OpTree

We have been covering the whole USANA saga to go private and Wentz and co. offering first $26 to take the company private and then upping their offer to $28 before getting completely rejected...twice.

Well what is most interesting is how Wall Street has reacted to the news to abandon talks to go private and the settlement with Barry Minkow. In literally a week, USANA’s stock (NASDAQ: USNA) has seen a huge jump from $28 (Wentz and co. last bid) to a close of $38.15 today - a 38% increase!

For those that may or may not follow MLM public companies, it is very rare to see such growth in a short period of time. No question that all of the news the company has been able to put behind them has helped but another theory comes to mind and that is Wentz had absolutely nothing to lose if his bid was rejected and everything to gain.

For one, USANA got a lot of free publicity out of the talks which gave them greater exposure to trading desks around the country and world. The other key component as we had pointed out since Wentz is the largest shareholder, the rejection by the independent counsel which was hired to review the offer (and later rejected as being far too low) only showed that Went’z stock was undervalued to begin with and people should start buying it up. GENIUS!

So where does that leave Wentz and Gull Holdings today? Combined they own over 16m shares which means they have made (on paper) roughly $160 Million in a week! Not a bad return for making a low-ball offer on your own company huh?

Whether this was planned from the start or is a product of the outcome, I give a lot of credit to Wentz and Gull for the results. It was a brilliant plan that was executed almost flawlessly with incredible results. Oh, and it doesn’t hurt that Minkow is now out of the picture as well.

Popularity: 3% [?]

We got word that USANA has settled their lawsuit with Barry Minkow and the Fraud Discovery Institute.

In exchange for dropping the lawsuit against Minkow, both Minkow and the FDI agreed that they will no longer trade USANA stock (NASDAQ: USNA). In addition, the FDI will remove all information regarding USANA within their control from their website and will cease from publishing any future statements about the company.

Minkow, who is a convicted criminal, served eight years in jail for stock fraud and when released decided to dedicate his life to torturing network marketing companies (Nu Skin), (Herbalife) and attempting to manipulate their stocks.

Minkow came out with his first negative report about Usana in February of 2007. Minkow went on to buy “put” options on the stock betting that the price would fall. USANA responded by suing both Minkow and the FDI for defamation and stock manipulation.

Apparently after a lengthy battle, both parties were ready and willing to come up with a compromise although it is very unclear what Minkow gets out of this since it seems he has given up all future chances to attack the company but it seems awfully strange that Minkow would agree to no longer trade the stock and will stop talking about USANA.

Hopefully each party is satisfied with the ruling and they can resume business. Minkow is free to torture and manipulate other companies, and USANA, who is in the midst of a corporate restructuring after a failed attempt to go private, can put another legal battle behind them and move on with creating and distributing its nutritional products.

Popularity: 4% [?]

As we reported earlier, Myron Wentz, founder of USANA Health Sciences, will be stepping down to focus on his role as Chairman of the board and his son Dave, formerly President of the company will now assume to role of CEO.

In some other management changes, Gil Fuller, Executive VP and CEO has decided to retire. Effective September 1st, he will step down from his management position but will continue to be engaged with the company as a strategic advisor. Jeff Yates, who is currently the VP of finance, will serve as the new CFO.

There were some other management changes made including:
- Dr. Fred Cooper, Ph.D., previously executive vice president of operations, is promoted to president and chief operating officer.
- Mark Wilson, previously executive vice president of customer relations, is promoted to executive vice president of North America.
- Kevin Guest, previously executive vice president of marketing, is promoted to chief marketing officer.
- Deborah Woo, previously vice president with responsibility for operations in Japan, South Korea, Hong Kong, and Taiwan, is promoted to executive vice president of Asia.
- Jim Bramble, USANA’s general counsel, takes on the added role of corporate secretary.
- Roy Truett, previously vice president of information technology, is promoted to chief information officer.

“I’m pleased to announce today’s promotions,” said Dr. Myron Wentz, Chairman of the Board of Directors, USANA Health Sciences. “Every one of these individuals is highly qualified to fill their new roles and will continue to help USANA achieve its long-term growth potential

No word yet on why all the sudden changes or if they had anything to do with the mixed numbers released as second quarter results or the failure of the company to take it private. Maybe Wentz has decided to shake things up now and re-group in an effort to perhaps try to take the company private again at a later date.

Popularity: 2% [?]

Shares of USANA have been a bit beaten up over this week after the news that the efforts to take the company private have been scrapped.

USANA has been plague d the last few months with lawsuits and fighting between the company and the minority shareholders over low-ball bid offers. After Monday’s hearing, during which a judge ruled to temporarily halt the bid, USANA had to throw in the towel and admit that they would not be able to acquire enough shares to complete the move to a private company.

Over the last year, USANA’s stock has fallen 34 percent. But the bigger news is the percentage of shares that are floated short. Short Selling is when you reverse the classic buy-low/sell-high order. You first borrow shares of a stock you’re bearish on (through your brokerage) and then sell them, expecting the price to fall. If the price does fall, you buy shares back on the market to replace the ones you borrowed. You’ll have collected more from the initial sale than you spent buying the replacements. Voila — a profit from bearishness!

Think of the many stocks on the market about which people are pessimistic. Many of them will be heavily shorted. If the market starts soaring, taking these stocks with them, what typically happens is that some of those short-investors panic, as their would-be gains are transformed into escalating losses as the stock price rises. They’ll “cover” their positions by buying shares to replace their borrowed-and-sold ones. Doing so will increase demand for those shares and will therefore push prices up even further.

We happen to take a look at what % of Float Shorted is for various companies and USANA happens to have the most at a whopping 68%! Only Beazer homes (NYSE: BZH) was higher at 69% according to Motley Fool. This does not bode well for the company in its continuing struggle to take more control of its shares. Also keep in mind that short selling appears to be the strategy that Minkow has been using to fund his legal efforts.

USANA also announced the date for the release of second quarter results. The results will be released on July 22nd after the close of the market. A conference call will be held the following morning, July 23rd to discuss the announcement with analysts and investors. The call will be held at 11 am eastern time. It should be a very interesting conference call…we will keep you up to date on the details.

Popularity: 2% [?]