Cue Red Bladder.
And here I am! (Cue a 'woosh' noise!)
Earnings came out on the 14th of March, or thereabouts, and the share price went from $4-and-change to $7-and-change. This was followed by some retail buying and that pushed the price up to $8-and-change, after which there was a good deal of profit-taking, bringing the price down to $7+ and now this week we are at $8+.
The story of mismanagement at Avid has been a textbook example of how to not run a company. I hope you will forgive me for not mentioning names, but I know many of the players here and owners of the company.
Let us just say that the present share price reflects that fact that the current CEO is not a madman, a bully, or a blithering incompetent. He is in fact, normal.
One could be tempted to think that when the founders sold the company, the board placed only the most foolish and buffoon-like people in charge. Without naming names, one went on an M&A buying spree of companies who were going nowhere. He was able to do this because the share price shot up into the stratosphere of the mid-60s as Media Composer and ProTools became the industry standards and the associated hardware was selling well.
These companies were duds and the share price came back down to Planet Earth. Crazy was replaced by slothful stupidity and a CEO who sold off valuable assets at fire-sale prices and fired all the expensive leading engineers and tried to replace them with a motley collection of Ukrainian graduates.
Unsurprisingly, this didn't work!
Stupid was replaced by testosterone-fueled Captain Ego, who went on another buying binge to boost his self-confidence. $100m was wasted on buying two dead-beat companies pushing 90s technology! The money came from pawning the family silver, i.e. handing over all IP to a finance company in exchange for $200m. Avid today owns no patents, designs or copyrights.
In the middle of Regime Stupid, Avid was delisted by the NASDAQ for fiddling the books (not booking all costs in the right periods) and a young and funky investment dude, who happened to also be a keen guitar player and user of ProTools did a bit of background reading on Avid and thought -
"Holey Moley! This company has been abused, mismanaged and drained in the worst possible ways known to mankind and the world of business. And yet it survives! Just imagine what a great company it could be if someone normal were to run it!"
Regime Stupid had made such a mess of the company, that during the delisted period, a big chunk of shares was up for grabs at a rock-bottom price. Funky Dude jumped and became the second largest shareholder. Some people (i.e. me!) thought he had lost his mind! This was a failing company that had never ever been able to show any kind of year-on-year profit. What the hell was he thinking?
Even with the forced exit of mad Captain Ego and many shareholders selling up in total despair, he stuck the course and bit by bit, even added to his holding, making him the largest shareholder!
"I don't get it!" I told him. "The company has neither profits nor equity, but huge debts and crippling conventions on that debt! It must fail!"
A few weeks back, he sent me an 'I-told-you-so' email - stating "I told you so!"
Avid ain't out of the woods yet. The results were OK, but it now has to innovate to catch up with the likes of Black-Magic Design and Adobe. And it still has those debts and they ain't getting smaller!
Time will tell.