Altruistica

"Altruistica": Seeking a return to full financial disclosure and regulatory oversight. A financial market analysis blog for "entertainment purposes" only by an experienced CFA seeking new hedge fund engagements for investment writing and analysis. The author has experience investing internationally, running a hedge fund, making angel investments, and helping launch five startup companies. Investors should do their own due diligence.

16 December 2006

OSTK- The Absurdity of "Buyout" Rumors



The Not-s0-subtle Attack on Put Buyers and Shorts:

A clever blogger has pointed out that many of the LBO "rumors" are pure fabrication and market manipulation attempts. Just spend a little time at "Fly-on-the-Wall" and you'll see that it it cluttered daily with a dozen buyout rumors, especially for junk stocks like Netflix and overpriced tout-momos like RIMM. But the more interesting thing here is that even CNBS is getting into the "buyout rumor" game with that shameless repeat of the SIRI and XMSR satellite radio companies MUST be merged.
http://biz.yahoo.com/seekingalpha/061112/20408_id.html?.v=1

From Jeff Matthews' blog:
For starters, while Overstock.com may very well at this moment be the subject of a dozen private equity investment committee meetings—so vast is the pool of private equity these days—the notion of a “leveraged buyout” as reported by the blogger is, I think, a howler, for several reasons.

Reason number one is that Overstock.com has, thus far, proven unable to report an annual profit since its 2002 public offering.

Reason number two is that Overstock.com has frittered away so much cash in the last few years—among other things by buying back its own stock at something like double the current share price—that it has less cash than convertible debt on its books.

Reason number three—and this is something Mr. Rumor apparently never bothered to check—is that Overstock.com has already collateralized “all or substantially all of the Company’s and its subsidiaries’ assets” towards obligations under a Wells Fargo Retail Finance Loan and Security Agreement, fully described in the latest 10Q. (Page 12, footnote 9.)

The restrictions of said Loan and Security Agreement are spelled out quite clearly, and might appear to the average reader to have some bearing on Mr. Rumor's ideas about Overstock.com's future:

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