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: 11% [?]

USANA was in the news again this week, but not for its ongoing battles between owners and shareholders and taking the company private….this time they were receiving several honors and awards for promoting a healthy workplace and supporting their employees in living a happier, healthier life.

Utah Governor John Huntsman presented USANA with a Work/Life award at a luncheon last week as the company was recognized for creating an exceptional workplace and helping address the work and life needs of their employees.

USANA was one of 21 companies honored at the 10th annual awards ceremony.

USANA has been recognized several times for listening to and meeting the needs of their employees. Their wellness program has been ranked as one of the best in the country. USANA has a top notch wellness program that includes a fully equipped in-house gym, full-time personal trainer, extensive annual health fair and free nutritional products for employees.

The nutrition company has also put a focus on the environment by making their corporate headquarter “green” by installing solar panels and rewarding its employees for carpooling and driving hybrid and low emission cars.

USANA was also recognized by the Utah Dept of Health for its smoking cessation program and for supporting and encouraging their employees to quit smoking. The company provides support to its employees as well as giving rewards for success, from gift cards to cash.

The Dept of Health held a contest recently to honor employers and employees for their efforts in quitting smoking. A USANA employee, Brad Pace, submitted an essay touting the health conscious company for its efforts in helping employees, and that essay won the contest. Pace leads the smoking cessation program for USANA’s employees.

Popularity: 5% [?]

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: 9% [?]

USANA’s bid to go private is OVER. Gull Holdings, the group led by Myron Wentz, the founder of USANA announced that they are terminating their offer to purchase the outstanding shares and take the company private.  

After losing a battle Monday that halted the bid from moving ahead, Gull was essentially forced to terminate their plans. In addition to the latest loss in court, the offer has been rejected by a specially appointed committee as well as many of the minority shareholders. It became clear to Gull and Wentz that they would not be able to secure the 90% percent of USANA shares needed to complete the offer.

Wall Street had a negative reaction to the news sending the stock down almost 13% to $24.43 in a much higher than trading day.

Gull and Wentz made the original offer of $26 dollars on May 13 and then raised it to $28 dollars on June 30th after the initial offer was rejected. Unfortunately the latter offer did not satisfy minority shareholders or the USANA board.

We have been following this story extensively and have always felt that while the intentions were good, the process in which Wentz and Gull went about the deal was poorly executed.  Aside from the  original bid being way too low, the ensuing lawsuits and standing by the offer even after the independent counsel rejected it made no sense at all. It also ddidnt help Wentz/Gull that economic conditions have only gotten worse since the original offer. Now, hopefully, Wentz can go back to spending time running the company and building even greater shareholder value.  Somewhere in the background you can almost hear Barry Minkow gearing up for another assault on the company. 

Popularity: 6% [?]