I have been sitting in the beautiful Seattle Summer (today and tomorrow, then it's over!) and pondering the past two weeks.
Remember when many (most?)felt CREE would announce a split either right before or in conjunction with the earnings announcement? Many were disappointed in no announcement, especially in light of such good news in the conference call...hey 70 million backlog. What's not to like? Split, 'er.
Well, CREE management knew, of course, that the Nitres lock up was expiring, and I am sure they knew of the strong possibility (nah, liklihood) that many of those shares would be dumped within a few days of legal release. In fact, if I remember the bits and pieces of news that have come out, it actually occured in two steps: non-employees on one date, existing employees a few days later. With this immenent sale of a couple million shares there was going to put pressure on the price. Neal and the gang knew this, of course, and since they are not going to speculate in the marketplace about stock movement (especially since the sellers may decide not to sell...or, gasp, the price might hold steady or even go up in spite of the sales), why annouce a split right when management knew of the real risk to the share price underway? It would have made the company look weaker in light of the subsequent price action.
What the company can do, and did, was hold and announce a very nice piece of new positive news right in the middle of the hurricane. Gee, another 70 million bucks in sales (bringing the backlog to a cool 140 million) and our largest customer firmly in the fold for a couple more years. Very nice.....sort of changes all the ratios one more time. If CREE was reasonable at 130 under various pricing models, what is it now with another 70 million in sales and at 104?
Watch for the split announcement in three weeks or so. The dust will have settled, another nice sales announcement is due about then (just speculation) and the price will have inched up to where a 2-1 will make solid sense.
JMHO and Speculation
Pomp....gotta go walk the dog. |
