In a bid that shocked me, Skechers (SKS) has made an offer to buy Heely’s for $142.8 in cash. Heelys (HLYS) has long been a magic formula stock as the stock continues to plunge after its $30 IPO. Heelys has been the classical “fad” stock with one of a kind product line. It has tried to expand its brand into other areas but has failed as it is known as the shoe with a wheel. I would highly suggest for Heely’s to changes its name or launch products under new brand as “Heelys” is synonymous with kids flying by at 50 MPH on that darn shoe with a wheel.
Its earnings might be on decline mode, but Heelys balance sheet is clean and has $3.70 in cash. The stock closed at $4.87 but is trading higher after hours. Essentially, Skechers will be getting Heely’s earnings for almost nothing due to Heelys cash on hand. Whether this is wize use of shareholder money is yet to be determined as I do not know what management plans to do with the Heelys brand. Heely’s has long been considered a value trap as it continues to produce declining earnings.
{ 1 comment… read it below or add one }
Very true. Although SKS has made the offer, I wont be kicking myself for missing out on this one.