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.