Aether Holdings: Perennial Loser

I'm always on the lookout for bad analysts or management teams that are consistently wrong - nothing is worth more than finding someone who's always on the wrong side of a trend. From friends who started trading Internet stocks in 1999 and flipping condos in 2005, to analysts that always go to a SELL rating after a stock has imploded or BUY after a stock is up 100%, these are the people that can consistently make you money. I have found there's nothing as "consistently consistent" as analysts, magazines or companies that chase trends, rather than anticipate them. By the time they get in, the trend is over and you can bet against it.

Aether Holdings (AETH) has been one of the top companies on my "consistently consistent" bad list. If you're from around Virginia, you'll remember AETH as one of the go-go Internet stocks that came public at the top of the Internet bubble in October 1999.

AETH is an Internet bubble classic - from $400 to $5...

Aether was one of the all time great shorts of the Internet age. With $5 million in revenues and $5 million in losses, it sported a market cap of about $10 billion at the height of the bubble. It actually lasted longer than most Internet companies because it managed to do a secondary offering in October of 2000. That left the company with it's most valuable asset - cash. Unfortunately, the company managed to burn through about $600 million in cash over the next two years.

After the Internet thing didn't work out for them, the company transformed itself into a company that invested in mortgage backed securities. In June 2004, the company began investing the $140 million that it had left in real estate securities. Once again, they managed to hit the top of the bubble.

As of this year, Aether Holdings decided to get out of the mortgage backed securities market and focus on Intellectual Property management - whatever that is.

And Tuesday morning, Aether announced they were buying "The Athlete's Foot" chain of stores. Outside of airlines, I couldn't imagine a worse business. Between online competition, razor thin margins, economic cycles and fashion risk, every athletic shoe retailer is guaranteed to go bankrupt several times during its short lifetime.

Aether has been consistently good at doing one thing - creating tax loss carry-forwards. I'm guessing this venture will be no different. Taking my own advice, I'm going to take a hard look at all the retail stocks that I own. Because when Aether's coming in, I want to be getting out.

Comments

[Jonathan Liss:]

I hear what you're saying and agree with your general sentiment. Still, looking at AETH's chart from this year, had you bought shares before April, you would have doubled your investment. Not too shabby.

2006 Aug 24 01:35 PM

[david wilson:]

I can't agree with you more that Aether's managment (David Oros in particular) was garbage. But your commentary here ContraHour IMO illustrates one of hte great mistakes of investing -- paying attention to changes in the fundamentals of the company, in this case leadership. You spent a lot of time talking about the past & the stupidity illustrated then, putting up a nice chart etc., that you dind' apparenlty have any time left to find out that Aether, through it's acquistion of UCC Capital two months ago has brought on Robert D'Loren as the new CEO, not only does he have NOTHIGN to do with any of Aether's past stupidity, he has a very extenisive track record that proves his success in this line of business he is entering. I think that's more relevant than the observation "the people who happened to be running this compnay int he past were morons, so whatever the management does in the futuere will be moronic" -- ignringthe fact it is completely differerent management, and this manager has NO EVIDENCE SUGGESTING his is a moron.

p.s. Jonathon, yes I was one of those people who bought when it was lower, though way before april, it was also under $3. I bought it holding my nose because I thought the management sucked (Aeth first came to my attention as a short too in the go-go days -- though alas I never pulled the trigger on it). But I bought because I realized the stock price was punished due to universal recognition that Oros was a f-up, and I hoped & prayed they'd eveentually hire someone who knew his a-- from a hole in the ground, and the market would respond. LOL, who is the contrarian here, contrahour or me?

2006 Aug 24 03:31 PM

[Bluefishdeep:]

So Aether became NexCen (NEXC)
So DeLoren ran it
So the stock price fell off the cliff in May '08 and has continued to plummet. Now at $.20 /share, up from $.04 /share
So the leap off the cliff was related to the CFO & CEO signing off on a lending agreement without reading the fine print wherein was a baloon payment due in Oct '08.
So they board of directors, most of them, quit.
So NEXC couldn't keep their OTC listing.
So they could not file their SEC reports on time.
So they had to restate the 2007 financial statements and have not issued them yet, and 2008 has also not been issued yet.
So now the SEC is investigating the financing of the Athelete's Foot acquisition.

So terms like moronic, stupid and incompetant all apply to the company's management, as well as to "investors" who buy into the stock.

But wait.... Some superman talked NEXC's creditors into a combination of interest rate adjustments and covenant adjustments so that the last knife has not yet been dropped. And the company's PR machine is cranking out favorable "news" at a furious clip. Do we believe the company's hype? How do we place a value on this mess? We don't and we don't. Buying into this stock now is a pure crap shoot.

Given all of the above and all of the suspected further bad news from the SEC, the stock is still being bid up. Market Cap is now at $.2 * 11,000,000 shares = $2.2 million. It was worth a 4.5 cent gamble earlier this year. It was still worth the 9 cents that I paid two months ago. So I have a few hundred bet on a target of $1.00 within a year. So that is my "flyer". Probably will loose it all. Couldn't buy a better novel to read. Drama, intrigue, suspense, stupidity, brilliance, deception (maybe). Catch the falling knife by the handle! Pick your target, buy in, then don't wait too long to set out.

Ode to my only flyer in an otherwise prudently diversified portfolio. Got to find some fun somewhere in this market.

Regards
Bluefishdeep

May 27 12:49 PM