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Interesting to note, the press release confirms this is a criminal investigation by the SEC.
Not sure an up-list is remotely possible.
Here are the requirements:
http://www.investopedia.com/ask/answers/121.asp
You're right. They have no standout products. They innovate nothing. All their products are simply copies of other products.
They are nothing more than a discount supplement company that spends far more money than they make.
It's only a better buy now than it was at $14 if you didn't buy it at $14 or $8 or $6.
I'll trade it when I feel the opportunity is there but I will be in and out quick. If you have to hold this thing more than a week you're gonna lose money.
Well he must think it's going a lot lower because he hasn't bought yet.
I think everyone is resigned to the fact that this is a $3-$4 stock now. That is until it's a $2 stock.
That is what's called throwing good money after bad. Knock yourself out.
Yeah no risk at all. That why investors are pouring in.
Like taking candy from a baby.
No. Sorry. But they couldn't pay their manufacturer and were cut of until they came up with money up front.
No kidding. So funny.
How do they dream up this stuff? Like Musclepharm is going to fake an inventory shortage so they don't have to participate in a 16% discount.
And then they act like this is some creatively genius move on their part.
Yes Musclepharm is a lean, mean, well oiled machine. Not a penny wasted.
Too funny.
This makes sense. I am aware contract manufacturers will not do business with Musclepharm without money upfront.
And I believe you are right Jimmy.
It's not surprising you don't see the connection.
Do some DD. bb.com also has it's own brand and has even before musclepharm existed.
I don't think it's going to happen either but there most certainly is a connection.
Liberty Media owns bodybuilding.com
See the connection now?
Massive decline in 4th quarter sales. Over $16 million in losses for the quarter. Brad refused to take questions during the conference call.
If the only thing you have going for you as a company from an investors perspective is revenue at the expense of virtually every other important metric - and you blow a quarter like Musclepharm did - share price gets crushed.
We continue to fall.
The only thing being run out of Ohio are tweets from Cory. Nothing is going on in Miami. That's a shell office.
It's all run out of Denver.
That's recreational sports not their athletic department.
Ouch! Down 8% with double average volume.
Who thinks we'll be in the 3s today?
The only problem here is that there are no future earnings in sight.
With losses increasing and revenue declining an expanded SEC investigation could be the final nail in the coffin.
It's become clear that the legal fees associated with the SEC investigation will not be covered by insurance. In fact, their insurance company has refused to pay.
I think the biggest take on the 4Q conference call was the fact that they refused to take questions.
A huge, huge red flag. They knew if they gave honest answers to questions about the poor results it would have had even more devastating effect on the stock price. They had nothing good to say.
I have a feeling the SEC investigation has expanded as well. The current understanding of the investigation has certainly been factored in to the price. And if it ended today I don’t think the price would react positively. Too many other problems. But when the expansion of the SEC investigation comes to light things will get ugly fast.
I Believe MusclePharm Has Shown Signs Of Significant Mismanagement
Summary
With its latest earnings report, MusclePharm confirmed the worst of my fears.
Due to the materialization of those fears and possible mismanagement, the company now faces vastly increased risks.
It's possible that only a management change can save MusclePharm's shareholders from ongoing pain.
In the past, I've been positive on MusclePharm (OTCQB:MSLP) due to its strong growth and the way it was seemingly building a valuable brand. However, the underperformance of the stock at one point led me to dig deeper to see if there was any possible emerging risk.
This, in turn, led me to write my article titled "Why Is MusclePharm Doing So Badly? Here's My Best Guess", where I explained my best guess regarding what might be going wrong. My guess was that MusclePharm was seeing problems with its sell-through pace, and thus, we could soon be exposed to bad news involving a significant drop in its revenue growth rate.
Soon after, I sold my MusclePharm stock due to the inherent risk. I said as much in my article titled "FitLife Brands Has Lower Risk With Possibly Similar Upside To MusclePharm". A couple of days later, I sold my FitLife (OTCQB:FTLF) stock, due to short-term problems emerging there as well, though those were unrelated to the ones at MusclePharm.
On March 16, after a long and unexplained silence, MusclePharm finally reported its Q4 2014 and 2014 earnings. These were, to say the least, disastrous. The reported earnings confirmed my "best guess" regarding what went wrong. The company phrased it this way (bold highlight is mine):
"While we were aggressive on our 2014 guidance, we saw a number of our key customers optimizing their inventory and fulfillment purchasing patterns in the second half of the year. We are now seeing order patterns returning to normal across the board in the first quarter of 2015. MusclePharm's brands are performing well as we strengthened relationships with retailers and introduced several new products that continue to resonate with consumers and gain distribution."
This is basically the same as what I described would happen if sell-through was outpaced by the sell-in due to the opening of new sales channels and the launching of new products. First, a large drop in revenue growth would be observed (Q4 2014 revenues were actually down 12.9% from Q4 2013). Then, going forward, and as retailer orders meet the ongoing sell-through pace, revenue growth should normalize (allowing MusclePharm to guide to minimally decent 2015 revenues).
Mismanagement
However, the bad news weren't limited to just the direct sell-through impact. There were other relevant developments, which were also related to the sell-through problem, but indicate significant mismanagement. These included:
Management not being aware of the sell-through problem in time. Though, by October '14, it was probably made aware, given that the company's chief marketing and sales officer resigned then. Indeed, it's uncanny how this resignation seems to have timed the top of the stock so well. In hindsight, we should have given it more importance there and then. Someone obviously did - though, it's open to question whether someone was already working with hard data instead of mere suppositions;
(click to enlarge)
(Source: Yahoo Finance; Highlighted day is the day the CMO resigned.)
Management failing to keep costs under control. This was already evident when MusclePharm reported Q3 2014 earnings. However, given the predictable impact from the sell-through problems, this mismanagement of costs gained further relevance in Q4 2014. Indeed, allowing costs to continue uncontained might have increased the company's risk considerably. Just to have a feeling for how uncontrolled costs were in Q4 2014, while MusclePharm had $10 million less in revenues than in Q3 2014 (31.6% less) and had around half of the gross profit, it actually supported higher operating expenses. These came in at $23.9 million in Q4 2014, versus $19.5 million in Q3 1014. This led to a massive operating loss of $16.4 million in Q4 2014. A loss of this magnitude is large enough that it might even endanger MusclePharm's survival. And it happened because of a lack of cost control in the face of something which was predictable, and which management should have acted on;
Likewise, due to management's inability to recognize and act on the problem, MusclePharm ended the year with $21 million in inventory. This was up 32.9% from Q4 2013, even though revenues were lower than in Q4 2013. At this point, the company's financial health can ill-afford to be failing both in cost control and working capital control;
Moreover, in spite of the approaching implosion, MusclePharm continued to have no control over executive compensation. The same executive team which failed to see the massive approaching problem, and which thus now has MusclePharm in dire straits because of the inability to act on it;
Adding insult to injury, MusclePharm continued introducing new products at a breakneck speed. This would have been healthy if the company was doing well financially. However, MusclePharm is not doing well, and as such, needs to consolidate before attacking - unless the launching of new products is seen as some kind of "Hail Mary". Why do I say this? Each new product represents a bevy of launch costs and working capital commitments, increases in either of which MusclePharm cannot sustain at this point;
Finally, even months after this massive problem began, MusclePharm somehow saw it fit to enter into a possible acquisition (the means to complete which elude me). And this possible acquisition included the commitment of $2.5 million the company doesn't really have. MusclePharm needs its every dollar to survive this episode.
Beyond all of these observations, I should also add that the stock seems to have traded on inside information. And that MusclePharm, by staying quiet all this time when it knew these developments were taking place, only helped those selling the stock ahead of other common investors.
Indeed, things in November must have looked even worse than the final Q4 2014 numbers show. I say this because accounts receivable increased strongly versus Q4 2013, while revenues decreased from Q4 2013 to Q4 2014, so either:
Horrid as they were, the Q4 2014 numbers were actually padded at quarter-end. I don't believe in this hypothesis, since the numbers were horrid anyway, so nothing would be gained from padding them or;
December sales were already a significant improvement on October/November. So MusclePharm was in possession of material data showing incredibly horrid revenues and earnings October/November and kept it from its investors, even when it had said it would schedule a call to discuss 2015 guidance. Keep in mind that the company reported Q3 2014 earnings on November 14, 2014 - and it's highly likely that by then it was fully aware of what was happening. In the meantime, the stock saw constant selling pressure, which is highly likely to have come from someone a lot better informed than your average shareholder who was getting the silent treatment.
I avoided today's massacre due to the doubts which crept up on me as evidence mounted. However, it's still sad that the company must have known about what was happening in October and November 2014, and yet chose to wait another 4-5 full months before letting its common shareholders know about it.
Going Forward
Due to what happened in Q4 2014 and the obvious mismanagement which took place, I believe that the risk greatly increased for one of the following two outcomes:
Bankruptcy. The company is sitting on $1 million in cash and accounts payable at year-end are larger than the sum of accounts receivable plus cash, meaning inventory has to be converted to cash ASAP. Also, the company is probably facing further losses in the short term; or
More dilution. Which was the company's previous modus operandi when faced with such troubles as the ones it's facing today.
MusclePharm is in a very risky place. Its guidance for 2015 is actually acceptable from a revenue standpoint. However, the gross margin guidance together with uncontrolled costs means that 2015 will have trouble being profitable.
At the same time, the company seems to have enough revenues and enough of a brand that, if properly managed, it could have a chance. However, I'd be very leery of investing a single dollar in this stock unless one of two things happened:
Either MusclePharm shows amazing "out of the blue" profitability; or
Management is replaced by a team with better experience and more proven operational abilities (MusclePharm seems to have excelled mostly at building a brand and nothing else). Here, although I sold my FitLife stock, I think that MusclePharm merging with it and keeping FitLife's management might be enough to give a shareholder some hope.
A Curiosity
Today, the market reacted strongly to the news that MusclePharm would be introducing a new energy drink. This is rather curious, because most following the name already knew this was going to happen. And moreover, the company's 10-K from March 16 already stated as much:
New Product Introductions
In addition to the growth of our existing products, the growth of our business is also fueled by the following new product introductions:
MP Energy Sport - An energy sports beverage containing 39 grams of sugar and total carbs, 120 mg of caffeine, and the use of the patented and clinically-tested performance ingredient CarnoSyn Beta-Alanine. We launched this product in the first of quarter 2015 with two initial flavors: Original and Electric Lime.
MP Energy Sport Zero - An energy sports beverage containing 0 grams of sugar and total carbs, 120 mg of caffeine, and the use of the patented and clinically-tested performance ingredient CarnoSyn Beta-Alanine. We launched this product in the first of quarter 2015 with three initial flavors: Citrus Edge, Power Punch, and Onyx Cherry.
Conclusion
MusclePharm has confirmed the worst of my fears. Indeed, not only did the company have horrid news coming from an obvious sell-through problem, but it has also shown increasing signs of mismanagement.
At this point, MusclePharm has clear risk of either bankruptcy or significant dilution. As such, I have trouble seeing it as a possible long investment.
To change this, either the company magically shows some profitability (which I don't find likely, but guidance does imply a revenue stabilization, which will improve the earnings picture somewhat), or at the very least, it needs to see a wholesale management shake-up.
I contacted the company's investor relations before publishing this article. Indeed, I delayed the article significantly for that same purpose. I had questions for most of the arguments presented in the article, but ultimately, I was referred to the 10-K and got no direct answers.
I will continue to monitor MusclePharm, because the story is still interesting. It's the execution on the financial and management side that seems to be faltering badly.
Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.
It's looking grim. Another new article on Musclepharm.
I Believe MusclePharm Has Shown Signs Of Significant Mismanagement
http://seekingalpha.com/article/3051456-i-believe-musclepharm-has-shown-signs-of-significant-mismanagement?app=1&auth_param=314k:1ai6a31:4feb00f3273fb5e929963e2dcac5fa8a&uprof=11
Not a good time to get in the energy drink business.
http://www.usatoday.com/story/money/2015/03/24/energy-drinks-beverages-red-bull-monster-rudd-center-for-food-policy-and-obesity/70388384/
Summary of new Musclepharm article:
Q4 Results: Ugly numbers. Ugly Sell-off.
Negatives: Depletion of cash, declining sales, negative operating income, millions in net losses.
Positives: Q4 positive cash flow and free cash flow.
A new $4 million credit line saves MusclePharm but the terms are awful.
Until MusclePharm delivers consistent positive cash flows, I'd stay far, far away.
MusclePharm (OTCQB:MSLP) reported some ugly numbers for Q4.
($16m) net loss
-75% decrease in cash
Exhausted $8m credit line
Y/Y sales decline
(4.91%) loss from operating income
From the SEC filing. Pretty easy to find.
Why do I find this question insanely ironic?
Maybe if he would have included a paragraph on how Tiger woods desperately wants to work for Musclepharm when he retires from golf I would say it was definitely written by a drunk.
New Article: MusclePharm: It's All About The Cash
http://seekingalpha.com/article/3052276-musclepharm-its-all-about-the-cash?app=1&auth_param=314k:1ai51ch:44a73667aae75a2ddc53045a3f3579e4&uprof=11
He's probably really thrilled about the 4Q and the massive decline in stock price. The kicker is probably when Musclepharm got caught protein spiking. And you know he loves the SEC investigation.
Yeah, I think the richest athlete in the world will probably beg Brad to hire him to help supplement his retirement income.
What are the ingredients? It's not even out yet is it?
and the stock price is hovering at all-time lows. LOL
What has Musclepharm ever done that increased shareholder value?
You realize it has gone from $1003 a share to $5 a share in less than 5 years? Or pre split $1.18 to .0058.
Shareholder value baby!!!!!!!
LOL - No they're not.
Well look at the bright side. Jeremy Deluca now gets paid half a million a year to deliver Energy Sport to Fast Eddy's Chevron.
That's far more work than he's been doing the last 3 years.
That's a very good breakdown on how beverage distribution works. This channel is absolutely essential for a beverage product to even have a chance of being successful and this doesn't even take product demand into the equation.
Even if Musclepharm had this distribution why would anyone buy it over Monster, Rockstar, Red Bull, and the 100 other smaller brands?
Also - Monster is the Energy drink of the UFC so that marketing avenue doesn't exist.
Don't kid yourselves. This energy drink is going nowhere.They'll spend $3 for every $1 return in revenue with this.
Like I said before, if they can't make money with high margin sports supplements how are they possibly going to make money with low margin, overly competitive energy drinks.
This will be just another excuse more massive loses.
Mark this post.
You know what is even more interesting is that a share of MSLP stock wouldn't even cover this 2 for $5 special.
In fact, pre-split it would take 1000 shares of MSLP stock to buy 2 energy drinks.
Think on that.
Still can. They have practically been giving the bars away. I'm sure it contributed to $17 million they lost Q4.
You can't do energy drinks as a sideline. The competition is way too stiff. Monster Energy spends more on marketing "Monster Energy" in a weekend than Musclepharm can afford to do in a year on all their marketing efforts on all their products.
These energy drinks will be their next excuse for bigger loses.