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A couple of weeks ago I wrote a follow-up to my original article about Blyth (NYSE: BTH) and why I thought the stock could make a parabolic move higher. When I wrote this article, it was my belief then as it is now that Blyth shares could make a parabolic move higher if the right catalyst materialized. I listed some potential catalysts, but each one I listed involved factors that made it hard to know if they (company stock buyback, shadow insiders/MLM reps purchasing shares) were actually occurring. In that article I used the Porsche/Volkswagen saga as an example of what can happen, but I did not discuss the potential of that exact scenario of a strategic/institutional buyer entering the picture as the catalyst for the move higher because I had no reason to think of that as a likely occurrence with Blyth. In the days since that article was published I have learned otherwise, as it appears that the company CVSL (OTCBB: CVSL) is making open market purchases of BTH stock and that they have indicated an interest in building that into a "substantial" stake in Blyth. Below is an excerpt from a Columbus Dispatch writer's interview with former chairman and CEO of Mary Kay and current CVSL Chief Executive Officer John Rochon (click here to read the full CVSL article) that was posted to the CVSL website:

"A source familiar with CVSL said the company recently sold a large position in Herbalife (NYSE: HLF) and has reached out to Blyth about acquiring a substantial stake, though CVSL's current holding in Blyth remains below the 5% threshold that would trigger an SEC filing."

I found it most interesting that CVSL released this interview on its website, but did not release it through PR Newswire as it did when it acquired stakes in privately owned companies and even after a research report on CVSL was completed. Releasing it through PR Newswire would result in it being distributed instantly through most traditional financial news resources/channels. I was not aware of it for nearly a week after it was posted, despite exhaustive efforts to stay on top of new developments with Blyth. It almost seems like it was done this way to place this information into the public domain, but do so in the least conspicuous way. Could this is a strategic legal move designed to insulate the company from charges of manipulating the market for BTH shares should it decide to use open market purchases to acquire a substantial stake? When Porsche essentially cornered the market for Volkswagen shares, it was sued for over a billion dollars as short sellers alleged that Porsche misled investors by not disclosing that it intended to acquire such a large Volkswagen stake and by hiding its stock positions. Given that there are only a little more than 1 million shares of the public float that are not already sold short, an acquisition by CVSL of a few hundred thousand shares beyond that 5% filing threshold would effectively be doing what Porsche did with Volkswagen - acquiring all (and perhaps more) shares that are in the public float that are not already sold short. Should Blyth shares quadruple in a few trading days like Volkswagen's did, CVSL has already muted the risk of such lawsuits by putting two key understandings into the public domain, covering both its actions and intent by disclosing 1) its interest in acquiring a "SUBSTANTIAL" BTH stake and 2) that it has already started buying BTH shares. Is it a coincidence that the interview article was posted to the CVSL website and the next two trading days saw Blyth trading volume soar to 8x and 9x its average trading volume before settling into a new volume range 2 - 4x what was normal before Richmont/CVSL disclosed this interest?

This article and its assertions being released through the company's own website are most interesting, but even more interesting are the implications of CVSL's disclosure of having already begun to purchase BTH shares, presumably on the open market. If CVSL has acquired the maximum possible (4.99%) without the filing of a 13d, they could already own approximately 800,000 of the sub 1 million share public float that is not already sold short, because 5% of the company's 16,010,000 shares outstanding would be just over 800,500 shares. If CVSL has not yet acquired that much, they can keep making open market purchases until they reach that level before the 10 day period within which a 13d filing is required begins to toll. If CVSL's buying was part of the huge spike in volume that occurred on the two trading days after that article was posted to the CVSL website and the volume purchased caused their position to cross the 5% threshold on that Monday the 16th when volume peaked at 1.8m+ shares, CVSL will be required to file a 13d by Thursday September 26th. Is it a coincidence that CVSL announced yesterday that it will hold a conference call to update investors on its strategy after the close of trading on September 26th?

Some investors may discount the ability of an OTCBB company like CVSL to acquire a NYSE listed company like Blyth or even their ability to be a player with respect to owning a substantial stake. However, the question to ask is not whether the capital structure of CVSL (market cap $125m) would allow for such a purchase, the question is how quickly CVSL's largest shareholders (Richmont Holdings & Mr. Rochon) would be able to do such a deal under the CVSL umbrella and the answer is "very". CVSL was a shell company that was acquired by Mr. Rochon's private equity firm Richmont Holdings to be the publicly traded vehicle they would use to acquire direct selling companies. Prior to each significant deal, Richmont and/or partnerhips owned by or that include Richmont or Mr. Rochon have injected the capital into CVSL that is necessary to complete the deal. Richmont has made investments much larger than what is now Blyth's current market cap including several multi-billion dollar attempts to acquire some or all of NYSE listed AVON (NYSE: AVP). Richmont and Mr. Rochon have long standing relationships with other private equity and sovereign wealth funds should they need to raise additional capital to inject into CVSL for a particular venture. Thus, if Mr. Rochon sets his sights on acquiring more or even all of Blyth through CVSL, whether a deal occurs will not be a question of financial wherewithal.

We can surmise that Richmont and Mr. Rochon see considerable value in the brands under the Blyth umbrella and you have to wonder what the architect behind one of the most successful Leveraged Buy Outs in Wall Street history (Mary Kay) might be able to conceive to create additional value for shareholders with the Visalus, Partylite, Miles Kimball and Walter Drake brands if they acquire a significant stake in Blyth. It appears that CVSL wants to buy a "substantial stake" in Blyth and that they have already started the process of buying shares. It also appears that they purposely remained below the 5% threshold until at least September 13. The parallels with the Porsche / Volkswagen situation are looking increasingly similar, with one significant exception being that Volkswagen had a public float of tens of millions of shares vs. Blyth's 6.85 million shares and Volkswagen only had 25-30% of its public float sold short when Porsche acquired shares that made the enormous squeeze occur. Blyth's most current short interest report (released last night after the market closed) shows 85.65% of the public float sold short (that is 5,567,300 of its 6.85m share public float) leaving just over one million shares in the public float that has not been sold short already. As such, any "significant" purchase of BTH stock by CVSL on the open market would likely cause a major increase in the trading price of BTH shares. I think it is also fair to say that the widespread recognition that a John Rochon / Richmont funded CVSL is buying shares would also be likely to cause a major increase in the trading price of BTH shares, irrespective of whether their purchase resulted in the acquisition of the entirety of what remains unshorted in the public float.

Source: Is CVSL The Porsche To Blyth's Volkswagen?

Additional disclosure: My intent in publishing this article is to inform investors about new developments with Blyth. I did not and do not intend to suggest any specific action by any investor or shareholder and strongly suggest that any decision made to buy or sell shares of this stock be made after consultation with an investment advisor as to the suitability of such an investment. I currently own shares of BTH and consider my investment in Blyth a trade that could turn into a long term holding depending on marketplace developments and the company's execution of its growth plan. I may buy or sell shares at any time based on market conditions and the trading price of BTH.