This guy's either some high-rolling trader, or he's just plain erratic. At first, I thought he was actually buying because the stock was undervalued. Even when he sold some stock at $7+, it might have been an effort to make some quick cash, so he could buy more NM.
But selling at $5? That either means that he has inside info. (that would be bad for us) or else he has an itchy trader finger. He wouldn't be trading openly with inside info., since his trades are reported to the SEC. So it's likely that he was disappointed with the Q1 results and may be selling off the rest of his stock. But just because he has many millions of dollars doesn't mean that he's smart or insightful. Just because he's rich doesn't mean he's a good investor. I don't think it means anything.
I think that his report of buying NM shares due to undervaluation boosted the stock. Then he sold after the stock had reacted positively to his report. After the market saw his sell report, the stock dropped (largely due to a bad Q1 report, too). I don't know why he'd sell at $5 though. Who cares? If someone is going to buy this damn company, it doesn't matter what Harrosh is doing.
NM hasn't filed a 14A yet, within which the annual meeting date would be indicated. This is the only remaining wild card, as I see it. If NM is refusing to sell the company at prices it may think is too low ($10, for instance), we may not be completely screwed. For example, if CUC International really wants to buy NM, but isn't willing to offer more than $10, they can go directly to the shareholders. There are 2 ways this may happen, assuming NM doesn't concede in private merger talks:
The first attempt by CUC (or another interested suitor) could take place in the form of a hostile takeover bid. In this case, CUC would issue a press release announcing its intent to acquire NM via tender offer. They might say that they will offer $10 per share for each NM share. After a short while, CUC may gain a large stake in the company.
There's only one major problem with this scenario. NM has anti-takeover provisions, more nicely referred to as a "shareholders' rights plan." In this case, it may work against us. I quote from 1996 10-K:
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11. STOCK PURCHASE RIGHTS
On January 13, 1994, the Company distributed one preferred share purchase right on each outstanding share of its common stock. The rights will become exercisable only if, without the Company's consent or waiver, a person or group acquires 15% or more of the Company's outstanding common stock or announces a tender offer, the consummation of which would result in ownership by a person or group of 15% or more of the Company's outstanding common stock. Each right will entitle shareholders to buy one one-hundredth of a share of a new series of junior participating preferred stock at an exercise price of $40. In addition, upon the occurrence of certain events, the holders of rights
will thereafter have the right to receive, upon exercise at the then-current exercise price, common stock (or, in certain circumstances, cash, property, or other securities of the Company) having a value equal to two times the exercise price of the right. In the event that the Company is acquired in a merger or other business combination, or 50% or more of the Company's assets or earning power is sold, proper provision will be made so that each holder of a right will thereafter have the right to receive, upon exercise at the then-current exercise price of the right, common stock of the acquiring or surviving company having a value equal to two times the exercise price of the right. Any rights that are, or were, under certain circumstances, beneficially owned by such a 15% owner will immediately become null and void. The holders of rights, as such, have no rights as stockholders of the company. The Company has the ability to redeem the rights at $.001 per right until the occurrence of certain specified events.
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The second attempt could occur via a proxy fight, in which CUC issues a proxy statement to us, telling us to vote for CUC executives as new NM board members. In the proxy statement, CUC would explain their reasons for taking control of the company, namely to increase shareholder value through a buyout. If CUC people attain the majority on NM's board, there could be another meeting in which CUC offers to buy NM (controlled by CUC). That means that the merger is sure to happen, but only if CUC (or any other interested suitor) can gain control of the board of directors.
Due to the shareholders' rights plan, I think that the second method, the proxy solicitation, is more likely. Unless a company is willing to pay over $1 billion for NM (and I don't think the company's worth more than half of that), they won't even attempt a tender offer, since they would have read the provisions carefully. But either way, the stock price will react very positively to any news of a hostile takeover.
For what it's worth, I think that NM is worth far more than $5 per share in breakup value. If the company were to sell off its assets and divisions to various companies (another possibility), it would likely generate more value than the current market value of $125 million. The company's "strategic alternatives" or "partnerships" that are frequently referred to in the press releases could refer to an outright buyout (the most popular topic to date), a company liquidation via the selling off of divisions to multiple companies, or perhaps the selling of some assets to raise cash. I think that the third option is least likely, because NM presumably needs all of its assets in order to function adequately (and it's not functioning well with all of them presently). Also, the third option would not yield a great enough increase in shareholder value.
I think that this company is broken, and that the only way to unlock the underlying value (what's left of it) is to sell it to the highest bidder. The business plan is no longer viable, especially with the current management. I am fairly certain that there are companies who are interested in buying NM, and I am fairly certain that SFE wants to sell NM, assuming the price is right. I just hope they can reach a price which is fair to us (and to them, since SFE holds ~15%), because I don't see any other way for us to regain some of the lost value.
I don't know about any of you, but I'd be ready to sell out at $10.
This is no time for foolishness, NM! Swallow what's left of your pride, and sell out!
Todd |
