Martha Stewart (MSO) Stock | A Buyout or “Sellout”?

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Martha Stewart Living Omnimedia Inc. (NYSE: MSO)

Today, June 22, 2015 Martha Stewart Living Omnimedia received a buyout offer of 353 million dollars or $6.15 per share from Sequential Brands Group Inc (SQBG), which currently represents and owns rights to such names as Jessica Simpson’s line of merchandise, Linens n Things and The Franklin Mint to name a few. Martha Stewart’s shares, which while much higher than last week’s close on the 17th of June when it closed at $5.10 was well below Friday’s close of $6.98. Shares of the company’s stock began to rise very rapidly on Thursday June 18, when rumors began circulating about a possible buyout and I simultaneously witnessed increased unusual options activity in the call options. Savvy stock market traders and hedge funds will often utilize options instead of or in combination with buying shares of a stock when they feel a sudden rise is imminent because options give a much higher percentage gain for their money; the goal all hedge fund traders and individual investors seek.

MSO Painful Profit or Loss

Either way you look at it, in this recent buyout of a publicly traded company one can view it as a money maker or money loser. You see, if you own shares from last Wednesday at the price range of $5 to $5.20 you are quite pleased at your percentage “guaranteed” gains but if you are some of the people that speculated that a monster buyout was going to happen for Martha Stewart stock and bought and held from Friday’s ($6.98) close then you were probably appalled to wake up Monday morning and see the buyout price significantly lower than where you own your shares. In mergers and acquisitions parlance it is called a “buy-under,” where shares of a stock are purchased in a buyout lower than where they close on the previous day.
 

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Martha Stewart Living Omnimedia

I must admit when Martha Stewart hit the scene in the nineties and she was all the rage, I found myself caught up in her image, her knowledge and her professionalism, not to mention  her cooking expertise. I at times compared her with Julia Child , however Julia Child only specialized in the kitchen and with mainly French Cuisine. Martha Stewart took the world by storm, educating the public via her television cooking shows, her branded everyday kitchen utensils, bedding and furniture products, internet sales and other licensing businesses. She was and is a true Entrepreneur.

A Value In Decline

Martha Stewart went public in 1999 for $1.8 billion dollars, and today the company was sold for 353 million dollars; a stark decline in company value. Back when Martha was the only name dominating tv, magazines, and talk shows it apparently demanded such valuations. Now however, Martha Stewart faces many competitors  pulling and draining from  her once strongholds.

Technical Analysis

Here is a weekly chart of MSO from 2013-present showing a very nice 45 degree uptrend channel-indicating things were going well for investors who bought near$2.25-$3.50.

MSO

Company Profile

Martha Stewart Living Omnimedia, Inc., incorporated on May 7, 1996, is a global lifestyle company. The Company operates in three segments: Publishing, Merchandising and Broadcasting. The Publishing segment primarily consists of the Company’s operations related to its magazines and books, as well as its digital operations, which includes the Website, marthastewart.com. The Merchandising segment primarily consists of the Company’s operations related to the design and branding of merchandise and related collateral and packaging materials that are distributed by its retail and manufacturing partners. The Merchandising segment also includes the licensing of talent services for television programming. The Broadcasting segment consists of the Company’s limited television operations and its satellite radio operations. Reuters

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