Tuesday, November 10, 2015

Looking Back on RadioShack

September 2014

I would've been honest with investors that the business was in runoff mode. Liquidating stores would have generated cash. It's possible that the honest, pessimistic approach would have caused the stock to be cheap. If so I would have repurchased shares. If shares were expensive, I would have issued more and bought shares of banks trading at huge discounts to book value. Could've been a Berkshire.

Anyway, management basically did the opposite of my plan. So now there are only two possible scenarios, one of which is going to occur in short order: either they file for bankruptcy protection or they get a generous "rescue financing" that lends them more cash and would probably be tantamount to a bankruptcy in terms of the dilution (like the Molycorp financing, but worse). Even all the sell side people admit these are the only two scenarios.
October 2014
I've been looking for an electronics retailer that has done what I say Radio Shack should have done; go into runoff for the benefit of shareholders. A correspondent suggested TWMC... Here's a key difference between TWMC and RSH: there's a former CEO of TWMC, Robert Higgins, who owns 45% of the company. That makes it less likely that money will be wasted on store renovations and "super bowl" advertisements.

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