Sell MSG … As Jeremy Lin Goes, So Does the Lin Premium
July 18, 2012 Leave a comment
“Character is Destiny”
Back in February of this year, LongShortTrader (and many others) were as intrigued by MSG’s stock performance, as we were by Jeremy Lin’s basketball skills. It made sense, as Lin helped boost viewership, ticket prices, etc. The City of New York had not experienced such bona fide basketball excitement in many years.
Too bad those days are now over. It is now time for the stock to come back down to earth.
LST was inspired by @Rabmanduky as he said the following:
Shorting more $msg into Lin news, stock is up from low 20′s to 35′s b/c of Lin. Analysts are saying Lin had no impact if he leaves, except the same analysts didn’t downgrade when it rose from 20′s to 35, b/c of Lin mania. They pointed to the 25% increase in nba viewership which was due to Lin mania, maybe its analysts sucking up to the Dolans for future business, but I don’t know why they are crazy. People bought $MSG on Jeremy Lin, you had analysts even supporting that thesis. It was a classic pump, and then those same $msg analysts now say it doesn’t matter, when people bought on Jeremy Lin. Articles supporting people buying $msg based on Lin in February http://www.cnbc.com/id/46466474/Linsanity_Knows_No_Bounds_Analysts_Comments_Push_MSG_To_Record the same people now saying it doesn’t matter http://www.bloomberg.com/news/2012-05-04/madison-square-garden-shares-climb-after-profit-tops-estimates.html .
As simplistic as it may sound, the tactical short thesis boils down to:
(1) MSG is trading on 20x 2014 earnings, still closer to highs (claims rabmanduky). Plenty of room for the Lin premium to disappear.
(2) Lin’s departure triggers a reflexive (in the Soros sense) reversal in the feedback mechanism that led the way higher.
(3) How can you trust Dolan/management? Investing is just as much about betting on character/judgment of management. If you can’t trust them to keep the best thing that’s happened to them since who knows when… can you trust them with other decisions? Is Cable safe?
Disclosure: Assume LST is and/or will be short MSG tactically.
