Markets
Last modified on GMT. 0 comments. Top.
Last modified on GMT. 0 comments. Top.
FC Stone Group (otc:FCSX) - Why the weakness after blowout earnings and a split announcement?
Last modified on 2007-09-19 23:07:53 GMT. 0 comments. Top.
The stock responds the moment the secondary is made public info. The market mechanism begins to work to discount the new information. By the time the secondary is ready to complete, in the final week leading up to it, the stock will pretty much stay locked in a very tight range. It’s actually quite unfortunate what’s happening to the stock. Management was doing great, and with the blowout earnings and split announcement, this stock should be trading around $85. Instead, by announcing a secondary from legacy shareholders wishing to sell, management not only nullified the upside benefit of their earnings and split announcement, but they basically notified the market that stock that was initially going to stay locked up into next year is now going to be released all at once in a secondary offering instead of in pieces over their vesting schedule. This was a major failure not only on the part of management to allow this, since neither the company nor any executives are selling any shares and not a single dime is going to the company, but also because it wiped out almost $200 million in market cap. The fact that they tried to sneak this announcement under the cover of a blowout earnings and split announcement only served to bring additional attention to the matter because when the market sees a stock react negatively to extremely positive news, it immediately gets alerted to sell first and ask questions later. Had they made the announcement in isolation, which they easily could have elected to do, the reaction in the market may not have been this bad.
Although I am a large shareholder for the long haul, I am glad that the syndicate leaders, namely Bank of America, have been hammering this stock relentlessly. I would rather be a buyer here than a seller at $75, and quite frankly, if those greedy, illiterate farmer idiots that haven’t seen anything other than the back of their tractor trailers for generations are getting punished now because of their stupidity, then so be it. I’ll take their stock. These are the legacy shareholders that are the result of the farmer co-op (FC) side merging with Saul Stone & Co (SX) that are the sellers in this secondary. The smart players are not selling any shares. This is going to be a $5 billion dollar company before the end of this decade, if not more.Ultimately, this was a major blunder from a management that until now, had a stellar track record. With that said, I do think the floor has come in and we won’t see any more weakness. Today’s action smelled of panic so the stock is likely to be exhausted of further selling.
