Comments on: EMAG: What a Wreck!

By: Jae Jun

Jae Jun — Sun, 01 Mar 2009 05:55:03 +0000

Im staying away from DISK for now. I’m looking for good high yielding bonds at the moment.

By: MKL

MKL — Fri, 27 Feb 2009 15:17:26 +0000

I have been keeping an eye on DISK. $2.75 purchase price, $1.60 right now. I am NOT IN. Have been keeping an eye on discussion groups because they are so similar to our discussions on EMAG when we were in (why no word? where’s the financing? who said what??? why the price drop? does someone (lots of people!!) know something we don’t??) and it is instructive and insightful to watch the drama now going WITHOUT being involved.

By: MKL

MKL — Wed, 25 Feb 2009 11:19:25 +0000

The numbers of this situation are the same for all of us. The assessments are all similar. I for one wish I had put a stop-loss myself, and not gone through the drama. I will NEVER do that again. I also did not like having to hold the terrible loss while I waited for another bidder.
@Jim, I like very much what you had to say about evaluating the downside with as much determination as the upside. It would’ve helped me better determine the price where I allowed myself in and told me where to get OUT. While I could see the $1.80 downside, because the risk of falling to it was present, I had too much focus on the upside and stuck with my focus on the upside. To my loss. I very much appreciate your comments. They articulate for me what I was thinking but would’ve taken me much longer to condense into usable thoughts, a usable frame of mind.

By: Jae Jun

Jae Jun — Wed, 25 Feb 2009 00:34:31 +0000

Good points and it is something I did consider. As I stated in one of the posts, it wasnt a company I wanted to hold as an independent company. Should EMAG have continued to operate without any bids, although they were trading for less than cash, the rate at which they burn cash was an issue for me. Every quarter that goes by without a bid, their margin of safety drops significantly.

This one ended up working out well in the end and quicker than what I expected as well but I wasn’t going to speculate on another buyout.

My reasoning was sound and I put in a stop loss rather than sell into the panic.

By: Mark S.

Mark S. — Wed, 25 Feb 2009 00:18:19 +0000

This obviously happened quicker than I expected, but as I stated earlier, I have seen this movie before with cash heavy, but not enough scale, businesses. Given the stock was trading at a material discount to its cash on the balance sheet, any takeover would get the operating business for relatively nothing. Plus, remember, there were multiple bidders for this company only a few months ago – they submitted real bids and not just indications of interest. While I am not necessarily happy with the $1.82 price – as I still think it is worth more – you still have to stick to reasoning sometimes.

By: Jim

Jim — Tue, 24 Feb 2009 20:31:05 +0000

Jae and all the gang, I’d like to share a quick little story concerning EMAG with you all and explain why I still believe that it was the PERFECT investment opportunity. So much time is spent on the upside in regards to analyzing a company that many of us fail to recognize the downside risk. Myself included. Although I didn’t public state this anywhere, I did however write an email to an investor friend of mine dated Jan. 20th, 2009 in which I disclosed the downside risk to EMAG which I believed to be $1.75 per share. I know many investors who panic sold EMAG when it took a dive and had they spent as much time on the downside as they did evaluating the upside, they may have come to the $1.75 per share downside conclusion that I did or somewhere near $1.75 per share. Believe me, I wanted to sell but instead of doing that, I shut my computer down and went on vacation to Montana. Enjoying the negative 20 below weather and 4 foot of snow, I believe it freezed me to the point of reality 3 day after returning from my vacation, the stock is trading at $1.78 per share today. I closed my position knowing that my reasoning was correct and knowing that the $1.82 per share offer on the table currently could take longer than anticipated or fall through just as the previous deals did. My point is, anytime you can find a business with a 40% upside and an 8% downside; to me that’s the perfect investment. It is just as important to measure the risk as it is the reward and the EMAG deal is a prime example of that. I could have lost a lot more money but I stuck to my reasoning. Warren Buffet said it best “You’re neither right nor wrong because other people agree with you, You’re right because your facts are right and your reasoning is right – and that’s the only thing that makes you right. And if your facts and reasoning are right, you don’t have to worry about anybody else.”

By: MKL

MKL — Mon, 23 Feb 2009 21:51:00 +0000

It is scary that there is, in fact, no way to know what it is we do not know. So even with all the knowns, say with PSD, as steady as it ended up resolving, there was that last day (or day before) when the stock dropped, and we were all wondering what was going on, did someone know something we didn’t know? And that one turned out ok. But there is always that – NOT being an insider..

By: Jae Jun

Jae Jun — Mon, 23 Feb 2009 19:16:05 +0000

@ John,

It really is strange how this stock is traded. Definitely seems to be a lot of “insider” trading. After the leak and the subsequent 50% drop on the day before the announcement on Feb 10, I don’t think I want to get involved with this merger at all.

By: John

John — Mon, 23 Feb 2009 19:12:30 +0000

Emag is being bought out for $1.82 by AMICAS. A tender offer will commence by March 5, and the board has already unanimously voted in favor of the buyout. Funny how it had a bid all morning before the announcement… Seems like quite a bit of info gets leaked to certain people with this stock.

By: Jae Jun

Jae Jun — Mon, 23 Feb 2009 19:01:44 +0000

Wow. I must say that this is one crazy turn of events. Thank goodness you got out ok.

By: Andrei

Andrei — Mon, 23 Feb 2009 18:56:28 +0000

Phew! I just sold my shares of EMAG for $1.52/share..saw the jump of nearly 100% when I came back to my desk from lunch and acted quickly…I must say…I feel lucky to have gotten out today at that price–It definitely wasn’t a stock that I wanted to hold and although I sustained a loss, it wasn’t as bad as it could have been. This one surely provided a good learning experience.

By: MKL

MKL — Mon, 23 Feb 2009 18:50:46 +0000

John, what do you mean it is being bought for $1.82? Do you mean someone else wants a merger and has offered $1.82? Or do you mean simply its popped up to $1.82 today? Thanks.

By: John

John — Mon, 23 Feb 2009 18:39:54 +0000

For those still in play… Emag is being bought for 1.82. It had a bid all morning so, of course, I dumped most of my remaining shares and then saw the pop just now. Anyone else sick of this stock?

By: Jae Jun

Jae Jun — Thu, 19 Feb 2009 05:08:17 +0000

It’s a great post. I’ll be sure to link to it this week.

By: Ken

Ken — Wed, 18 Feb 2009 23:24:59 +0000

Fyi, finally published my arb/emag post and published it today. Thanks again JJ for the frequent updates.

Ken’s last blog post..Risk Arbitrage & EMAG Post Mortem

By: Jae Jun

Jae Jun — Tue, 17 Feb 2009 21:51:02 +0000

In hindsight, we should have heeded the warnings from the bloomberg and various other articles. Let the SEC rip into them. Their investors are already withdrawing money like crazy so they should be going down soon.

By: John

John — Tue, 17 Feb 2009 19:33:08 +0000

Just noticed on Minyanville that the Sec has charged Allen Stanford, and that the FBI, among others, are investigating SIBL. Not sure if it matters at this point, but does anyone know if EMAG might have any legal footing for a lawsuit? Or perhaps a shareholder lawsuit?

By: MKL

MKL — Tue, 17 Feb 2009 18:05:23 +0000

Red Flags for Investors or EMAG: What a Wreck. Wasn’t sure where to hear some reactions to SIBL. Either way, I am amazed that EMAG got their $9m. What would EMAG’s responsibility have been on due diligence on their purchasers? What would EMAG’s responsibility have been to disclose to shareholders any knowledge of SIBL’s probe which is apparently far more in-depth than we found on the internet?

By: Wide Moat

Wide Moat — Sun, 15 Feb 2009 19:23:34 +0000

Even if EMAG has $1.30 per share in debt, they are not a profitable company in their current state. So, that $1.30 will be whittled away quarter after quarter.

The hope is that management will now have to do something–either find a new partner, or fix the business. I’ll need to see some plan before I jump back in.

Wide Moat’s last blog post..Buffett the Bondsman

By: MKL

MKL — Sun, 15 Feb 2009 15:36:33 +0000

I don’t have much hope for the company with that. That would be only a one-time infusion and I think this management needs help running its business for what it’s worth.