enoch01 Posted January 28, 2011 Share Posted January 28, 2011 Koss is a retailer specializing in stereo headphones, run by the Koss family. Over a period of 4 years (2005-2009), the vice president of finance managed to steal $34 million from the company. This is 80% of today's market cap. This has "ick" written all over it: criminal behavior on the part of the embezzler, likely incompetence on the part of her superiors - what's to like here? http://www.msnbc.msn.com/id/40245372/ns/us_news-crime_and_courts/ The thesis is that, going forward, if the company could run the business as they have historically, you are looking at 34 / 4 = $8.5 million per year. That is against a market cap of $42 million. Debt is negligible. Today comes news that there will be an auction of goods purchased by the former executive, with proceeds going back to the company: http://www.jsonline.com/business/114727814.html Any proceeds from the auction would be icing on the cake. I don't think one needs to rely on it to make a case for going long. Insiders were buying in late 2010 at less than today's prices. Disclosure: long Link to comment Share on other sites More sharing options...
Baoxiaodao Posted January 31, 2011 Share Posted January 31, 2011 Koss is a retailer specializing in stereo headphones, run by the Koss family. Over a period of 4 years (2005-2009), the vice president of finance managed to steal $34 million from the company. This is 80% of today's market cap. This has "ick" written all over it: criminal behavior on the part of the embezzler, likely incompetence on the part of her superiors - what's to like here? http://www.msnbc.msn.com/id/40245372/ns/us_news-crime_and_courts/ The thesis is that, going forward, if the company could run the business as they have historically, you are looking at 34 / 4 = $8.5 million per year. That is against a market cap of $42 million. Debt is negligible. Today comes news that there will be an auction of goods purchased by the former executive, with proceeds going back to the company: http://www.jsonline.com/business/114727814.html Any proceeds from the auction would be icing on the cake. I don't think one needs to rely on it to make a case for going long. Insiders were buying in late 2010 at less than today's prices. Disclosure: long I only spent 10 mins on the story so do not take my comments very seriously. One thing I read in the story is that the money was stolen over a period of 12 years, not 4 years. And please let us know what the rationale is to sugget Koss will earn 8.5 million after tax a year. Another is that I was shocked that the internal control was so awful. I just cannot imagine how this mentally-ill woman can do what she did over a decade without the detection. Mr. Michael blamed a lot of things. But isn't he supposed to be responsible ultimately for what happened? What a sad story! Link to comment Share on other sites More sharing options...
enoch01 Posted January 31, 2011 Author Share Posted January 31, 2011 I only spent 10 mins on the story so do not take my comments very seriously. No worries. One thing I read in the story is that the money was stolen over a period of 12 years, not 4 years. "In December 2009, the Company learned of significant unauthorized transactions, which totaled approximately $31,500,000 from fiscal 2005 through December 2009". The remaining $2.5 million (7%) was outside this period. http://sec.gov/Archives/edgar/data/56701/000110465911003721/a11-4697_110q.htm And please let us know what the rationale is to sugget Koss will earn 8.5 million after tax a year. What if all that money hadn't been stolen? They didn't have to take on debt to fund her actions. Of course this does assume that they can run the business as they have in the past: no growth, no loss of business. Another is that I was shocked that the internal control was so awful. Me too. I just cannot imagine how this mentally-ill woman can do what she did over a decade without the detection. Me too. Mr. Michael blamed a lot of things. But isn't he supposed to be responsible ultimately for what happened? Probably. I think the important question is, going forward, do you think they will be more or less careful with internal controls, and hiring the right people? What a sad story! You can say that again. Link to comment Share on other sites More sharing options...
ragnarisapirate Posted January 31, 2011 Share Posted January 31, 2011 After something of this magnitude, it does seem unlikely that it could ever happen again... I do wonder what the odds of them getting some of the cash back is. I would imagine that a huge company like American Express would be more than willing to settle the case, just so they don't have to fool with it. Link to comment Share on other sites More sharing options...
ericd1 Posted February 1, 2011 Share Posted February 1, 2011 Seems to me the firm's auditors might be a target for reimbursement too! Link to comment Share on other sites More sharing options...
enoch01 Posted February 1, 2011 Author Share Posted February 1, 2011 Seems to me the firm's auditors might be a target for reimbursement too! Don't worry, they're covering that base as well: http://media.journalinteractive.com/documents/KOSSCOMPLAINT.pdf Link to comment Share on other sites More sharing options...
enoch01 Posted March 4, 2011 Author Share Posted March 4, 2011 It looks like the auction begins March 19: http://www.bizjournals.com/milwaukee/news/2011/03/03/sachdeva-auction-to-start-march-19.html?ana=yfcpc Here's a link to the merchandise (some 22,000 items): http://media.journalinteractive.com/documents/sachdeva_list_091510.pdf I have absolutely no idea what the auction proceeds could garner for the company. Pulling a number out of the air I would say between $3 - $6 million, or somewhere around 10% to 20% of what she stole and spent. Insiders have continued their purchases all the way up to $7/share. Disclosure: still long Link to comment Share on other sites More sharing options...
A_Hamilton Posted March 4, 2011 Share Posted March 4, 2011 How much are current shareholders going to owe individuals who were shareholders in the class period marked in the derivative suits the company is facing? I imagine 100% of the recovery from the auditor and the auction... I owned this briefly after the fraud was announced but got out after thinking about how non-involved the Koss family and the board must be to piss away this much money... Link to comment Share on other sites More sharing options...
enoch01 Posted March 4, 2011 Author Share Posted March 4, 2011 How much are current shareholders going to owe individuals who were shareholders in the class period marked in the derivative suits the company is facing? I imagine 100% of the recovery from the auditor and the auction... Exactly, that's the huge question mark, and why I find it hard to assign any value to the auction proceeds. I just look at it as a catalyst for recognition of the company, which is worth probably $8-$9 per share without netting anything from the auction and lawsuits. Anything more than that is icing. Link to comment Share on other sites More sharing options...
enoch01 Posted January 28, 2021 Author Share Posted January 28, 2021 This one worked out well. Link to comment Share on other sites More sharing options...
stahleyp Posted January 28, 2021 Share Posted January 28, 2021 This one worked out well. Only took 10 years. ;D Do you still own it by any chance? Link to comment Share on other sites More sharing options...
jschembs Posted January 28, 2021 Share Posted January 28, 2021 This one worked out well. Amazing post. The most comical aspect of all of this WSB shit to me is that it's ending up bailing out deep value guys who rode most of this stuff down to the point where it was effectively stub value. And I say that as a deep value guy who unfortunately didn't own any of these fun exit trades. Link to comment Share on other sites More sharing options...
Jurgis Posted January 28, 2021 Share Posted January 28, 2021 This one worked out well. Amazing post. The most comical aspect of all of this WSB shit to me is that it's ending up bailing out deep value guys who rode most of this stuff down to the point where it was effectively stub value. And I say that as a deep value guy who unfortunately didn't own any of these fun exit trades. QFT. If only Sears had managed to last to Jan 2021... ;D Link to comment Share on other sites More sharing options...
jschembs Posted January 28, 2021 Share Posted January 28, 2021 This one worked out well. Amazing post. The most comical aspect of all of this WSB shit to me is that it's ending up bailing out deep value guys who rode most of this stuff down to the point where it was effectively stub value. And I say that as a deep value guy who unfortunately didn't own any of these fun exit trades. QFT. If only Sears had managed to last to Jan 2021... ;D Ain't that the truth. SHLD and JCP would've been some amazing charts. Edit: nevermind, didn't realize SHLDQ still trades - of course, that was up 113% today. Link to comment Share on other sites More sharing options...
aws Posted January 28, 2021 Share Posted January 28, 2021 Blockbuster's liquidation holding company was up almost 5000% over the past two days. Not sure why that hadn't been cancelled after 10 years or who they think pumping that would punish. Link to comment Share on other sites More sharing options...
clutch Posted January 28, 2021 Share Posted January 28, 2021 VALUE is back!!! Link to comment Share on other sites More sharing options...
bobp Posted January 28, 2021 Share Posted January 28, 2021 This one worked out well. This is the best post ever. Link to comment Share on other sites More sharing options...
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