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December 2009

Recs

24

Look out Talbot's. Frosty will want his hat back.....

December 09, 2009 – Comments (15) | RELATED TICKERS: TLB.DL

Don't tell anyone....but the manikins at Talbots have no clothes! Talbots has borrowed Frosty's magic top hat to appear to produce something from nothing. I suspect he will want his hat back soon now that the snow is falling heavily, at least in the Northeast. Talbots will hold the magic hat while the 80% shorts stumble to cover and it might razzle and dazzle a few more investors who are gullible and can't count. The share price may fluctuate upwards slightly from here, but the smoke and mirrors will eventually clear. Yes, Talbots pulled a slight profit this past quarter, but still expects a loss overall. Despite what appears to be a reduction of debt at excellent terms, the terms are at least 20% dilution and Talbots remains with negative net tangible assets

If anyone else issued 25% more shares their stock price would tank accordingly. IN this case Talbots has pulled it off and is enjoying a huge premium.....so far.

The merger with a blank check company, BPW should raise some flags. What's in it for them? About 65% of Talbots shares. Japanese investors and Aeon is the winner here, getting back the money it loaned Talbots at even dollar, compared to the chance that Talbots wouldn't have found sufficient footing to pay them back for several years, or worse at a reduced rate if the economy continues to languish.

Would Aeon be willing to part on even dollar if they thought Talbots was a turn around story? Would BPW be willing to be bought out if they thought Talbots was a turn around story when they already had a strong holding? Both are allowing this to happen because the risk to each is GREATER if Talbots is left to continue in it's current footprint. Neither is after further gain, (though BPW is hoping for some). Both are trying to protect what they currently have and are scared the rabbit will take back the top hat if this type of deal wasn't done.

So lets see. 55 Million shares outstanding now. Retire about 30 Million that AEON holds. Sounds good so far.   [more]

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