What You’ll Learn

  • Iconix (ICON) has fallen close to 80% YTD and is not worth $7
  • A look at the valuation of ICON using 4 different angles
  • What a good entry price for ICON is

    • A picture is worth a thousand words.

    So much has happened that a quick recap of Iconix’s woes reveals how much trouble it’s fallen into.

  • Absurd CEO compensation history
  • SEC investigating accounting issues at the beginning of the year
  • CEO/chairman quits
  • COO quits
  • CFO quits
  • Shifting in timing of revenue for the The Peanuts movie launch
  • Decline of men’s brands
  • Multiple lowering of earnings guidance.. by a lot..
  • 3 years of financials have to be restated

    • The recent 52% drop and the effect it has had on the stock is staggering. Here’s a good article going over the possible accounting shenanigans, its effects and an updated valuation.

    But I want to look at what the market is factoring in and try to kill the investment further to see whether it makes sense as an investment.

    If the current price of $7 over corrected the realistic penalties and cash that Iconix has to dish out to fix itself, it’s a great opportunity.

    If however, the accounting is so bad that everything has been materially overstated, and the brands continue to decline, it’s overpriced at $7.

    At this time, it’s not important what Iconix is exactly worth. What’s important is to be confident in whether Iconix is cheap or not.

    I’m not interested in whether ICON is worth $11.34 or $15.64.

    I’d be happy with both.

    My decision process is to figure out whether $11 is more realistic than $5.

     

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