About the bond issue:
It is not clear what Cymer wants the money for, however (1) the increased use of leverage will probably be very good for existing shareholders but (2) will have a downward influence on the current stock price. By all accounts, Cymer has a very strong balance sheet and with the liquid assets it currently has, no forseeable problem with debt service. Someone should check the prospectus on the bond issue and see what the company says it plans to do with the money. (1) because of better ROE down the road. However, equity investors have a real fear of debt on a (nonutilities) company's balance sheet (see Peter Lynch's comments in both books), and this would cause some to run scared (hence (2).) Two more thoughts: (a) if the company needs to raise cash, an equity issue is out of the question at these share prices, and (b) it is conceivable that there could be a debt-for-equity swap going on (ie a buyback announcement coming soon!) which I think would be very good right now.
About the share price:
Cabot's timing couldn't be worse. It is possible that even though the official Cabot announcement was after 5, information leaked earlier and this showed up in the selling pressure. Could be a bit choppy Monday. Furthermore,
(1) This company has (and is continuing) to disappoint shareholders for whatever reason. WE believe that there is nothing fundamentally wrong with the company, but the Market does not (because for all it does know, the rumors might be true, etc.) See LK's "damamged goods "comment. There is truth to it.
(2) Then the industry showed weakness (see Mason's comments about the declining front-end book-to-bill ratio and its effect on the whole industry.)
(3) Then the whole frigging market went punk (see the world's comments.)
Any stock that only suffered one or two of these conditions might bounce back. All three? It will take time now. Is the stock oversold? Almost certainly. Could it get even more oversold? Again, almost certainly. That's the dilemma for day traders and shorts. If you're long, and long a ton, you'll pick up some gray hair during the next quarter, and it could take that long or longer for the stock to righten. Only positive numbers and recommendations will help, and we may not get the latter until we get more of the former. My own plan is:
In my discount account, I will sell my last remaining issue, my 2,000 shares of IDTI and that will build a little (but not much) buffer back.
In my full-service account (which is 100% CYMI) my broker has instructions to dribble sales of Cymer out as needed to keep me at (or slightly above) 30%.
If you believe in this company, and I obviously do, there is no alternative but to suck it up a roll with it. Time to be a warrior.
jess. |
