I don't buy the story that HLF management is untrustworthy, etc. etc. But capital has been destroyed, and since the announcement of the acquisition capital has been destroyed in a particular drastic fashion.
Yet,iInvestment alternatives in this industry space look like this for the last 12 months:
Huge losses across the board. To conclude that these 4 companies are all run by untrustworthy individuals is a mistake. The real mistake was to have invested in this space in the first place! Up until the recent announcement, HLF wasn't even the worst performer (which it now is)!
What going forward?
Here is my fluff and I am happy to read objections:
For myself, I remember a negotiation with a real estate agent who insisted on a low or lower selling price, presumably to chase a quick sale (as higher prices might drag out and delay fees - that are only marginally better on a higher price). I think that is what Peloton and Potter did with HLF. In my book the HLF SP was reasonably anchored around 13 cents in the weeks before announcement. Hence for the offer price, instead of 10.5c, it should have been 13c minus 15% or perhaps minus 10%. The lower the price, the easier the work and fees for Peloton and Potter. - I view that as particular poor negotiations and we have the results at the open market.
The announcement with its inbuilt driver has shifted the bid / offer drastically to the offer side. The size of it, the past course of trades only serve to strengthen the momentum. I appears that people in charge completely forgot that every trade has a signalling effect.
Price movements that we observe currently completely drown out rational thought. This is evidenced in HC by the increasing number of emotional posts; and that is completely understandable given the recent SP movement. Naturally, one wonders if something sinister is going on.
If the only driver is the inbuilt machinations of the offer price of CR, then, I think this was foreseeable! What were they thinking?
I was wondering, initially, why Bergen would part with the parcel at 10c (then a new low). The answer would be, that only at that price this thing would get going. And as it stands now, Bergen got an excellent price (for 20 million units) with 7% above current price as I type this.
I should think that the founder of THM would not be too happy either; now there is more pressure to perform going forward.
The SP jitters will go on for weeks until the dust settles, and economic realities of the underlying business will come to the forefront.
I also expect selling pressure afterwards if the 20m parcel is being broken up. Currently we don't know who bought it.
As for the management, they have shown:
to be inept in structuring this deal
to be able to grow t/o
to be forced to hunt from contract to contract
to be opportunistic in a challenging space (see graph above)
to be out of the woods only on paper (see revenue and EBITDA projections)
I think current management can produce and sell and make money under the forthcoming set up. They need, though, get up to speed in negotiating the financial deals, and designing / making fashionable (especially now) products.
This is my largest post so far, and it is obviously borne out of anger about what happened over the last couple of days. Everyone in this space has a hard time (yes, see graph above). But this? This is particularly poor!
I am inclined to post a sell sentiment, but keep the none sentiment, as I believe - at some stage - the market will focus on the underlying business, i.e. making and selling stuff.
HLF Price at posting:
9.2¢ Sentiment: None Disclosure: Held
(20min delay)