Whenever you wonder why I write what I write and react the way I react, especially when I run those
stupid emails from
investors who lambaste this column for questioning their company -- don't forget the
"Iridiot" is slang for
investors whose hostility sent this column's Hostile React-O-Meter careening when I first questioned
back in May whether the news on Iridium was about to go from bad to worse. Iridium initially slid into the mid-single digits before bouncing back three weeks ago into the midteens. The stock's rise caused Iridiots to
come out of the woodwork, including one who asked: "Are you ready to eat your last negative words about Iridium??? Have you seen what it's doing lately? Looks pretty green to me in them thar hills, stars, whatever!!" (That prompted the headline: "Iridium's Stock Is Back, and So Are the Iridiots.")
The rest, as they say, is history. Yesterday Iridium sagged 1 7/16, or 18%, to 6 3/4 after
, Iridium's biggest investor, said it wouldn't commit any more money to the struggling satellite company unless it was joined by other investors and lenders. Motorola said the only options for Iridium, at this point, are a) an out-of-court restructuring; b) an in-court restructuring and bankruptcy; or c) a bankruptcy and liquidation. The betting is that it'll be either "a" or "b," but none of the choices are likely to be good for Iridium investors.
Credit Suisse First Boston
analyst Cynthia Motz joined the list of analysts who have cut their recommendations to a sell from a hold. After a restructuring, the stock may very well become a "bagel" (Wall Street lingo for zero) if all or most of a new class of stock goes to current debtholders, as is expected.
More is likely to be known within a month. In lieu of a sudden cash windfall, Iridium is generally expected to miss an important debt payment Thursday, and then it has a grace period that lasts until mid-August. And don't be fooled if the stock is resilient in coming days. Iridium is heavily shorted, and the stock will actually hold up if and when short-sellers cover their positions, as they buy the actual Iridium shares they had borrowed to short the stock.
Moral of this story: IDT-iots, beware.
Calling all cults:
After reading this column's back-and-forth with IDT investors, California clinical psychologist
wrote that he believes it's clear the IDT-iots "reflect an additional classic behavioral principle. This has to do with external support for one's pathological condition. If an individual with pathological ideation is surrounded by people who challenge the pathological position there will be a reasonable probability that the position will be re-evaluated, rejected and a healthier one put in place.
"However if the pathological position has external supports -- people who similarly hold that position -- there is often very little chance to have that position re-evaluated, let alone having it modified in a healthier way.
"This is why cults are so powerful an influence on their members. It seems that for many buying a stock is similar to joining a cult. Instead of being investors -- open, alert, considering all information concerning their holding -- they become cultists, cheering the stock in spite of negative data and wanting to kill the messenger who brought it.
"They find cult mates on Internet message boards and in a kind of ritualistic behavior, post wishful predictions like 'up 10% by next month' or 'big takeover coming.' These posts have nothing to do with fact, but by posting them the action itself serves to reassure them and other cultists that all is well and that they have done something in the service of the cult -- e.g. the post and prediction.
"This is similar to primitive peoples who during a drought do a rain dance. It gives them something to do to validate their beliefs and it reaffirms the cultist hope."
Which is where the "springs eternal" comes in.
Back on the Iridiots:
wonders if I've received any apologies from any Iridium investors. Answer: No, but I have from investors in other cases where I had stirred the cults. (Several recently, in fact, from former investors in
"When are we going to see the IPO for
?" asks reader
. "Perhaps we could have five lead underwriters and
as the covering analyst ... just a thought."
Chris Byron as covering analyst? No way! He even scares me! (Glad I'm on
Herb Greenberg writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, though he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He welcomes your feedback at
firstname.lastname@example.org. Greenberg also writes a monthly column for Fortune.