ThinkEquity is out defending Bidz.com (NASDAQ:BIDZ) this morning noting that although last Monday's attack on the company from Citron Research was, "ill-informed... exaggerated... poor financial analysis... and ... mere innuendo," the stock price was cut in half.
Some investors simply flee when stocks suddenly become complicated or controversial, and buying pressure is reduced. Thus, even though Citron's promised Wednesday follow-up, advertised as an exposé of "questionable bids and bidding practices," proved to be a fizzling bit of a tempest manqué in a teapot, the stock did not recover. It sometimes takes a while for the market to recover its usual aplomb in "anticipating profitability reasonably well and valuing it appropriately."
According to ThinkEquity, the attack on the company and its credibility has set up a classic Mister Market Moment... a moment of real investment opportunity. In 'The Intelligent Investor', Ben Graham proposes that you have an emotionally-volatile partner in a business, Mister Market, who offers to buy your half or sell you his at wild prices, some very high, some very low, and asks rhetorically whether Mister Market's labile lunacy should change your sense of the value of the business.
The answer to that question, ThinkEquity thinks, of course, is "No." The question that was not asked, "Should you sometimes accept Mister Market's offer?" has an obvious answer too... and they think the answer is "Yes."
The firm still thinks that BIDZ.com shares should trade in the $20 range in the next 12 months and maintain their Buy rating.
Notablecalls: If for nothing more, at least it's entertaining. Citron's piece of BIDZ didn't include anything shocking, so I would not be surprised to see ThinkEquity to be proven right here.
Can't say I'm a big fan of BIDZ's business model but they are profitable and showing strong growth.