The current "sell-off" is nothing more than tax-deferred selling. This was quite common today in stocks that had performed very well in Q4 and 1998. I think that THQI will have a near-tern bottom at $19.875 in a couple of days, and it will reach $27 sometime this month. Excluding any bad news (such as THQ missing my estimate of .70), we should see the low 30s in February.
I don't expect a secondary offering. Someone mentioned that THQ could have used their credit line last year, but they opted to sell stock, instead. That's not really true. THQ did not have a favorable bank agreement last year. Although it was better than their previous relationship with BNY, the Imperial Bank credit line was not sufficient to support THQ's 1997 goals. A growing company should always choose to finance its growth with debt, rather than with equity. Last year, THQ may not have had a choice.
For Q1, THQ's cash balances, the credit line, and the expected receivables from Q4 should provide plenty of liquidity for growth. For the rest of 1998, I suspect that THQ's operating cash flow should provide sufficient funding for its business activities. Also, I think that THQ will get another extension of its credit line. If we see a secondary offering at all, it would likely occur in Q2 or Q3. I would be disappointed if THQ pursues this route.
Todd |
