Carl,
I am always on the lookout for potentially negative information about a stock that I am long. It would be foolish of me to ignore anything negative and short sellers can be a good source of an opposing view. However, in the case of GUMM, most of the short sellers have used scare tactics, outright lies, and deceitful tactics and have not been a good source of negative information.
Your concern about the short position is valid and I think that you will be enlightened if you review the history of Gum Tech's short position at olook.com. The short interest has remained virtually flat at a high number since 1997. During the course of my due diligence on GUMM, I learned that one or more funds might have taken a large short position in GUMM in 1997. This was during a time when the company wasn't doing well and they were looking for financing. I'd rather not get into the entire story here, but I believe that one of the companies that was "offering" financing was really just a ploy to look at their books, and they went away and shorted the stock. Subsequent to that, a large shareholder pressured the Board to replace most of the management team. They did this, and the new management team has turned the company around. There is a lot of evidence of this, from growing revenues, to lower losses, to higher margins, to bringing Zicam and Swedish Match to the company, to very favorable financing terms with Citadel, among other things. The fund that shorted GUMM was caught off guard, IMO, and is trying to figure out if they want to cover. I'm sure that they are watching Zicam very closely, but they have to know that they have lost this battle in the long run, especially now that Gum Tech has Swedish Match as their nicotine gum joint venture partner.
I don't believe for a minute that the fund(s) have been short all this time. They have probably been boxing and unboxing their short and could be one source of the volatility in GUMM. If you review a chart of GUMM over the past year or so, you will see a pattern where the stock has declined at the end of each quarter and then rallied in the first week of the next quarter. I believe that this could be caused by a short doing window dressing at the end of the quarter and boxing or covering in the first week of the next quarter. Ironically, we are at the end of the quarter and the stock has been weak this week. If the stock performs true to form, it will rally next week, and possibly even starting tomorrow since people have recognized the pattern and may buy stock ahead of the short covering. I sincerely appreciate your comments and hope that you will continue to share your skepticism as well as positive perceptions about Gum Tech.
Mad2: I wasn't referring to whether you have been made or lost money in GUMM over the last year. You have been negative on the company for almost a year and the stock price has almost doubled. Sales have increased significantly despite your criticism of the company. You have also been wrong about specific details, but I see no reason to rehash those. It isn't important. I will say one thing for you. You haven't been dishonest like some of the other shorts, but I still think that you have been wrong and I think that you haven't given Gum Tech credit when credit is due.
Regards,
Dan |
