Skullcandy, Inc. (SKUL) Message Board
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I sold about 1/3rd of my position today around $9.25, but looking to buy it that piece back at $8.80. I think works higher over the coming months. I think there is a good chance next earnings are decent. It seemed like they were straight-lining some pretty draconian trends in their guidance so there is a chance things aren't as bad. I was waiting for a true insider to buy (I don't count Okumus as an insider) to confirm that the current quarter is tracking reasonably well. A purchase more than half way into the quarter is meaningful, though Rudman's buy 2/3rds in last qtr was spectacularly ill-timed so who knows.
Sentiment: Strong Buy
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Was away from my desk this afternoon, but came back to a veritable blizzard of filings in VOCS. Okumus bought more shares and switched to a 13D, and Director Kevin Burns drew the short stick and bought 25k shares at $8.50. Anyone here live near DC and planning on going to the shareholder meeting? I might go to propose a reverse poison pill that disallows management from making any more horrendous acquisitions.
Sentiment: Strong Buy
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If the stock is over 12.5 on friday, I don't think we will care very much if Okumus has to amend their 13G.
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It is semantics. If they are in the money, they are counted like stock.
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No, the options are already included "as exercised" in his holdings calculation so they won't add to the total, and thus the rights agreement will not be triggered.
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It's not a big deal, and it doesn't preclude a takeover. It's a standard defense against an unwanted suitor (in this case Okumus). If the company was approached by anyone interested in buying the company they would still consider an offer, even from Okumus though I don't think that is his intention. It is called a shareholders rights plan because it disallows someone from coming in and accumulating enough stock in the open market (51%) to control the board and then selling the company to themselves for a below market price that would harm the minority shareholders.
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I guess VOCS management doesn't want Ahmet playing in their sandbox.
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We are about 20% of the way through the option related buying
by trdr1904 •May 13, 2013 1:51 PMGood point on table 2. It shows no activity. Those purchases might have just been open market, not option related. An insider activity service i use was listing those Okumus purchases at $4 and change so I assumed they were option related ($12.5 strike less the current price of $8 and change), but looking at the fact that open interest hasn't budged and the fact that Okumus share count owned keeps rising (the options were already included in his original filing of 3.3m shares), I would have to conclude that the full weight of the option related buying is still to come. I retract my prior post about 20% being done.
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Another Form 4 hit the tape today for Okumus related to the exercise of their puts. I went back and checked all the filings and including today's I come up with 276,081 shares exercised out of 1,323,800, or roughly 20%. There is still over a million shares to buy by Friday.
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these larger sized offers are getting lifted today very aggressively. given the long consolidation sub 8.50 or so post earnings, every major seller who wanted out has had ample opportunity to sell so could really see a vacuum here
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Ran out of space there. One further observation which speaks more to your version of events is that anytime the stock looks like it is getting some mojo above $8.50, a large offer appears. Today there was 25k (~7% of the days volume) offered out near the end of the day. I haven't seen one of these big offers get lifted so they are succeeding in either getting algos to front run them or scaring away buyers. This has been the case for the past couple weeks so that would indicate that there could in fact be someone who is trying to keep a lid on it so they can buy stock to offset their long put positions. To paraphrase George Costanza, this situation is like an onion, the more layers you peel back the more it stinks.
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I did enjoy the poetry. This is an odd situation to say the least though I don't think that Ahmet was on both sides. I think someone just picked him off. Based on my understanding of his strategy, he looks for beat up names and then tries to bottom fish, usually entering by first selling puts. Then he either collects the premium (in this case it would have been ~3-4% in less than a month which is pretty good annualized return). He is also not afraid of being very concentrated so this also fits his profile. He probably also figured, hey the CEO just bought $1MM worth of stock 2 months into the quarter at ~$14 so what is my risk here. So here is my theory: when Ahmet came in to an option market maker looking to put this trade on (I assume he used whoever he is prime brokered with) maybe they didn't want to take the entire trade and asked around to see if they could lay off the risk. They would have looked at the holders list and asked the big holders if they were looking for protection ahead of earnings. They would have called Cortina for sure. Then Cortina, who we now know based on their 13G was already gone (they sold an 8% stake all in one quarter so maybe they had some insight into what was coming down the pipe), might have said that they would happily take down the entire trade. Then the stock blows up, Cortina crushes it and has the balance sheet to have simply bought stock against the puts on that high volume first day down in which case we don't get the rally next week. Ahmet is bagged but decides to get his average better by buying stock outright, which he filed that he did. He gets his average sub $10 (we can calculate it exactly if we want) and he figures well it will eventually bounce back. Maybe if it gets closer to his average he starts selling calls against his position. If he gets very desperate he can switch to a 13D and push the company to sell itself. This is all just wild speculation though. That said, I am long some stock to see what happens.
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For those of you scratching your heads over the cryptic comments on this board (admittedly they are clever and entertaining), I will attempt to translate for you in simple english. There is a huge open interest in the 12.5 Puts. They were sold by Okumus Opportunistic Value Fund as a way to collect some "cheap" premium (the "putz writer").It turned out not to be so cheap after all when the stock plunged 40%, but hey what's $12 Million to a market wizard(google Ahmet Okumus). So now the mechanics of this trade is that the counter party that bought the puts from Okumus has to unwind it by buying back roughly 1,350,000 shares by May expiration, which is next Friday ("five sessions left"), unless they want to be short the stock. Option market makers tend not to take inventory of shares in that size. From Okumus' form 4 filings with the SEC ("got filings") you can see that they have only been allocated on a small amount of the puts ("a pittance of puts"), and open interest remains at 13,439 as of today's close since no volume traded in them today. As mentioned above, the speculation is that the market maker will have to buy 1,350,000 shares between now and next Friday to close the trade. Given that only a few hundred thousand shares are trading each day, this kind of volume on the buy side would significantly move the stock higher, especially since 16% of the float is now tucked away at Okumus (at least until he gets back in the black which is well north of here), and there has been sufficient volume since the blowup for any long term holders to have exited. My only issue with this scenario is that it is possible that the market maker has already bought stock against his puts and essentially closed out the trade. I will admit that I don't know for sure if it is customary for market makers to do that though as I said before, I don't think they like to deploy their balance sheets to hold huge amounts of stock (~$10M) for long periods. Maybe GTH has better insight into that.
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I can already tell you what they will say tomorrow morning: "Company appears to be doing the necessary things to right the ship. We like the vision of the new CEO, but we are taking a wait and see approach to the turnaround. Reiterate neutral rating and $5 price target." Then of course if they actually do turn things around they will be upgrading to buy when the stock has already doubled off the lows. And these clowns get mid six figures to low seven figures to chase their tail. nice work if you can get it!
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Not much volume, unlike last time earnings was announced
by redzombie85 •May 2, 2013 4:53 PMThere was more action last time because the delta between expectations and guidance was much larger.
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EOM
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guided q2 lower on both revenue and EPS. 3c loss vs. street at 1c profit. revenue down low to mid 20% vs. street at down 19%. Not a total disaster, but not particularly inspiring either. I don't think much downside for the stock from these levels, but hard to see it rebounding strongly either. Dead money for at least another 3 months.
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"there is still much work to be done in order to improve on our recent performance" doesn't sound like they are going to guide particularly well. The 2c beat this qtr is meaningless as they pre-announced after the qtr was 70% over so clearly they were going to be at the high end of the range. Will they commit to being profitable for the full year? that will be key. street is at 16c now. on the last call westcoat said that they expected "for now" to be profitable for the full year. Will be interesting to see if he still thinks that.
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Those late March sales were not actually open market sales. They were sales made by the company to cover the tax liability for employees who were receiving restricted shares as part of their compensation package.
Sentiment: Strong Buy
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At the end of February after VOCS had their first blowup, co-founder and CEO Richard Rudman bought 70,000 shares in the open market at $13.93. When asked on the conference call last night why he bought stock at that level 2/3rds of the way into the current quarter which produced disappointing results, he said that he is a believer in the long-term value that the company is building. I would expect that he will be a buyer again in the next few days which will probably produce a bounce. If you listened to the call or read the transcript, it is pretty clear that their high end product, the marketing suite is doing phenomenally well. It is still a relatively small % of revenue, but it is going to triple to ~$35M this year compared to their expectation just a couple months ago of it "only" doubling. They are in a transition phase here which is clearly producing lumpy results, but they will still generate $13M of FCF this year, and it seems likely that they can do closer to $20M in FCF in 2014. The market cap at current prices is about $160M and they have $40M in cash. With a convert of $75M, you get an enterprise value of $195M, so if they do $20M in FCF, then the FCF yield is over 10%. That means they could essentially buy back 10% of the company every year. That is a very attractive valuation for a company with no growth, let alone one growing FCF at 50% in 2014 vs. 2013. I don't know if the stock will bottom in the $7s or not. Anything is possible when people are so offsides, but you are supposed to be buying it here in the low $8s and adding on any additional weakness, IMO.
Sentiment: Strong Buy