Martha Stewart Update

I believe that MSO is undervalued and would probably be a good buy. The analyst ratings are mixed due to how the volitility will affect the stock, but the company had reported better than expected earnings.


If anyone was able to watch the Charlie Rose show they had discussed the case against Martha. One of his guests, John Coffee Jr. (Lawyer from Columbia University Law School), said that he believes that it would be very difficult for the government to prosecute Martha. He explained that it would be difficult to present the case to a jury. So, he believes that she would not be found guilty of insider trading. But, there could be a possible case of obstruction of justice. Due to the alleged statement that Martha's assistant was told to say she had a sell order in place. Mr. Coffee believes that it is easier for the government to prove obstruction of justice.


A few other items of interest. Martha was a stock broker and is on the board at the NYSE. What Martha has going for her is all the women love her. Every women that I have talked to believes she is innocent. I believe even if she is convicted of obstruction of justice or insider trading, the public that supports her will believe that she was framed.


So, I think the stock is a good buy value wise. You may want to wait to see if it drops further before buying it. I would wait until she gets indited and then buy it when it tumbles down.


Good Luck


Mark

havent looked at MSO fundamentals. ill bet the govt is on a witch hunt with her as no pun intended. why all this pub about a measly 4000 shares of stock i dont know. its great to get the bad guys but the feds to me a lot of times are bad guys too. feds go after a high profile personality to get the pub. im sure there are trangressions in the markets that are far worse that get no pub and no action from the feds. for someone who is portrayed in the media as looking probably guilty there hasnt been an indictment yet. if the case was a slam dunk there would have been by now. feds are trying to make themselves look good now in publics eye because john q public knows that they didnt do there job in the 90s. john q public also knows that the feds are the masters of spin.

Feds go after a lot more people than you think and are very aggressive in their pursuit of cases that you don't hear about. Martha has a lot of resources to defend herself and her reputation with. The media doesn't latch onto smaller stuff, but there are many small ongoing investigations of 5,000 share and smaller transgressions. The obstruction of justice is the real kicker because then she crosses the line into what might be a jail-time sentence (although not that likely) from what most likely would have been a fine and censure by the SEC. The obstruction of justice may seem smaller, but that is where she went wrong because that just makes her look guilty for one and for another it brings in more visible enforcement because a lot of SEC cases are done behind closed doors without the usual visibility that is required of regular courts.


I personally don't know what to make of the stock. Fundamentals mean nothing, the trading will be done on news for quite some time to come. I would just stay out of it unless you like to gamble on the news or the outcome and steer clear of making judgements on it for valuation purposes, at least for some time. My guess is that both sides are playing their hand strongly right now, not wanting to lose any negotiating power. In the end there will be some settlement, the "I don't admit anything" settlement where she gives back any profits she might have made and pays some administrative fine, yet avoids pleading guilty which could damage her company or make her unsuitable for her job of running it. Jail time or any stiff punishment seems very unlikely.

I think you're probably right about MSO. But with all the news maybe a person might get really lucky and buy it at $5 or so and make a monster score from there. You'd think so, but if she's finally found guilty of something or other then isn't the company all of a sudden worth less than the paper it's stock is printed on? Put it this way, suppose the company were worth $8 a share on fundamentals alone. That's a pretty conserative estimate but let's go with it for now. But without a healthy brand name behind the company, I think it's worth $0. Maybe that's overly pessimistic? But let's go with that as well. Well, I'm not in any position to say what the chances that she will be convicted of anything are but suppose you're guessing that the brand name will be crushed with 50% certainty. Then the company is worth $4 a share to you at most. Probably less than that since you'll have to wait a considerable amount of time to reach your verdict. Hmm, maybe it's not such a bargain?

MSO to sell Kate O'Grady goods .. nope just won't work.. they have nothing w/o Maaartha


and Maaartha's goin to jail, and a NYSE board member too...what a jerk...


Of course it's OK to make a buck of this fiasco


http://www.savemartha.com/

I think you overestimate its value going both ways. If convicted I highly doubt it becomes a zero stock. Its basically an "image" stock that would still have some appeal, maybe even as a cult-like issue. In any case its not like its a debt driven empire that suddenly won't bring in any money and remember there are assets of value there, just that she is the biggest asset. So a conviction brings it down from its level but not to zero by any means. On the other hand, if she is not convicted, just being tarnished can hurt her credibility going forward. Her personal image won't change to those that love her, but this is about her stock not her popularity and investors tend to think the worst of it. So upside isn't all that great either. Seems like just a middling stock with maybe some intrinsic value to the upside just because so many people have equated Martha's legal troubles as the absolute make or break of the stock but I don't think that is the truth.

I'm not the Martha Stewart popularity or legal issue expert. I just think it's important to weight the value of her company depending on a) the various possible outcomes of her legal troubles and b) the earning power of her company.