“Analyst Buy Ratings” Why You Shouldn’t Trust Them

424b4 April.10th. Oppenheimer commits to buying 26 400 000 shares and warrants from Outlook.

The price per share in the offering was $2.75. Before this recent uptick on May.15, the price was under $1.00.

You can see here that the deal closed with Outlook receiving $26.2 million from the underwriters on April.12

Are we really to trust Oppenheimer? They were down more then 50% at the time of that buy rating. If it moved from $1.00 to $12.00, that would be a 1200% increase! Charlie Munger is famous for saying, “show me the incentive, and I’ll show you the outcome”, and with the warrants exercisable at $2.90, this could make a good short term trade, but $12.00? Absolutely not. Think about it though. Lets say the price did in fact go to $12.00, Oppenheimer would theoretically be making $160 160 000! They would obviously exercise the warrants well before then because their job is to underwrite the offering, not invest, but it still puts into perspective how ridiculous this buy rating is. How many more offerings will they do between the run up to $12? Just look at their most recent quarterly report. They only had $100 000 in cash!!??!

Ludicrous. Again, always be weary of “analyst buy ratings”, especially if they come from the exact same firm that underwrote the company’s secondary offering. Until the next time. See you all later

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