vestor - entirely appropriate. "We will see if NITE has any tricks up their sleeve or if the insider selling is all that one needs to pay attention to here."
Indeed, it is not unusual for a relatively young company to see insiders sell shares - often this is their first opportunity to cash in on some gains for years of work. However, short term it certainly adds to the selling pressure.
Watching NITE mngmt. is indeed the keyword. Obviously, they cannot directly control the value the market puts on NITE shares. Yet it is very telling to see what measures management takes to protect shareholder value. As I pointed out a few posts ago, a dip below $30,
would wipe out any gains by a substantial chunk of shareholders - the bulk of heavy buyers from $30 on up. This has to be of great concern to management. The technical damage to their stock is already extensive. A dip below $30, would be IMO, Hiroshima.
There are several tools management can use to protect shareholder value. One is positive (and obviously truthful) press releases, and increased visibility, coupled with positive forward-looking statements. This tactic (positive forward-looking statements), f.ex. allowed INTC to soar to new highs in a generally rotten market. If in this time of dramatic pain for your shareholders, management is silent, it can mean one of two things, neither of which is comforting: (a) there are no positive statements to be made (indeed KP, did the opposite, warning of unsustainability of volume growth - I suppose he was being truthful and honest, so he cannot be blamed for it) - that would be depressing; (b) management does not regard the price of NITE as dramatically undervalued - again depressing.
NITE mngmnt. has thus far been silent. I was frankly rather dissappointed in the relative lack "damage control" from NITE thus far. I mean, what - they have nothing good to report? They don't have the PR skills? They don't think NITE shareholders feel under assault and are experiencing significant pain? Maybe they think NITE is fairly valued here - or perhaps even overvalued? I mean what is the explanation for what seems like complete lack of action?
Not even general ones like "there are no developments the company is aware of, which would justify the present low valuation of the shares, and we regard the present valuation to be strictly the result of general market conditions and are not the reflection of management beliefs about the future business prospects". These are very general statements, and we have all seen companies issue them, when their shares are being sold off far beyond any rational valuation models.
The point is **NOT** that whatever they do in the way of PR or issuing statements will in fact impact the present price of NITE. Rather it is a signal from management, that they understand that shareholders are experiencing significant pain; that they are fully confident in their business prospects; that they regard present low valuations as unjustified by the business fundamentals; AND THAT THEY CARE ABOUT SHAREHOLDER VALUE.
In this time of pain, for mngmnt to remain silent, is IMO, a major faux pas. We all understand that whatever they say will not likely impact the price. But are we to conclude that either of the options I outlined above (there is no good news and faith in the business by management, or they think the shares are fully valued) obtains?
The other tool is a share buyback. This is even more telling - a vote by the management that they think their shares represent compelling value. I strongly suspect they will not buy back any shares above 30, and who knows, maybe not even 20. Maybe they'll buy at $10, or less. Whatever. I think that unless you have extremely urgent need to use the capital to enhance the long term value of NITE through expansion and/or other uses of capital, IF they are to have a share buyback program, then it should be used to defend the $30 level - for reasons I outlined before. To only buy once the price is at a lower or much lower level, is closing the barn after the horses are out. It is actually worse than not having a share buyback program at all. If they buy only at $10, what are present and more importantly, FUTURE shareholders to conclude? That NITE is cheap only at $10? That only then it is "value"? Good grief, what confidence will that give anyone to buy at $15 or higher? That you're on your own, a wild speculator and fool who overpays? That the company itself doesn't see anything above $10 as "cheap"? Talk about technical damage! Again, IF you already have a share-buyback program, you have to use it at an appropriate level, or you are just compounding the damage - it is penny wise and pound foolish to say "hey, we got it cheaper at $10" - there are longer term implications that far outweigh such petty "savings"... this should be obvious, as not only does it impact the shareholder value in the short term, but also a healthy shareprice can be used for acquisitions etc. The current volatility is not healthy. It is not OK, for NITE to sink so dramatically from the highs - at this point far more than 50%. I believe it makes NITE seem less serious a business, more on par with purely speculative issues, a KTEL. Perhaps that is the reality! But whatever - institutions and serious long term investors, as opposed to quick traders, will avoid such an issue.
Bottom line: what I would like to see, is for management to make some moves to protect shareholder value. Even if it does not actually affect the price. It is a question of confidence. And I would like to see NITE management make a show of defending the $30 line with share buybacks. The actual impact is less important, than what is says about the management and its awareness of shareholder concerns, and their attitude to shareholder value.
To run a publicly traded company, management must address themselves to more than just running the business itself well. That's fine for a private company. A public company has an additional obligation - to enhance shareholder value. A manager who is good at just running the business, is not good enough (for a publicly traded company). He MUST address himself to shareholder value - that is PART OF HIS JOB. When I evaluate how good management is, I take both into account. It simply is not enough to be good at running the business - I am confident that KP is good at that. I am no longer confident KP is good at enhancing shareholder value. I will not pass a negative judgemnent, until I see what develops next week, and how KP and crew react to further price pressure on NITE, especially should it reach critical levels. In that light, I will evaluate my own position - I *invest* (as opposed to *trade*) only in companies where the management is TOP RATE. And that certainly includes how they act on shareholder value issues. Thus far I am not overly impressed.
How they act now, at this dark hour, will not be forgotten. Good or bad.
Morgan |
