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It shows that Phillip Frost is a better trader than us.
Frost can always increase his position if he finds it worth it, at a lower price....billionaires jump in and out of their positions too, there is nothing that forces him to stay in it when the stock is temporarily overvalued.
That said, just because a stock goes from $14 to $3, that doesn't mean it may not be worth $20 one day.
If Musclepharm succeeds in increasing revenue while reducing costs...then the sky is the limit.
I have owned many stocks that I picked up at rock bottom and that then went back up again. I can mention Credit Agricole, that I bought for EUR 5 and sold for EUR 10...and now I think it's worth EUR 14. I bought Bank of America at $ 5 and sold that at $15.5.
What matters to me, is whether the business is viable. I believe, based on the numbers and strength of relations Musclepharm got that it can make it big.
Frost is the master of finding synergies between different companies and combining them. I have the feeling that we have not seen the last of that.
I wonder what his master plan for Musclepharm is?
We have gotten some clue to the end goal, that Musclepharm combines with Capstone Nutrition.....but before that, what's up Frostie?
Richard Estalella talked something about some value drivers during CC, that would come in the period leading up to the potential acquisition of Capstone (over the next year and a half). Interesting to know, what exactly he was referring to?
If it's already done, then it is a sunk cost.
http://en.wikipedia.org/wiki/Sunk_costs
I doubt he will spend this kind money again until he has paid down the line of credit....
It might be that there were advantages associated with supporting the High School last year though....in terms of goodwill in the local community. Most cities appreciate businesses that support local neighborhoods, so that wouldn't surprise me the least.
he thought he could afford it, but he couldn't....it's not happening this year, I promise you that.
Musclepharm may keep on giving $30,000 to needy children because the cause is good, and the money involved is limited.
Brad sounds serious, and many of his recent initiatives are directed towards saving more money and improving payment times. Capstone Nutrition and Bodybuilding.com, the partners that originally helped Musclepharm become big, are brought in to take this to the next level, for the benefit of everybody involved.
Brad is being disciplined well by his creditor, and that's only a positive to me. It's apparent now, that Musclepharm needs more revenue, but that it needs to get to that revenue being as cost effectient as possible.
After you have invested into your operations making them more cost efficient, cost savings follow.
This nonsense gotta be subdued by Musclepharm, GNC and Bodybuilding.com better sooner than later.
The industry needs to correct those trouble markers that cheer bashing of competitors on social medias.
I don't have any problem with Jym Nutrition being on Bodybuilding.com, but he needs to talk more about what his products do for you, than being the drama queen insinuating that competitors products aren't reliable.
Let's face it, the industry has gotten pretty clean and honest...so, there is no need for the public getting any other impression. The article written by Forbes about protein splking is a consequence of all this Internet bashing of the larger industry players
before Jim Stoppani gets too excited over how frequent posters on his twitter account bash competing brands, he should carefully read the law:
Jim's entire approach to marketing through social medias, is to support bashers of musclepharm and other major brands.
:) “@KHow20: @JimStoppani and @MusclepharmPres @MusclePharm read enough tweets to settle this myself pic.twitter.com/cYmOaLzypy”
— Jim Stoppani, PhD (@JimStoppani) August 16, 2014
The best approach forward is trying not to have any enemies in the industry.
I think the two companies complement each other beautifully on bb.com, to each advantage and to bodybuilding.com's advantage.
Bashing competitors through BB.com gotta be unwise of Jim Stoppani, as he could risk that BB.com decided to focus on some other new kid on the block....BB.com sells marketing services, and the prerequisite for doing that is that the brands it promotes aren't bashed by other brands on it's site.
BB.com is not a kinder garten, it's a business!
it's not always easy being a public company...and for that reason most sports nutrition companies have chosen to remain private.
Brad faces much complication with financing, dealing with SEC, quarterly reports, conference calls because his company is public.
It's not fair not giving any credit to Brad.
In the tone of voice during conference call, it seems like Brad is on the ball while Estalella pretty much doesn't care about anything.
Brad is a super talented and creative guy, in creating a brand from scratch, and putting together a team of talented and creative people creating exciting new products and brand extensions, and have 100s of skus manufactured and delivered with revenue close to $200 million.
However, at the very top, he needs to have some data and numbers guy to take him down from the clouds once in a while, to complement his talents...in particular at this crucial stage.
Brad Pyatt has been the backbone of the company, but it's time for better financial advice. Brad is not needed as much as in the past, but he still got quite some drive, and more important, he got some strong ties to clients and suppliers. These ties are worth more than what can be read on the balance sheet.
The reason why the Ferrero family is the richest family in Italy is that they have always treated suppliers and clients very well, making Mon Cheri, Nutella and Ferrero Rocher globally recognized brands.
very high volume at the end..so, some big guy is buying this.
Musclepharm's stock will keep on rising until it reaches $6-7....at that point, investors may demand some more answers.
No doubt that key supplier and key client relationships help Musclepharm through the fluctuating times, allowing it to come back to normal revenue this quarter...but we would like to get some more answers as to what steps it is taking to cut costs.
Just stating that it is running lean is kind of empty to me, when we know for sure, that it is laying off staff to pay for bills....and nothing wrong with that, normally that is something investors want to hear...Employees hate it, but investors love it!
Brad is not worried about his salary right now, but the relationships to employees, key customers and key suppliers that will be the ones bringing the company to profitability.
Executives hold large holdings of the stock, so their interests are aligned with Brad's.
Brad's salary for last year was for the most part pre-paid...it was a stock grant to pay him over the next 5 years.
Equity based compensation to Brad won't happen in 2015 and in 2016....and I have a feeling that he won't receive much cash this year either.
Musclepharm got $100 million to pay all non manufacturing expenses with and make a profit with....it's not a terribly large amount of money when you spend 30% on endorsements and advertising alone.
Naturally, the more Musclepharm sells for...the easier to pay the bills and to pay large cash bonuses to executives. As long as Musclepharm only got $100 million post manufacturing costs, it's still limited what it can spend money on.
Right now, many executives hold large stock grants, so that should be something to motivate them to perform at realistic salaries.
If Tiger Woods retires from PGA, then Musclepharm can exit the contract.
The question is whether Tiger Woods implicitly has done so already?....I think he has when it comes to a golf bag sponsorship...Something I would try in court if he is getting too costly for Musclepharm and no data shows that many customers are acquired because of the endorsement.
Payment terms are important, a large size of account payable allows a business to borrow cash for cheap for current bills....which is good when you sell a lot like Musclepharm, and have lots of payroll, endorsement payments, etc.
Same thing with up front payment from clients....that's a good thing when times get tough...
Musclepharm has no other choice than running lean and I'm quite certain that it has cut head count with 50 people or so this quarter....
Musclepharm got some close relations with suppliers and clients, and that's very important to us. Furthermore, it needs to cut away, any unnecessary expense....even if it receives lots of payments all the time, because with payments come expenses....and so far, the expenses have been greater than the payments.
the pricing and payment terms of Capstone deal could be much better than what Musclepharm had earlier..
that would be comforting to investors as Musclepharm might have much more time to pay Capstone for manufacturing services at a lower price
So, more flexibility to Musclepharm.
Quote:
CytoSport, which is owned by the Pickett family, first started talking to potential buyers in the fall of 2013. Hormel was considered a possible buyer from the start, along with Irish cheese maker Glanbia and Colorado-based butter and soy milk maker Whitewave Foods.
It helps reading an article to know what's written.
This is pure speculation of course....but, it shows there is some interest from various sides in these kind of companies, because the growth potential is tremendous.
Whitewave Foods is doing alright when it comes to growth....but it does possess the capabilities needed to make plant based as well as milk based protein products.
It makes sense mentioning Whitewave Foods as Musclepharm wants to launch a plant based protein brand this fall....The Nature Sport line.
Colorado based Whitewave Foods may be looking for sports nutrition company it seems
http://postbulletin.typepad.com/kiger/2014/06/hormel-bulks-up-portfolio-by-buying-maker-of-muscle-milk.html
Musclepharm would have to sell the assets it got....in order to protect buyer from legal issues.
Nobody will buy legal liabilities....that's not happening.
It's no problem as Musclepharm has posted many losses it can offset in the profit from sale of the company, basically paying very little tax on the transaction.
It's a wise move and the value creation can be credited entirely to Brad Pyatt.
Now he might be preparing for this to happen by buying back apparel and consolidating manufacturing.
With all the money from the sale, then Brad will be fully protected financially against litigation and he could write himself salaries for handling this protection as well.
Later on, with the money he gets, he can start another sports nutrition company if he feels like it.
I have the feeling that it is the same people running Beast Nutrition as those that created BSN. Both companies come from Boca Raton, Florida.
Musclepharm is probably going to be combined with Capstone Nutrition....it's just that we are not given any details.
Most likely it is some other company that is going to buy the assets, potentially a cheese manufacturer that wants to replicate Glanbia's strategy....and perhaps buy multiple sports nutrition companies, starting with Musclepharm.
Could be it is Leprino Foods. http://en.wikipedia.org/wiki/Leprino_Foods
Pure speculation, but such a transaction would make 100% sense to me.
A big company like Leprino could close this fast, but it would require confidentiality that makes it hard to answer questions during a conference call
It's a completely different animal dealing with Walmart, explaining why it's only MuscleTech (Six Star) and Nature's Bounty (Body Fortress) doing that. Walmart wants you to be the bank for them, in exchange for the huge market access it provides.
More experience dealing with Walmart and better liquidity and Musclepharm will be okay. I'm sure though that Walmart does treat small suppliers a little better than the big ones when it comes to fast payment....but nothing like the small online retailers that pay right away.
Walmart's slow payments caused Musclepharm's pain in Q3 and Q4....making Musclepharm take the $8 million credit line to begin with.
Hardcore is a winner.
Even if I was not an initial fan, I do see the packaging is really really nice....and more importantly, the product engaged the "hardcore" crowd giving them what they want......I notice that Musclepharm is doing much more on social media with the scientific side of products, something that has been missing over the last two years.
Also, working with Bodybuilding.com is a plus...a place where Musclepharm can ask for money upfront, in times of limited cash.
The relations that Musclepharm builds with loyal online retailers are worth gold really.
Optimum Nutrition sold for more than $300 million with $50 million book value and $185 million in revenue.
Endorsements and related activation costs (TV advertising, social media, etc) are good to achieve brand awareness in the first 5 years of a brand. So, Musclepharm is attractive to a buyer that wants to establish themselves long term in the sports nutrition category as a major player to take out Glanbia and Post Holdings.
I find $150 million debt free....meaning $138 million or $11 per share quite realistically.
More than likely Musclepharm won't owe more than $10 million on lawsuit and investigation. The managers may be the ones that will pay, by giving us back stocks, meaning we could get more.
"We are now seeing order patterns returning to normal across the board in the first quarter of 2015."
This was stated March 16....so, I would assume that Musclepharm sold for more than $35 million thus far...meaning that $40-50 million is what we should expect.
With probably 40-50 person layoff following credit facility obtained in February and consolidation of manufacturing...which I'm sure the bank asked for...Musclepharm should get back to even.
Product development costs are going to decline this year, and more than likely Tiger Woods is going to retire from PGA tour...which he already has done really....making it possible for Musclepharm to terminate that deal.
So, costs are declining from being more effective.
Musclepharm's assets are worth at least $150 million. It's an exciting food and beverage company that appeals to a broad audience of people, both domestically, but not the least internationally in places where health and nutrition is big...like Australia, Canada, Brazil, UK etc.
The question is whether Musclepharm should be passed on to somebody else or be injected cash?
Dealing with vendors like Walmart does require quite some cash, as you are going to sell a lot, but will need scale and resources to wait for your account receivables. Walmart is the monster of accounts payables, it never pays you right away and it doesn't want to keep an inventory either...The leanest inventory imaginable considering how big the retailer is.
Musclepharm doesn't have any litigations against it...but one investigation into company behavior....which may come out of executives pockets more than investors.
Musclepharm stock back to $12 if it gets a cash injection, or alternatively sells all assets, similar to Biozone deal.
There seems to be signs that Musclepharm is preparing for a sale of all assets, as it is securing warrant and option to buy manufacturer and as it is securing rights for Musclepharm Apparel while in a cash crunch.
Essentially, Musclepharm would receive like $150 million in exchange for the company's asset. The Musclepharm company would then continue, Brad and the other parties entitled to stocks would get their stock grants vested over the years and the investigations and litigations against Musclepharm would remain the responsibility of Musclepharm.
Most likely Musclepharm would change corporate name and ticker symbol...but essentially be the same company.
Whenever, all lawsuits are settled, and everybody got their stocks vested....the company could cease to exist, or invest the money into some other business.
Musclepharm got virtually no debt...it only owes $12 million....and all the convertible preferred stocks have been converted to common stocks....accounts payable get nothing if a company or a person runs out of liquids....
Annual reports: Branding and Strategy from Miami office. Look at the list of real estate leased by Musclepharm.
you got smart people working from that building...it is not a building with empty offices.
Musclepharm needs some minor restructuring.
It's not a terribly complicated or indebted company....the value lies in it's logistics system, customers and in it's brand at this stage.
The company got a process right now, that needs less people to operate...costs needs to go down, in order for the company to handle fluctuating revenues from quarter to quarter. It needs to post sustainable profits and do whatever it takes to get there.
Musclepharm doesn't need to be the most innovative sports nutrition company imaginable anymore...it has been heard and it's time for it to profit from it's products.
Cost can always be cut in half.
You got two billionaires working from that building. Bruce Berkowitz and Phillip Frost...It's Fairholme Capital management headquarters as well as Opko.
And I have not been inside building even if I live in Miami...it is famous for the old IVAX sign, the company Phillip Frost sold to Teva for $7 billion years ago.
Tiger Woods exiting this deal is good for both parties....it was a misfit from day one, damaging both parties.
Tiger Woods was a borrow from Fuse....so, I hope Frost can help in some sort of exit of Tiger Woods from Musclepharm, that is a real company close to profit....unlike Fuse that was a pump and dumb penny stock.
Walmart channel still intact...that was mentioned on conference call.
it told us so on the 17th of March.
Musclepharm knows down to the penny how much it sold for....so, if it's not higher than the $32 million already....then the company would be lying. Also, the guidance of $220 million and the fact that the company thinks it can pull through without capital raise....that tells me that the company is in a slightly better position than last quarter.
The company has gotten a wake-up call, that it cannot spend before it has earned money.
There will be interested buyers and investors into the company.
They want management style changes and that's what they will get.
normalized revenue in q1, it was stated by company....and it got amazing new products in the pipeline that we know will sell well.
Specifically designed product for Bodybuilding.com is a winner....just look at Jym.
Low calorie protein bar for specialty and Costco is a clear winner...just look at Quest Nutrition and Clif Bar and Co.
High protein bar for specialty and for Walmart with Arnold on it, that's definitely a winner product too.
Does Musclepharm need promos....probably just as much as everybody else.
Half price of Whey protein from 1 year ago.
http://future.aae.wisc.edu/data/weekly_values/by_area/1610?tab=prices
The international strategy comprises of Canada.
Ireland is just an address thus far.
The company can definitely run with less than half the employees. You definitely don't want to tie up to much money on employees
Virtually no debt!
Wait and see....Musclepharm will be back in $7, $8...when it convinces the market that a change is coming.