5. Blyth's Catch-22
If only Blyth (BTH) could somehow combine its candle-making and weight-loss businesses then maybe its shareholders will stop getting burned at both ends.
Blyth stockholders were less than blithe (the happy kind of blithe) this past week after seeing their shares plunge more than 40% to $25 as a result of a Moody's downgrade and the company's subsequent decision to abandon the IPO of its rapidly growing nutritional products division ViSalus. The ratings agency chopped its view of Blyth to "negative" from "stable" late last Thursday, citing concerns about the company's financial wherewithal once it completed its plan to spin off ViSalus. Moody's decision put so much selling pressure on the stock that Blyth ultimately announced on Wednesday it would cancel the offering and keep the division in house.
In case you forgot, news of the ViSalus IPO caused the stock to pop to a 52-week high of $46 in mid-August, a feat certainly enhanced by a vicious short squeeze. Since then, however, the company's stock has gently flitted lower until Moody's downgrade and its ensuing obliteration.Hmm. Not to sound blithe (the callous kind this time), but this is one heckuva Catch-22. The stock goes up on the original IPO announcement because the market knows that sales at ViSalus are on fire - and they want in. Revenue for its energy drinks and food supplements totaled more than $190 million in the second quarter versus $41 million last year. Furthermore, ViSalus claimed over 114,000 independent "Promoters" at the end of the second quarter versus 28,000 a year earlier. Meanwhile, the company's PartyLite candle sales for the second quarter sank 13% to $86.8 million from $100.1 million last year. And, as one might expect, PartyLite's European sales came in even worse, dropping 16% compared to the prior period, in part because of currency translation woes. In other words, Blyth's fragrance business stinks so bad right now that investors holding onto shares for the sake of gaining exposure to ViSalus -- hey, they could give the IPO another shot! -- have no idea whether to keep hanging on. Oh man. Even we can't be blithe about a double-edged decision like that. Or perhaps we just were.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV