Saturday, June 10, 2006

Management Faith in True Religion

TRLG is a volitile stock. Certainly, it is the most volitile of my investments. Yesterday, it was up $1.25 in NASDAQ trading, on a report that management is putting the company up for sale. More accurately, they are looking to do a deal and take the company private, so they would be selling to themselves, too. They have retained Goldman, Sachs to advise them on a potential private equity takeover.

With no actual offers on the table, we have to conclude that much of yesterday's action was short covering (though there was probably also some risk arbitrage). Yesterday's volume of 1.587 million shares, 150% of the average day, no doubt involved quite a few short covers, but with 5.19 milion shares short as of May 10th, there is still plenty of short interest, even with gradual covering over the last few weeks as the stock has risen.

We have no idea what price tag would be put on the company, but as I have said before, the numbers at this company are just tremendous. Even at $21-22 is a fair valuation, with a control premium on top of that. But with other good values emerging from the recent market meltdown, I hope that a sale at a favorable price is announced and quickly, offering an opportunity to redeploy the capital I have in this stock.