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Circuit City Stocks Remain Unstable
Stocks are plummeting to the $3.50 range. Expect greater volatility after Tuesday's annual shareholder meeting.
If beleaguered electronics retailer Circuit City was a theater troupe, the last week of its share price movements would have involved juggling chainsaws and flaming bowling balls while balancing on a tightrope.
The most dramatic movement was last Friday (see chart), when investors pushed stocks down in response to an under-performing Q1 press release the previous day.
Stocks were also down in anticipation of Tuesday's annual shareholder meeting.
After trading below $3.50 for an entire day, Circuit City shares surprisingly surged before the bell, selling more than 5 million shares at $4.28.
The two leading explanations for the spike in share price: investors were exercising their options to sell (and buy); and a last-minute purchase by parties interested in gaining voting shares before Tuesday's meeting.
Of the two, however, the first explanation carries the least weight. Investors, who exercised calls to pick up Circuit City for $4.28, would have to display tremendous optimism that future turnarounds or buyout prices would deliver a substantial return.
At the same time, any investor who had sold puts would have to be among those fortunate to scoop up Circuit City stock when it's been in sight of the 52-week low (such as right now).
More likely, the activist investors and their allies have been accumulating stock prior to the shareholder meeting, leading to Friday's brief rally.
Of great interest to observers and investors are the board elections. Both Mark Wattles and Carl Icahn want to increase the size of the board from 12 to 15 and replace incumbent board members up for re-election with their own candidates.
Friday's rally has since fizzled, however, and Circuit City shares are plummeting back to the $3.50 range.
Even without a crystal ball, we can predict greater volatility with Tuesday's shareholder meeting: either unbridled optimism over new board members, or savage disappointment in both the elections and Circuit City's planned turnaround.
Lee Distad is a freelance CEDIA Certified Professional Designer who offers design and process consultation to firms in the Custom Installation industry, as well as copy writing and other professional writing services. Lee’s business and industry blog can be read at http://www.leedistad.com
The most dramatic movement was last Friday (see chart), when investors pushed stocks down in response to an under-performing Q1 press release the previous day.
Stocks were also down in anticipation of Tuesday's annual shareholder meeting.
After trading below $3.50 for an entire day, Circuit City shares surprisingly surged before the bell, selling more than 5 million shares at $4.28.
The two leading explanations for the spike in share price: investors were exercising their options to sell (and buy); and a last-minute purchase by parties interested in gaining voting shares before Tuesday's meeting.
Of the two, however, the first explanation carries the least weight. Investors, who exercised calls to pick up Circuit City for $4.28, would have to display tremendous optimism that future turnarounds or buyout prices would deliver a substantial return.
At the same time, any investor who had sold puts would have to be among those fortunate to scoop up Circuit City stock when it's been in sight of the 52-week low (such as right now).
More likely, the activist investors and their allies have been accumulating stock prior to the shareholder meeting, leading to Friday's brief rally.
Of great interest to observers and investors are the board elections. Both Mark Wattles and Carl Icahn want to increase the size of the board from 12 to 15 and replace incumbent board members up for re-election with their own candidates.
Friday's rally has since fizzled, however, and Circuit City shares are plummeting back to the $3.50 range.
Even without a crystal ball, we can predict greater volatility with Tuesday's shareholder meeting: either unbridled optimism over new board members, or savage disappointment in both the elections and Circuit City's planned turnaround.
Lee Distad is a freelance CEDIA Certified Professional Designer who offers design and process consultation to firms in the Custom Installation industry, as well as copy writing and other professional writing services. Lee’s business and industry blog can be read at http://www.leedistad.com
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