My Crazy Mother

Social media often gets junked up with catfights and misinformation. Quite a few times in the past two days in stocks I closely follow I've watched as posters try to throw algos into a frenzy with gross fallacies. Aside from the potential illegality of such actions, especially if those parties traded on any reaction they may have gotten, those people forget that fact checking in today's technologically enabled world is one of the easiest tests we can perform. For instance, my crazy mother (if I had a dollar for every time I've said that I could tender for Herbalife myself) once claimed that she hadn't received a rather sharp-tongued email from me in which I was asking some very pointed questions, because her iPhone was broken. I smelled that all too familiar odor of bullshit, so I decided to investigate a little and saw that on that same day, about 3 hours after I emailed her, she used her "broken" phone to check in to a spa on Facebook. It was clear that she was sparing me from her opinion that she thought I was being a dick and didn't want to talk to me about what I was pointedly asking. Wouldn't be the first time I've gotten that response from people.

Form your opinion on facts (long or short) and stake your claim. You can be a cheerleader all you want, but outright lies and lack of fact checking are too easy to catch and simply inexcusable. Another good example is Icahn's sales restrictions in Herbalife. Just go to the SEC website and pull the terms yourself.

Sale Restriction.
In consideration of the Company’s agreement set forth herein, so long as the Company has complied and is complying with its obligations under the first and second paragraphs of Section 1(a), Sections 1 (b), 1(c) and 1(d), and Section 7, and has otherwise materially complied and is materially complying with its other obligations set forth in this Agreement, the Icahn Parties agree that from the date hereof until February 28, 2014, the Icahn Parties shall not, and shall cause their controlled Affiliates not to, directly or indirectly, voluntarily sell any common shares of the Company (or Beneficial Ownership thereof) or any securities convertible or exchangeable into or exercisable for any common shares of the Company (or Beneficial Ownership thereof) (including, without limitation, any derivative securities or instruments having the right to acquire common shares of the Company) unless such sale involves a sale, transfer, tender or other disposition involving a tender or exchange offer (whether commenced by a third party or the Company), or a merger or other business combination transaction that is not in violation of Section 2 of this Agreement. This Section 3 terminates and ceases to have any effect at such time as the VWAP for a share of the Company’s common stock on the New York Stock Exchange (defined as dollars traded for each transaction ( i.e., price multiplied by the number of shares traded) divided by total number of shares traded) for any five (5) consecutive trading day period is at least $73.00, as adjusted to account for any stock split or stock dividend.

By my calculations, Icahn's lockup provision expired around 10:51 a.m. on December 3rd when the VWAP hit $73.26. That is without adjusting for the quarterly dividends either. I'm just too lazy right now. DADCo's Tim Ramey reiterated this in a note his team published yesterday when he stated that Icahn's lockup actually expired yesterday Dec 4th:

 "A VWAP of $76.65 was achieved as of the close of trading yesterday."

As of yesterday's close the VWAP was $76.48(again without adjusting for the dividends). With Uncle Carl stating that he has no intention of selling his shares we can speculate what could change his mind but after reading that his lockup expired, I'm sure some will see that 750K block that traded yesterday at 3:32 and think that Uncle Carl took some off the table. Again, it isn't too hard to do some rudimentary research to see that the tape has this tied to an options trade (Jan 2015 puts anyone?). Plus, Icahn's shares are insider shares, so if the LBO/buyback deal is in the works, or he has information about the impending audit release, he wouldn't be able to sell because he is an insider. And even if he could sell why would he if a LBO/buyback was on it's way?

There are some important implications in all this. For Icahn to be able to sell when his lockup is null would require that nothing material is on the horizon. Aside from the fact we aren't seeing a 17M share iceberg break off into the market, we don't even have to speculate that he isn't selling because Icahn hasn't filed a Form 4. We know his lockup has been expired for days now and he isn't selling. There are two simple reasons why he would continue to hold them at these levels:

1. He thinks the shares are undervalued (insert preferred  reason of choice for the discount). You can disagree with him, but this is a simple explanation.
2. Regardless of share value, information is on the way that would prevent him from selling because he is an insider. 

What does that mean? In the absence of insider sales I have to conclude that as has been often discussed, the audit re-issue and a meaningful share purchase are coming. DeSimone very clearly stated that the audit would be here by the end of year leaving us at most just over three weeks to wait.

These are all such easy facts to check I don't even want to waste any sarcasm in this post and I'll save it for the next email to my mother.