Aloha - YOU DID IT :(((( I wasn't going to post here for awhile again, but I can't let your remarks go unchallenged, because they grievously distort my position.
<<We had a discussion some months ago concerning the way Amazon promoted their stock value with PR & hype to leverage acquisitions. We disagreed as to the advisability of that strategy. I think we are beginning to get a glimpse of the consequences of Amazon's strategy as the stock and perhaps the company are beginning to unravel. Amazon laying off employees and taking about obtaining another 1B in new debt financing. Given how Amazon had pyramided their hyped stock, I believe we will witness a very bad ending for Amazon shareholders.>>
All I ever maintained was: Bezos understands the importance of managing the STOCK, not just the company. No doubt, his talents were used in service of a possibly fatally flawed business model, but that does NOT mean he was not right to manage the stock. You have a real problem understanding that distinction, and I've tried to explain this to you a 1000 times. My point was: if KP had the same dedication to managing the stock that Bezos had, NITE shareholders would be in 7th Heaven, because those talents would be in service of a fundamentally SOUND business. So here you have:
AMZN bad business model + great stock managing = great stock price.
NITE great business model + disastrous stock mis-management = disastrous stock price.
What I would like is:
NITE great business model + great stock managing = great stock price.
Further you persist in utterly failing to appreciate the LOOOOOOOOOOOOOOOOOOOOOOOOONG TERM importance of managing the stock price. Managing it is not just for "short-term and day traders."
<<As I said in our earlier exchange, I believe a company's management has an obligation to the companies investors (read long term shareholders) but virtually no obligation to short-term and day traders.>>
There you go again. Why is it that you cannot grasp the fact that managing the stock price represents an obligation to LONG TERM shareholders, not "short-term and daytraders"?
Having a high stock price allows you to make acquisitions on the cheap. They allow you to leverage your capital in ways that has a DIRECT and LONG TERM effect on the well-being of your BUSINESS. And that benefits long-term holders. Further, you must try to bulk up your shareprice and so, your capital leverage AS SOON AS POSSIBLE. You cannot afford to let the "results speak for themselves" - obviously they haven't... or haven't you looked at what happened after the blowout 4Q. So:
<<I still feel that NITE management is pursuing the correct strategy of simply crushing the numbers Q after Q. Eventually the shareholders will be rewarded.>>
this is catastrophically misguided. Being quiet as a church-mouse does not work in this market that operates on PR and perception. Letting false rumors circulate without contradition, does not work in this market that operates on PR and perception. Failing to correct false images (NITE being linked to OLBs), does not benefit the NITE shareholder in this market that operates on PR and perception. If you want the results to "speak for themselves" with no PR or incompetent PR - I recommend that you get out of the stock market, and get out of the business world altogether, because every product and every service needs to be promoted, advertised and made known.
You are hoping that somehow, one day, justice will prevail, and the market will notice KP's silent little company and all the good deeds they have done. This is naive at best, and criminally stupid at worst. First, this state of "underappreciation" can go on for years. Second, you try to form the image of the company as early and as fast as possible (this is true of products, services etc. - first law of advertising). The reason is that you want to convince the investment/analyst community that you deserve a certain p/e level based on your future prospects - because once you get an image that you deserve a low finance company type p/e, it is extremely hard to shake... now the 12 month target is $60-$70, and everyone here would be thrilled to death to hit it. How tragic - instead of looking at $400, and shooting for $800, you're just hoping to hit 25% below the high from early 99, glad to get $60 by February 2001. Oh boy. Is it possible to have a high p/e in this industry - sure it is, just look at AMTD with its 200-300 p/e... KP manages to get all the negatives of OLBs associated incorrectly with NITE, but none of the good things (like sometimes a very high p/e - only here the p/e is actually more justified than with AMTD).
And is getting "bulked" up **early** important? You bet. You can have the leverage to be an "early mover" - which is often critical in the business landscape - you can acquire competitors and/or expand fast enough to create "facts on the ground" which give you a permanent incumbent advantage. And you can do it "cheaply" (calculate how much cheaper the Arb acquisition would have been in share dilution, if NITE were trading at $300 instead of $45). All this has serious, often permanent LONG TERM consequences for the business, for LONG TERM holders, and for the entire future of a prospective business.
Funny that you should bring up AMZN as an example of the bad consequences of Bezos' managing the stock price. Somehow this is supposed to argue against my case. Boy, did you strike out! Not only are you wrong in understanding my argument (I'm endorsing Bezos' stock-management skills, **not** his business model), but actually, provided an excellent arguments FOR my case.
Here's a nice little article from The Motley Fool:
fool.com
A short excerpt:
<<Just about everyone knows that Amazon is unprofitable. It hasn't had a profitable quarter in its history, and none are in sight for at least another year or two. When earnings are released next week, the company could report a quarterly operating loss that approaches $200 million before special charges. Amazon is awash in red ink, right?
Well, luckily for Amazon shareholders there is the mitigating factor of Amazon's investments. For those who may not know, Amazon has been an aggressive investor in upstart "dotcom" retailers, acting as a sort of venture capitalist. The thought is that being the world's largest consumer e-commerce company gives Amazon insight and experience needed to select the future e-commerce leaders. Having the largest customer base in the business doesn't hurt, either.
The benefits of these investments to Amazon and its investees are several-fold. First, the investees have the experience of Amazon's senior management to draw upon to better grow their businesses. Second, Amazon has the ability to funnel some of its 16 million (and growing) unique shoppers towards these investees, greatly improving the traffic to its affiliate sites at little cost. For its part, Amazon gets these investments at fairly good prices and can personally help its investments grow.
To see if Amazon's investments are profitable or not, let's first start by taking a look at the estimated value of Amazon's investment portfolio.>>
Bottom line, AMZN's investments are worth $700mln today. All thanks to the fact that Bezos has managed his shareprice, raised a bunch of $ from WS in bond offerings etc.
You just don't get it Alohal! Given how flawed AMZN's business is, without Bezos stock management skills, there would have BEEN NO AMAZON BUSINESS. Let alone a pac-man monster that's gobbling up companies, expanding etc. In the simplest terms: without Bezos skills - AMZN business model=ZERO...actually it wouldn't even get off the ground. With Bezos, AMZN=$21billion - now you tell me, that Bezos skill in turning a pig's ear into a silk purse, and selling it for a price that buys him a castle, is worthless.
In short, Alohal, you got it exactly backwards. The ONLY good thing that AMZN has going for it, are the tangible results from Bezos skills at managing the stock-price, not the business model - oh, if only those skills were applied to a sound business model like NITE. To finally try to get through to you, imagine this: Bezos skills are like those of Moriarty - in services of a bad cause. But you cannot deny the value of those skills - because Sherlock can use them to a good cause. NITE meanwhile, is like Dr. Watson - good cause, but lacking crucial skills, and so condemned to a pedestrian, uninspired future (for the shareprice, and perhaps even the business). Never confuse the skills with the cause, as you do with AMZN. And btw, don't be so sure that it will all end "very badly" for AMZN holders. Remember AOL/TimeWarner. What if AMZN uses their inflated market cap to take over a LEGITIMATE business? Now Bezos' skill has allowed him to get away with the crime. Moriarty wins - crime pays - AOL is the proof. AOL will now never be de-listed, no matter if AOL business sinks to ZERO, because TimeWarner is a real business. What if Bezos pulls off the same kind of trick? Thanks entirely to his ability to sell a piece of glass for the price of a diamond. Believe me, the **early** investor in AMZN could do very well, no matter what happens with AMZN. Meanwhile, NITE's early shareholders? Geez, NITE at $32 is hardly rewarding most investors who got in as early as March of 99.
What NITE management is doing, is not only painful for the shareholders. It is not only injurious to NITE's business - by having the price low, and stuck with a low p/e, they devalued their currency and capital leverage (probably permanently, unless they somehow manage to get a higher p/e). But it is extremely dangerous. Companies like NITE - good business models, but horrendous shareprice are targets for "take-unders". When your shareholders are so disgusted, and the price so bad, for so long, they may be willing to accept pennies on the dollar. I can just imagine Merril Lynch thinking... we already have an MM operation, but not terribly successful... what if we take over the state of the art NITE operation? Now, instead of NITE taking over Merril Lynch - my fond dream - you get the opposite nightmare. The NITE shareholder is now permanently robbed. Talk about long-term consequences for the long-term holders. Coincidentally, Gateway just took steps to protect their shareholders against a low-ball 'take-under' taking advantage of their depressed price:
<<It's certainly not unusual for a company to adopt such a plan in the face of stock price weakness. "That's one thing that a company would take into consideration," said John Purcell, general counsel at Georgeson Shareholder Communications. "It's a measure of how attractive a company is at the time as a takeover target."
Purcell added that it's best to take such a step "before the 800-pound gorilla is knocking on the door because it's much more defensible.">>
nytimes.com
Hmmmm. I wonder how attractive NITE might be to a Merril Lynch... or a Bear Stearns!
So while everyone was celebrating NITE's "great" performance today, I was fuming. I even wrote something, which I wasn't going to post here, but since I'm posting anyway, here it is (excerpt):
<<...but really, when is KP and gang going to wake up.
Today was a golden opportunity to strengthen the stock. They got positive coverage by an analyst. This was a #$%^@ opportunity to build momentum - especially in a down market. The PR department should have had a press release ready with SOME good news. Something. Surely, they've got SOMETHING good to report???? Look at how other companies put out BS news, even if it's just "Mr. Sh[|]thead has been promoted to VP". Enthuse the shareholders. Keep them from bailing with every 1/2 gain in stock - because they are so shell-shocked that they think this is the last 1/2 point gain in this stock ever. If you release SOME news, at least it looks like something is cooking, that business is going well, etc., etc., etc. That keeps the shareholders from selling, and builds momentum. A steady silence from the company in the face of a huge selloff, just gives people the willies. We all remember how silent they were, when the stock started selling down from $60 last summer - then the bomb of bad 3Q earnings. People are conditioned to think: if they are silent, it is because they CANNOT release good info, because the situation is bad. If you are not going to defend the stock when it breaks $30 on a criminally bad analyst report, then when will you? Given how oversold the stock is (it was oversold already at 33-35!), if you took today's analyst coverage and added some company PR, you'd see the stock leap 5 points - just on the analyst, the stock leapt 3 points intraday - now add PR and not only would the stock jump 5 points, but get to keep most of it (like 3 points - I say only 3, because the market was very negative). Instead, the stock gains a grand 3/8. Granted the market was negative, but that is all the more reason to push the momentum, so the stock can hold 3 points gain. Then when the stock takes off, it takes off from a higher plateau than before. These guys never failed to miss an opportunity to build momentum in the stock since early 99. I'd much rather discuss 20% gains and declines from a $300 stock, than a $32 stock. NITE could have been $300 easy (just look at AMTD p/e).
I work in the entertainment business. I'm well familiar with building momentum for movie releases etc. I tell you, it infuriates me no end to see the bumbling going on with NITE PR. I'm almost tempted to offer my services for free to NITE, because it breaks my heart to see such great potential so tragically mis-managed.>>
<<Re:IIJI
Today the stock managed to eke out a 1 3/8 gain - just because they released some lame PR. Now, had they had also the good fortune of a good analyst coverage initiated, you'd have seen an 8 point gain. Still, in a negative market, a stock that is in a **DOWNTREND** manages to bounce a little - because they release PR that shows that something is going on.
Meanwhile, NITE is scraping close to the bottom (up 2 1/2 points from the recent rout to 29+), so it should have some kind of leap with the analyst coverage - but absent any company PR, this amounted today to 3/8. A wasted opportunity. NITE PR has been silent since releasing their earnings - for 9 days now, while the price sinks almost 20% on these great earnings. Unbelievable.>>
The thing that NITE management doesn't get, is that managing the stock price is not an "option", but can mean the difference between LIFE AND DEATH for the company (take-unders etc.).
Morgan |
