TST up 40% today, The GE crash, Matter/Hasbro antitrust, Bitcoin goes crazy
Quite a lot of not-so-random headlines and thoughts on those headlines to run through this morning.
GE plans to slash dividend by 50% – Too many of the cans that were kicked down the road while GE was a media/financial services/industrial roll up are now recognized. The good news is that the company and everybody on Wall Street and everybody who’s ever owned GE now recognizes that pain. The question now is how long will it take for this ship to turn? I would be that GE trades between $15 and $25 for the next two to three years as the market worm turns.
Mattel’s stock up some 25% premarket following report of Hasbro offer – I’m not sure what the government of the last thirty years thinks the Justice Department’s Antitrust Division thinks their job is, but I’m pretty sure their job description is as follows: “First, restrict the formation of cartels and prohibit other collusive practices regarded as being in restraint of trade. Second, they restrict the mergers and acquisitions of organizations that could substantially lessen competition. Third, they prohibit the creation of a monopoly and the abuse of monopoly power.”
The bold there is mine, of course, but is there any question that the frenzy of M&A amongst the giant corporations of this country and the world over the last thirty to forty years has “substantially lessened competition”? No.
Would allowing the two largest US manufacturers to merge substantially lessen competition? Yes. With two little daughters who love toys, I guarantee I will be spending more on toys in the next ten years than I would if these two companies were to stay separate. And their combined stock price will do better than if they were to remain apart. See how all that’s correlated?
Bitcoin’s value rose $10 billion in just 12 hours after a dramatic weekend sell-off – Blow-off tops in asset markets are often associated with crazy volatility before the crash. I still own a few bitcoins and I remain a long-term believer in bitcoin and cryptocurrencies and blockchain technology. Heck, I wouldn’t be surprised to see bitcoin rally towards $10,000 sometime in the next few weeks. But boy do I think at some point in the next year, will there be a lot of pain and ugliness as the many scammers and wannabe traders get killed on a reversal that takes on a life of its own and becomes a crash. Risk/reward just doesn’t seem great for the bitcoin bulls at $7000 in November 2017.
And then there’s this: TheStreet, Inc. (TST) 1.33+0.39 (+41.70%) As of 11:17AM EST.
TheStreet Retires Series B Preferred Stock and Closes $7.85M Common Stock Financing
TheStreet Reports Third Quarter 2017 Results and Announces New Share Repurchase Authorization
The biggest news is that TheStreet was finally able to rid themselves of the $55 liquidation preference that had been in place since the company raised money by issuing those Series B preferred shares back when the stock was above $10 about a decade ago.
The company is spending $20 million cash to buy back those preferred shares and sold nearly $8 million in common stock at $1.10 in a private placement with a (hopefully) long-term investor who joined the board. At the end of last quarter they had $26 million in the bank, so I expect these transactions leaves would leave TheStreet with about $14 million in the bank right now. Any plans to buy back TST common stock with up to $5 million of that cash would leave the company with about $10 million in the bank. I do think TheStreet could generate $5-10 million in cash next year.
By getting rid of those preferred shares, the company could conceivably sell itself, can have some flexibility with their balance sheet and gets rid of the overhang from these preferred shares. The company is continuing to generate cash and might finally be getting the topline growing sustainably again. To be sure though, this is still a penny stock micro cap which reflects that TheStreet is still totally not in the clear. I’m holding my shares steady for now.
