This is yet another post on Pretium. It’s not a particularly important one unless you are interested in following the on-going Pretium saga.
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writeups – shorts
Closed my CHK put option position
Here’s what I think about Chesapeake…
Closed my Tile Shop position
When I originally shorted Tile Shop, I was hoping that some massive Crazy Eddie-type accounting fraud would be uncovered. (Let me be clear: I really have no idea if accounting fraud is happening.)
Chesapeake’s one-sided midstream deals
Originally, I thought that Chesapeake may have been using its midstream deals to inflate its profits. I was mistaken. Chesapeake’s midstream vehicle (now named Access Midstream Partners) was structured in a very one-sided deal that heavily favored Chesapeake.
I don’t think that many people give credit to Aubrey McClendon for this deal.
Avid: I don’t understand what they’re doing
Today, Avid issued a press release titled: Avid Announces Appointment of Deloitte & Touche as New Audit Firm. Some key points in the press release and the 8-K are:
- Avid doesn’t expect that it will be able to file its financials by March 14, 2014. It expects that delisting is likely.
- Its current auditor, Ernst and Young, is being replaced by Deloitte.
- From the 8-K: “As of the date of this Report on Form 8-K, material weaknesses in the Company’s internal control over financial reporting continue to exist.”
- Avid is adopting a rights plan. It looks like a poison pill to me.
- The Company expects that cash expenditures in 2014 related to the ongoing accounting evaluation through completion of the evaluation will amount to approximately $25 million to $34 million.
From the perspective of Avid’s high-end professional customers, all of this is highly unfortunate. The well-being of these customers will be affected if Avid is no longer updating the software and issuing new versions of it. They want to know that Avid is financially sound because their livelihood depends on Avid. Avid should come out and put any speculation about its financial well-being to rest. It should be louder when it says that the “Company’s cash balance on December 31, 2013 was approximately $48 million and it had no debt or draw on the available line of credit with Wells Fargo”. It should explain to its customers why a delisting would not in any way affect its commitment to updating its software. It should file its financial statements as soon as possible. I don’t understand management’s lack of urgency and why it still hasn’t filed financials (it’s been almost a year).
Liberator Medical’s “investor relations” firm
(This is not an actionable idea.)
Libertor Medical (LBMH) is a direct-to-consumer medical products supplier with a $224M market cap.
The investor relations page of Liberator’s website shows that Wall Street Resources (WSR) is Liberator’s IR firm for non-institutional investors. WSR is very unusual for an “investor relations” firm. The WSR website boasts:
Since inception on March 13, 2009 our Trading Alerts have resulted in a 109% average annualized return. This means $100,000 invested on 3/13/2009 would have grown to $1,477,162 on 9/30/2013.
Golly, I am sure that WSR is doing a wonderful job as an “investor relations” firm and that those associated with WSR are compounding money at 109% and are on their way to becoming millionaires.
Chinese stocks and ICP numbers
Chinese Internet users face restrictions as to the websites that they can and cannot visit as China censors the Internet. It makes sense for Chinese companies to get an ICP number/license to ensure that its customers can easily visit its website without having to circumvent the ‘Great Firewall of China’.
When performing due diligence on Chinese stocks, I want to see that its website has an ICP number/license. Chinese websites will typically display the number at the very bottom of its webpages. Remember to check the Chinese version of a site as the English version may not show the ICP number.
