Tuesday, March 08, 2005

Martha Stewart's stock doubles since October! Uh, oh...

Why has this company's stock more than doubled as magazine sales fell 21%, ad revenues fell 56% and TV revenue fell 82% from the year before [TheS] ... it just reported a $7.3 million quarterly loss and says it expects a bigger loss next quarter ... and "every analyst who currently covers the stock rates it either an 'underperform' or an outright 'sell'"? [NY Post]

Well, many reports from the Street say an "historic" short squeeze is going on as investors have lined up in great numbers to short the stock in light of the business's performance, but its biggest holder -- Martha herself -- has been unable to sell to take profits and provide a supply of shares. So the shorts are having trouble covering. That's what one calls a risky rally to buy into.

Especially as other insiders have sold 5 million shares during this short stretch while the price has risen.

Oh, did anyone mention there are prospective management problems when Martha returns to the office?
.... there are questions about how Stewart will work with the company's strong new chief executive, Susan M. Lyne, a widely respected former ABC entertainment head who is moving to put her own mark on the company...

Paul A. Argenti, a professor of corporate communication at Dartmouth's Tuck School of Business who worked with Stewart as a consultant in the early 1990s, was blunt with his concerns about how Stewart and Lyne would work together.

"I cannot imagine those two people are going to get along," he said. "It happens in companies I work with all the time, where the person in charge won't allow a really good executive to shine because they fear that the spotlight will be taken off them. And Martha is more like that than anyone I've ever met."
Yes, the WaPo did right there.

I had a fair amount of sympathy for Martha during her prosecution -- but as to her stock, if anything like the short squeeze described above really is going on, it's going to be a heck of a lot more fun to watch than to own in coming months.