A few weeks ago I wrote an article following the revelation that CVSL (OTCBB: CVSL) had made a tender off for BTH (NYSE: BTH) at 16.75 per share. Two questions posed in the article were related to the size of the then existing short position and how aggressively BTH management would respond. As of last week, we now have both answers, but also many new questions.
Last Monday after the close of trading the new short interest report was published and it was still near record highs at 90.63% of the public float according to ShortSqueeze.com. On Friday morning, Blyth's BOD announced that it had unanimously rejected CVSL's proposed acquisition due to a laundry list of issues it had with the proposed consideration. This was a surprise to no one, as the company itself had been making open market purchases of BTH shares at prices that were much higher than the proposed $16.75. What is kind of surprising is the degree to which the market is discounting the likelihood of some kind of deal ultimately occurring. While I certainly do not have a crystal ball, I do have Google and SEC Edgar access, which allows me to see how many deals John Rochon has pulled off in the past and how they often start just like this one. I can also see how much he has ramped up the deal making machine since starting CVSL - the deals completed in the last 12 months are nothing short of remarkable and the machine is currently running at about two new LOIs per month. While Blyth's recent earnings release shows the company may be turning a corner that will allow it to resume its growth trajectory, CVSL just announced a quarterly revenue figure of $23.75 million, a $23.5 million increase in revenue year over year. Obviously CVSL as a direct marketing company/consolidator did not exist in Q3 of last year (and all of these companies they have acquired did) so its not like a de novo situation; but the point not to miss is that John Rochon and CVSL have made what seemed like (when said) some pretty grand statements about what they intended to do with CVSL. They then proceeded to do exactly what they said they intended to do, including going from zero to a $100 million+ run rate in one year, with the currently owned assets (ie not including deals in process) tracking at a $140m annual run rate.
Does this mean that CVSL is ultimately going to buy Blyth for $16.75 per share? Given Blyth's response to the offer and their prior open market purchases of their own stock at higher prices, I would expect to see a higher price if the parties reach an agreement. In the meantime, it seems that Mr. Rochon and CVSL have successfully created a "ceiling" (at $16.75) price and a set of circumstances that has resulted in a trading range well below that price. Did anyone else notice that the 10Q filed by CVSL last Thursday night included $16.42m in marketable securities? While this figure represents CVSL's marketable securities holdings on Sept. 30 (several days after the conference call detailing CVSL's interest in acquiring "substantially more" ownership in BTH), we know that the company owned something less than 800,000 shares at that point or they would already have been required to file a form 13. BTH's official rejection of the offer on Friday morning lead to CVSL responding just before the close on Friday that they intended to "amplify" their offer in "due course". CVSL's response caused the volume traded in the final twenty minutes of trading to surge to several times the volume traded the rest of the day, which leads to another question - is CVSL now starting to buy more open market shares in an amount that will push past the 5% threshold that will require a form 13 filing with the SEC? If they are, will they try to acquire as much as possible below the $16.75 offer price and possibly beyond if the intent is to "amplify" the offer with a higher price point?
If may be a few weeks before we know the answer to all these questions, but the one thing we do know is that the case of the Blyth Buyout is getting curiouser and curiouser.
Disclosure: I am long BTH. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: My intent in publishing this article is to inform investors about developments related to CVSL and 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 BTH to be 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.