Shortly before my last article on Internet and catalog outdoors-gear retailer Sportsman's Guide
Yes and no. Here's why.
At the time of my sale, company executives had been granting a lot of stock options. At their annual meeting, they were seeking approval of even more -- a total potential dilution of 43%. My last article seemed to have triggered a bit of shareholder revolt, based on some emails I received. The board of directors withdrew the 2005 plan from consideration the day before the annual meeting, but the directors did approve a stock buyback plan. Shortly after the meeting, Sportsman's Guide tried to do a secondary offering, a move that shareholders and fellow Fool Bill Mann both frowned on.
One of the unhappy shareholders was Marathon Partners, which owned 6% of the outstanding shares. In a 13-D filing with the SEC, Marathon Partners harangued the company's management for first authorizing a share buyback program, which would indicate that shares are undervalued, and then trying to authorize a secondary offering, which assumes that shares are fairly priced or overvalued. A bit of a contradiction there, don't you think? A few weeks later, the company pulled the secondary offering, too.
Sportsman's Guide now seems to be back on track. Since the weird behavior stopped in late June, the share price has appreciated by about 45%, climbing from about $17.50 to about $25.50. Not bad at all for a three-month span.
So, with the tremendous gain over that time, I should be filled with remorse that I sold back in February, right? While I apparently left some money on the table, I'm not entirely upset. The company has a history of granting a lot of stock options and trying to pull some fast ones on its shareholders. Sportsman's Guide's management team lost my trust, and it'll be a while before that team can earn it back.
That said, on the whole, this company's management is pretty good. It turned a poorly performing company around, made a smart acquisition last year with The Golf Warehouse, and seems to be creating shareholder value once again. I'd advise Sportsman's Guide shareholders to keep their eyes open and never let management forget who really owns the business.
But then, that's good advice for every shareholder in the market.
Blaze a trail to further Foolishness:
- Bill Mann slammed the secondary offering.
- Just one month later, the game was off.
- A few weeks later, the company seemed back on course.
Map out your own opinions on our Sportsman's Guide message board.
Fool contributor Jim Mueller cries into his pillow at night over the lost gains, but then he says he has no regrets. At least, that's what he tells us. He also tells us, per the Fool's disclosure policy , that he owns no shares in Sportsman's Guide.