uf,
I believe a company has a 30 day window in which they can delay the announcement of earnings, without any specific action. After that, they are required to file with the SEC explaining the reason, along with the anticipated time frame to file.
I don't know the specific conditions which allow this, but I believe a merger would be one (along with others, such as if a company retains a new accounting firm).
Since we're postulating, I think its important to consider some details of the merger. From the merger agreement (as it pertains to TVGIA):
"The agreements governing the Company's bank credit facilities and 8 1/8% senior subordinated notes due 2009 contain provisions which, absent modification or waiver of such provisions, will result in the Company being required to repay outstanding borrowings under the bank credit facilities and to repurchase the outstanding 8 1/8% senior subordinated notes, at the option of the holders, following closing of the transaction with Gemstar. The Company is currently assessing its options with respect to financing the repayment of any borrowings ultimately retired or seeking modifications to the agreements to allow the transaction to occur without resulting in the repayment or repurchase of the outstanding debt."
GMST may have to cough up some CASH at the conclusion of the dance to pay off old TVGIA debt, I am SURE this is weighing HEAVY in deciding when to finalize the merger and announce earnings, based on the negeotiations that are, or already did, take place concerning the subordinated notes and credit facilities. This is BIG MONEY, and it might be premature to assume shenanigans or lack of disclosure, they may also be PREVENTED from saying anything until the deal is done.
Also, with respect to stock re-purchase, the company has i the past been less than aggressive in buying as many shares as they authorize in buybacks. From 11/15/99 10Q filing:
"In August 1998, the Company's Board of Directors authorized the repurchase by the Company of up to $100 million of its Ordinary Shares. As of September 30, 1999, the Company has repurchased 1.4 million Ordinary Shares for $28.4 million."
In this case the company bought back only 25% of what was authorized in a period of one year, which I consider less than aggressive. It's hard to know whats going on now, I called IR specifically to address this issue on Monday and still have not heard back from the company.
How they handle this buyback may be affected by the rules governing the merger (pooling vs. purchase), as well as the outcome of possible re-payment of the subordinated notes and credit facilities. If they must be re-payed, that might limit how much potential there is to buy back shares, just a thought.
With respect to the rules governing the merger, pooling is typically the favored approach because it is much more beneficial in terms of accounting for the combined company. It does come with a couple caveats though, two being the combined company typically cannot split the stock for a period of 1.5 years following the merger without petitioning the SEC, and also the combined company is usually prevented from buying back any of their shares for a period of six months from the time the merger is finalized.
GMST may be WISE to delay announcing earnings as well as the merger, in order to stock up on shares, since once the deal is done (assuming) the opportunity will disappear for a period of six months. The issue may be that until the credit and debt issue is resolved, they won't know exactly how much money is available to buy back shares.
Frankly, this is a very tough situation to be in, and I give the benefit of the doubt to Mr. Yuen in this regard, I think his job is VERY difficult at present. When I imagine being hamstrung, out on a limb, gagged in the mouth, and at the mercy of the SEC in terms of their decision, I get a little squeamish myself.
Mr. Yuen strikes me as someone who cares, but will act independent of, what the prevailing market is doing. After all, it is this characteristic that provided him the motivation to invent VCR+ in the first place. This is typical of leaders, and sometimes it is hard to understand and follow along with such actions. Toss in the complications of the merger, and I think it's fair to consider current events as reasonable (although not necessarily likeable).
I fall back to the simple facts GMST has the technology, patent protection, market position, proven history, and secured agreements to succeed regardless of what transpires. In this time of uncertainty in the general market, I consider it a stroke of luck that current conditions provide the opportunity to get in on this company without paying a fortune.
I'm not making an argument for or against Gorilla status, I am not knowledgeable enough on the matter to do so. I also do not wish to make a case for other to buy or not buy the stock at current levels, because personal decisions should always be the basis in doing so. However, I do wish to point out that GMST and MR. Yuen are in a VERY difficult and stressful position at the present, and therefore as investors it is a good time to re-consider factors which might be at work.
I'm confident my investment is safe, regardless of the outcome, if I take a longer-term perspective (thanks, in part, to kind and sensible advice given by our very own "Cuf" :o)
Uncertainty breeds opportunity (not always good), and I think that simply is where we sit at present. Personally, my opinion is that there is a delay in determining the status of the credit facilities and notes, that is delaying the decision concerning share buyback (because Mr. Yuen well knows the opportunity will go away for six months once the deal is done), and so he's strategically exercising his right to stretch things out until there is definitive course of action to undertake.
I'm with Mr. Yuen, I bought this stock because I believe in him. In tough times I get silent, so in optimistic fashion I have to assume he may simply be doing the same. He does not strike me as the manipulating type, he much more strikes me as the fiercely loyal but silent type.
Having said all that (whew), I simply must agree this is VERY trying on the nerves, but I repeat these are EXACTLY the types of moments tremendous OPPORTUNITIES are made of (much like the recent softness in QCOM, especially immediately following China's wavering on adopting their CDMA technology, as part of trade negeotiations).
I'm LONG at this price, two years from now I hope to be reminiscing with uf about how wise we were to get in at these levels. I look forward to that, this uncertainty BS makes me fat, since I try to eat my worry away :o)
Kind regards, JB |
