HEAR update - so far, quite good
My personal and the subsequently rumored buyout speculation has yet to come to fruition, but shares have rallied anyway; thus, taking a bit off but staying the course with the core position.
It’s been a good month for Turtle Beach ($HEAR). Since I first wrote about it on April 25, shares are up about 20%. Since I pounded the table on May 18th, shares are up about 35%. Over the last few days I made some trades so I figured it was time for an update (despite this never being anything close to something that should be interpreted as advice). Always gotta highlight the ones that work out, right?
To briefly summarize as I don’t get anything out of you clicking on my old posts, in the first one, I noted that I liked HEAR at $30 on a fundamental basis and speculated that if it didn’t naturally drift higher, it could become a buyout target. In the update, which was after news broke that HEAR was indeed rumored to be gauging interest from acquirers and HEAR shares somehow *sold off* on the news, shares fell as low as $26, and I added to my positions. Shares closed on Friday, June 11 at $37.
So, thanks to this run-up, I was able to take some shorter-term/speculative money off of the table.
On May 14, I bought 20 June 18th 35/40 call spreads for $.20 each or $400 total.
This week, I sold off 13 of them for total proceeds of about $2,000, and am still left holding 7. With 1 week left on the clock and a pretty 45 degree angle rise over the past couple weeks, I figured it was time to ring the register.
One other aspect to note here is that, should a buyout indeed be in the works, the buyer won’t be bidding against the current share price. I had always penciled in ~$40-45 as my potential (and probably somewhat conservative) buyout target (as detailed in my earlier posts if you care to go back and read the details). But to the extent the buyer was going to pay a ~30-40% premium over the stock price at that time, that does not translate into a 30-40% premium over the stock price at the time it is announced - and to that point, deal press releases often reference “xx premium over last 30/90 days average price” to hammer that point home.
So while I have sold some shorter-term speculative positions at a tidy profit, I continue to hold my core position of shares (which I sold some calls against) along with some July call spreads. $40 still looks like a good target, deal or no deal (and it seems like some of the recent run-up has been the chart boyz liking what they see with a breakout and strong price action begets further strong price action), so if we get to that point, I will likely consider selling off part of the core position. (I’m not a big “always adhere to the price target you envisioned upon entry” kinda guy, but in this case, I bought it via a fundamentally-undervalued lens so I’ll sell some at a fundamentally-fair-valued point.)
In closing, I am happy that some of my Twitter boys have been in this trade with me, but I would not put on any new position at this time based on any fundamental basis (if you momo boys want to chase, have at it). A 30-40% move in a month (from the low of $26 post deal rumor to the close on Friday at $37) means that the easy money is likely off of the table.
And in a rare full disclosure, my full position as of 6/11/21 is below. Note that the marks (the right-most column) may be inaccurate on the LEAPs as they do not mark-to-mark at the close in Ally except for the latest trade.
I shall further update if we get a deal or if the situation changes.
Thanks as always for reading. I will hopefully have a next idea for y’all soon.
-Elmo