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J Mintzmyer
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J Mintzmyer is a CFA candidate (testing Level 2) and investment enthusiast who utilizes Seeking Alpha to provide a free exchange of trading and investment ideas and to provide online visibility for his developing business. Founder and President of Mintzmyer Investments LLC, a financial services... More
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  • Why BBRY Made The Loss Announcement

    Note: This is purely speculative, which is why I am posting an Instablog and not writing a full article.

    I believe today's trading activity in $BBRY is completely irrational and misses the bigger point of what is really going on here. We know that Blackberry is trying to sell itself. Part of that process requires access to "the books." Most of the current information (i.e. this quarter's results), which is VERY important to buyout firms, and they are looking at, is non-public information.

    In order to act on non-public information, firms or individuals need to persuade the company to make information public. Blackberry made the extra effort today to make this information public.

    The entire reason that (I believe) Blackberry made this announcement was to clear the way for a few funds (or individuals) to purchase stock on the open market while having insider information. In this case, the insider information was 'bad news,' but it was still legally "insider info."

    Now that BBRY has plummeted even further, I expect massive buying from a few key parties (I have no idea who they might be) over the next 1-3 weeks.

    I have previously shared my firm belief in a $BBRY takeover for $15-$20 either late fall or early spring 2014. I recently sold all of my BBRY in the $10-$12 range and have staked my entire position 50% on cash and 50% in $12 March 14 calls. I will probably buy some $10 June 14 calls if the stock price persists next week.

    I expect that certain parties will begin increasing their share of BBRY stock prior to making their first bid. If the market continues to value $BBRY stock at these (single-digit) levels, the first bid might be as low as $12. Regardless, I still see a final close at $15-$20, if not higher.

    Please keep in mind this is 100% speculative. I do NOT recommend any positions based on these observations, or anything else for that matter. I just want to share my thoughts in a public forum while the news is fresh.

    Disclosure: I am long BBRY.

    Additional disclosure: I am long BBRY via $12 March 2014 calls. I may add to my position or alter my position in any way at any time.

    Tags: BBRY
    Sep 20 4:27 PM | Link | 30 Comments
  • My Napkin Calculation For A Netflix Bankruptcy



    For a background basis- check out my original hypothesis last February. I missed the mark on revenues which has pushed my date for a liquidity crunch back a few months to a year. There's a chance I could be wrong again IF subscribers can grow fast enough.

    Numbers are based on an annualized basis from the Q3-12 letter to shareholders data.

    My recent article sums up the earnings miss and related events.

    The Napkin Calculation

    Please keep in mind this assumes 4 quarters at the annualized rate of Q3-12. It's very likely that revenue will increase slightly and that other expenditures will also increase. The question is whether or not revenue growth will outpace additional expenditures, especially international expansion.

    Revenue at $905M*4= 3620M in cash inflows

    Content liabilities are estimated at $2.1-$2.2B --> $2150M

    $1470M left.

    interest+g&a+marketing+techdev+fulfillment ($291.7*4=1167M)

    $303M left. (please note that fulfillment will likely slightly decrease due to less DVD traffic, marketing and G&A increases should more than comp)

    Subscription costs are difficult to breakdown... What is the cost of bandwith/servers/etc. What are the costs of tech support, and other related fees? The best method I can figure is to take the $602.1M in "subscription costs and subtract the $410.9M amortization of streaming content liabilities that is include in the operating cash flow statement. I am taking out the $410.9M since this figure would already be included in the upcoming $2.15B liability bomb.

    This leaves $191.2M per Q X 4 = $764.8M annually

    Netflix will burn $461.8M in cash in the next 12 months if revenues do not outpace related expenses!

    Netflix has $790M in cash and STI, but the next 12m will not be much better. Plus NFLX will be forced to stop buying new content which will drive subs away. Any way you slice it, going cash flow negative on a large scale will spell the end for NFLX.

    To avoid this end, they need to find $435M more revenue in the next 12m while holding expenses constant. Since it's impossible to hold these other expenses constant, I'll be extremely genererous and assume 50% growth. They need $870M.

    How Many Subscribers Do They Need?

    As DVD continues to go away, the revenue/sub continues to fall, although it appears to be stabilizing around $30/q--> $120y. Effectively they need 7.25M subs TODAY to breakeven, and that is WITHOUT counting DVD exits.

    Let's assume DVD exits are extremely slow- only 250k leave each qtr. Since it takes approx 1.5 streamers to replace the revenue of a DVD user, we need a qtrly gain of 375k subs just to break even.

    For the 7.25M mentioned above, assuming equal quarterly gains, and 0 gains today, they need approx 14.5M at the end of the year/4 qtrs = 3.625M subs + .375M from DVD = 4M each quarter.

    In Summary

    I'm being VERY generous to Netflix here, and they still need to gain 4M streamers each quarter for all 4 next quarters just to stay cash flow neutral.

    The past 4 quarters from Q4-11 to Q3-12, NFLX has added .1M, 2.83M, 1.28M, and 1.78M.

    Good luck!!

    Disclosure: I am short NFLX, AMZN.

    Oct 24 12:01 AM | Link | 3 Comments
  • What Is A K-Cup!? Is GMCR A Fad?
    I've never heard of a K-Cup, and therefore don't understand the GMCR hype, but I'm not a big coffee guy (understatement- I hate coffee). I read Einhorn's analysis and bet naked short-- made around $20/sh to cover. I bailed, unfortunately $10 too early, but I don't like naked shorting (almost had a heart attack last year with NFLX).

    I just asked two of my friends who are huge coffee nuts if they'd ever heard of a Keurig-cup or K-Cup? "What the hell is that?!"

    I said "apparently it's the coffee revolution or something," my buddy says "guess it isn't much of a revolution!"

    For those comparing this to Apple, I remember being in school when those came out. Everyone and their mother knew what an iPod was. It was the hottest product out there- kids would wear their white earbuds with pride, and our entire football team converged to check out our QBs new iPod. If only I had any money and knew about investing at the time... 49-bagger.

    K-Cups... That's a stretch. I hope I don't come back in a year and this comment bites me in the butt-- just remember AAPL had none of these accounting questions either, or GOOG, or even NFLX until very recently (approx 9 months ago).

    I'll be posting on Facebook asking if any of my 950 friends know what a K-Cup is.... I'd like to know what sort of device I'm betting against before I initiate something--- I have 36 hours to get to the bottom of this and decide if I want to trade on earnings again... My gut says short, especially after reading this article by Bill Maurer:

    and this warning by Sam Antar:

    Disclosure: I have no positions in any stocks mentioned, but may initiate a short position in GMCR over the next 72 hours.

    Tags: GMCR, Short ideas
    Jan 31 3:26 AM | Link | 1 Comment
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