Disclosure: As of yesterday I am long call options on XRTX. I’m debating whether to purchase more.
Here are the stories that piqued my interest:
I have reviewed all the referenced documents, including Baker Street Capital’s letter to the board (which in its own way is a passive stock teaser once people start chatting it up).
The gist: Xyratex was plagued by old-school, unresponsive, under-incentivized management, some of whom also sat on the board and were thus not as accountable as Baker Street, the major shareholder, would have liked. The company was overspending on speculative R&D instead of focusing on its core business, according to BS, flushing shareholder value in a bid to be considered a growth company. BS was successful in tossing the CEO and CFO. Afterwards BS began to discern that, whatever their misgivings about the speculative R&D, it had in fact resulted in products that were cutting edge and in demand. In fact one major customer has already reported in its quarterly a major purchase from Xyratex partner CRAY. XRTX doesn’t report until early October, but the claim is that we know from CRAY’s report that Xyratex may report an upside surprise. Baker Street estimates actual value at $13.80-$19; XRTX currently trades at $11.50ish.
OK enough details from me. If anyone has the inclination to read the articles and references, along with the skill to interpret them critically, I’d like to hear from you. I’m considering purchasing $12.50 and/or $10 calls for October or November but would like to hear some arguments against. Or arguments for, if you think it’s a no-brainer.
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