Lateral Capital Management
Long/short equity, special situations, event-driven, arbitrage

Weight Watchers International Inc. Has Reduced Its Bankruptcy Risk But Trades 50% Above Fair Value

Why focus on WTW?

In recent months there has been much commentary - both by Wall St equity research analysts and by Seeking Alpha authors - regarding the future direction of Weight Watchers International Inc. (NYSE:WTW) ("WTW" or the "company"). It appeared that much of this commentary had confused two very distinct concepts: bankruptcy risk, on the one hand, and fair value for WTW shares, on the other.

Figure 1: WTW Weekly Closing Share Price: 2011 - today

(click to enlarge)

Source: TradeStation, LCMI estimates

WTW shows up on various stock screens from time-to-time because of its relatively high operating metrics and its relatively low trading multiples. In addition, it recently appeared to have successfully broken out of...

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