I received the following analysis from a person who is bearish on NITE. While I am long, and will remain long, I thought I should share this viewpoint for the sake of analysis.
Gary Korn
My question to you is the following: we all know NITE has solid earnings etc. But doesn't the issue of the share overhang seem extremely grim? Look at the very figures you cited: how much more does Waterhouse et al own? I personally find that extremely frightening. There is a mountain of shares to get through - 10-20 times as much as has been sold so far - and already we are barely holding on to 30! Granted not all shares will sell, but dear Lord, the flood of shares out there waiting to be unleashed will take eons to be absorbed. And further, I ask myself - why do they sell? They are in the business. Yet they sell - what do they know? And why, is the NITE management eerily silent? Perhaps it has all an innocent explanation - but even so, from a technical point of view, that ocean of shares still waiting to be unleashed, says one thing to me - SHORT. After all, we know one thing - NITE management will not lift a finger to defend their shares valuation. So why not short? And more importantly, why isn't the strategy I articulated long ago, valid: short every rally in NITE.
Long term, I think NITE will recover. But it will need to demonstrate by quarterly financial results, that it is growing, and growing strongly. Otherwise, indeed, as the fund manager said - down to $20 it goes. I don't pretend to know when NITE will reach $60 again, (or indeed beat it's high of $82 or so). But I do feel, it will be a long, arduous, hard road to climb. Just look at how the stock is trading - it's pathetic. On days like today, it still manages to be down by another point. Market down - NITE down. Market up - NITE down. Market neutral - NITE down. Eventually it will go up, but patience is the real key here.
To me, this is strictly a trading vehicle for now - but investors need to examine the issue of ECNs head on - I feel this is at the bottom of this stock as a fundamental concern. This is where the energy of the board should concentrate, IMO. Day to day trading is fine - but what really moves the stock, is fundamentals. So, IMO, time is best spent examining the fundamentals of NITE business. |
