Syntax-Brillian: Some Shareholders Are Smarter Than Others

Syntax-Brillian (BRLC) closed down 16.5% at $4.56 on June 12, making it the top loser on the Nasdaq for the day in percentage terms. It is also down 24% in just two days. The price drop in the last two days makes it very apparent that some Syntax-Brillian shareholders are smarter than others.

Take for example, Taiwan Kolin Co LTD, a main supplier for Syntax-Brillian and Chow Man Kit, Syntax-Brillian’s EVP and Chief Procurement Officer. They sold 2.4 million shares of Syntax Brillian total at $5.75 a share in the secondary offering. What was a “discount” then is now a 26% premium over today’s closing price of $4.56. That appeared to be a smart move on their part.

However, on the other end of the spectrum you have those that purchased the 30 million shares of Syntax-Brillian at $5.75 during the offering. They are down 19% from the initial purchase which was a “discount” then. It certainly doesn’t like such a smart move now unless some of the buyers are using the shares to cover their short positions or to lend to others to short.

Another example are the individuals that sold on May 11, the day after Syntax-Brillian announced the secondary offering and missed analysts estimates for the third quarter. The stock closed at $7 that day; it is down almost 34% since then, only one month later. The individuals that sold currently look smarter than those that held on.

Yesterday, the stock had trading volume at 11.6 million shares, much greater than average volume and also more than twice the volume on May 11, the first trading day after the secondary offering announcement. The stock started falling and continued falling further and further before finding some support around $4.50. The only published explanation offered to the price decline is that of John Vinh, an analyst for C.E. Unterberg, Towbin, who said that Syntax-Brillian might stop selling their Olevia televisions at Circuit City (CC) and may instead move to a retailer such as Best Buy (BBY). However, I highly doubt that this is the only reason since it is still currently a rumor and Syntax-Brillian hasn’t announced anything yet. There might be other undeclared reasons yet to attribute to the 24% decline in two days.

Nevertheless, given the amount of trades yesterday, it may be worth asking which shareholders are smarter - those that unloaded yesterday or those that bought? With the volatility of Syntax-Brillian, it shouldn’t take too long to find out.

Disclosure: Author has a short position in BRLC

BRLC 1-yr chart

Comments

[chiggins:]

Live In Play


14-Jun-07
08:56 BRLC Syntax-Brillian: Would be aggressive buyers on weakness- CIBC (4.56 )

CIBC reits their Outperform and $15 tgt following the significant share pressure in the past few days. The firm says the selloff is likely due to published reports that Olevia will soon be out of Circuit City (CC), while Sony's deal with Wal-Mart will impair Olevia demand. The firm believes both assertions are "way, way off". Firm notes the reports that Olevia was abandoning Circuit City in favor of Best Buy (BBY), although this would be great if true (BBY is larger, more successful), they say their checks at CC & BRLC totally contradict these assertions. Firm believes Monday's pressure was due to another competitor's suggestion that Sony's intent to sell entry-level LCD-TVs at Wal-Mart will likely damage Olevia's competitive position. They believe Sony's cost/markup structure will not compete with Olevia, nor is Wal-Mart a BRLC customer.

2007 Jun 14 09:02 AM

[vreporter:]

The firm believes both assertions are "way, way off".

Then maybe "the firm" (CIBC) should consider that the real reasons for the selloff are not known to them yet - and that their own assumptions for the price fall are "way, way off!"

Willy
Hoboken, NJ

2007 Jun 14 11:16 AM

[Ralph F:]

Why would an analyst's assertion that the TVs will be sold in Best Buy instead of Circuit City cream the stock? Best Buy is better distribution than Circuit City, no?

2007 Jun 14 11:39 AM