervalued by the market.
The upcoming huge event will be the earnings release. At that point all the innuendo and other baloney will see the face of the real numbers. Management's comments in the past two months will be closely examined. Turnaround progress can be assessed. Etc. Stock is down hard in front of the announcement. I would take the money and run if I were a short. The shorts already were handed the gift horse early, even as every announcement from the company has been positive. The shorts have had nothing favorable happen their way except to have a couple analysts freak out and lower their price targets. Well, they all said sell Facebook shares too. I would attach low value to analyst opinion here. I would attach huge value to anything (good or bad) that the company says.
Once the earnings news comes out, it will be important to get a read on the seasonally slow Jan/Feb period. Retailers don't usually report anything great in that period, so no reason to think JCP will be doing any cartwheels. However, further turnaround progress in Jan and February would be well received. Management said yesterday that the turnaround is progressing on plan. To me, that means January should be showing the same. As management, I would never make that turnaround statement if Nov/Dec were okay, but January was not tracking in line with the turnaround plan.
This is a terrible short idea here and a great long.
That is an awesome move. Flip from huge money making short to go long! That is how to make money. Jeez. JCP already $5.20, so your long position is up almost 5% right off the bat!
So JCP shares have traded 550 million shares in basically less than three weeks. This is almost twice the total share outstanding. Any long term holder who has wanted to sell has had more than the opportunity and liquidity to do so. I would add that there are 110 million shares shorted, so the total adjusted "longs" in the stock are 414 million (304 million true shares and 110 million shares borrowed and shorted). That said, the 550 million shares traded is a staggering number. Who is left to sell that hasn't already done so? If JCP were in effect bankrupt, the stock would be $1 already. But it isn't at $1.
I have no experience in trading volume analysis on things like this (eg Enron, Bear Stearns, etc) right before they went bankrupt. I suspect that the trading volumes were large too ion those cases. But these JCP trading volume numbers seems off the charts to me, particularly in light of the management statement that the "turnaround is on track".
October 21, 2013, 2:59 P.M. ET
By Michael Aneiro
JC Penney (JCP) shares are down 8% to $6.44 today after Imperial Capital cut its JCP price target from $5 to just one lousy dollar, and JCP’s bonds are down too as Imperial cut its ratings to Sell for JCP’s shorter-dated bonds maturing between 2015 and 2018. The retailer’s 6.875% bonds due 2015 are down 3.125 cents today to 82.3 cents on the dollar, yielding 18.1%, according to online bond trading platform MarketAxess. From Imperial analyst Mary Ross-Gilbert:
We are lowering our ratings to SELL on the shorter-dated bonds (maturing 2015–2018), from Hold on the 2015s and from Buy on the 2016-2018s… as we believe the risk of a financial restructuring is increasing in the absence of a “deep-pocketed” investor(s) and despite significant strides in the “turnaround.” We believe that risk is causing “compression” in the prices of the shorter-dated bonds versus the longer-dated bonds.
But Imperial still likes JCP’s longer dated bonds, including its century bonds issued in 1997, which are down 2.25 points to 62 cents on the dollar today, per MarketAxess, lifting their yield to 12.3%. JCP’s 5.65% bonds due 2020 are the retailer’s most actively traded issue today, shedding 2 points to 65.5 cents on the dollar, boosting their yield to 13.8%. Imperial again:
We are maintaining our BUY ratings on the longer-dated bonds (maturing in 2020–2097) trading in the 60s, which creates the company at approximately 25% of revenues (net of excess cash) and 42% assuming excess cash is burned. We think this compares favorably to healthy retailers trading in the range of 44–86% of LTM revenues, and yet revenues could recover by as much as $2bn over the next two years, by our estimates. We recommend investors hedge by shorting the shorter-dated bonds and/or the common shares. While we think JCP can be “turned around,” we are becoming increasingly concerned that without
Anyone have any idea what JCP's real estate is worth. I know that a bunch of it is pledged to Goldman Sachs as collateral for a 2013 $1.7 billion loan to JCP. Would love to have an estimate of all their real estate holdings. Anyone have an answer?