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  • NIHD: Despite Deals And Upped Cash, Shorts In Control 4 comments
    Aug 21, 2013 8:34 AM | about stocks: NIHD, OIBR, AMT

    We have written extensively on NII Holdings (NASDAQ:NIHD) and how it is undervalued. We still think that is firmly the case, especially as the company has delivered on its promises of selling off non-core assets and raising a significant amount of cash to fund capex upgrades and a turnaround in subscriber growth.

    However, the last two deal announcements have fallen on deaf ears as far as the street is concerned. Here is a chart of the stock since the American Tower (NYSE:AMT) tower sale deal was announced on August 9th and the completion of the sale of Nextel Peru on August 19th: (click to enlarge)

    It looks like the short term rises are corresponding with heavy selling. This could be a combination of shorts increasing their negative bets and funds liquidating their holdings. Whalewisdom shows several large funds such as Renaissance and T.Rowe Price liquidating their positions and several large funds initiating positions such as Black Rock and Tiger Cub Coatue Management.

    Our take is that the shorts are in control of this stock and it will become the next battleground stock between shorts and longs. Brazil's economic headwinds are surely factoring into the competitive telecom sector as evidenced by the S&P downgrades of Brazilian operator Oi (NYSE:OIBR).

    We also think the public relations gods have not been good to NIHD. The timing of the August 9th release in conflict and confusion with AMT's release was awful. Moreover, the August 19th release after the market close on Monday did not do the deal justice. Together, these transactions bring in more than $1.2 billion in cash to the balance sheet and the stock has been negatively affected. Our advice is to keep your powder dry as the shorts pile in and wait for the next deal the company is working on, as it will most probably reveal the true value we have placed on the company above $13 per share.

    Stocks: NIHD, OIBR, AMT
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  • Tufenk
    , contributor
    Comments (963) | Send Message
     
    Author’s reply » Emerging markets in rough shape http://cnb.cx/1ar8OpA
    21 Aug 2013, 08:37 AM Reply Like
  • db6strings
    , contributor
    Comments (8) | Send Message
     
    Shorting NIHD has become a very crowded trade. Thomson Reuters shows SSV (short sale volume in 100s) as 827160. That is 82 M shares out of a float of 172 M roughly for a stock that just raised over $1.2 B and restructured debt. The short thesis assumes no growth and the capex investments to be a futile exercise. It completely ignores the embedded value of the company. Mexico and Brazil are underdeveloped markets whose economies will recover when global commodity demand returns. Brazil has the twin catalysts of World Cup soccer and the Olympics over the next three years. Wireless assets are presently in big demand. NIHD is rolling out MotoX phones and PRIP and is updating their tech profile. They own strategically important spectrum assets. Given the upside potential if they execute on their strategy and / or unlock the embedded value, I am not sure why you would short this stock now at $6. From 2011 through April, 2013, it was a smart trade. I think you now look for the turnaround or the unlocking of that embedded value by sale, spinoff or joint venture and go long.
    21 Aug 2013, 02:11 PM Reply Like
  • Tufenk
    , contributor
    Comments (963) | Send Message
     
    Author’s reply » I agree, but they are doing it for some reason, probably macro Brazil concerns.
    21 Aug 2013, 02:43 PM Reply Like
  • db6strings
    , contributor
    Comments (8) | Send Message
     
    MS downgrades to underweight this morning. Of similar note GS downgraded heavily shorted TSL and RBCN to "sells" in the past few months only to have them both rip higher pf late after the initial reactionary selling. They are providing cover to their institutional shorts. Why here and now - when it is most vulnerable? This is where the bottom is made and weak longs are shaken out.

     

    Alright where are you Stifel, Macquarie?
    22 Aug 2013, 07:51 AM Reply Like
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