Imation posts loss, adopts rights plan
One day after posting yet another quarterly loss, the board of Imation Corp. took the unusual step of adopting a "shareholder rights plan" Tuesday to preserve the carrying forward of significant operating losses that might be lost should another change of ownership occur.
The plan, on which shareholders will vote next year, hopes to protect the company against losing favorable tax benefits should Imation be the target of another activist investor, such as the one that recently shook up its board.
In May, shareholders led by a newcomer, the Clinton Group, ousted three board members, including Imation CEO Mark Lucas. Last month, Lucas said he will step down as CEO, effective September. The company reported Monday losing $16 million during the second quarter. Second-quarter revenue sank 15.7 percent to $150 million during the quarter.
"Imation experienced another disappointing quarter," said Lake Street Capital Markets analyst Eric Martinuzzi. "We are lowering our price target as we saw no action taken to reduce the cost structure relative to the revenue contraction. The company noted it is planning cost reductions, but offered no details."
Martinuzzi lamented Imation's "substantial losses" for the quarter and observed that the firm's net cash balance fell 27 percent.
Tuesday, Imation CFO Scott Robinson said in a statement that Imation's ability to carry forward its "significant" operating losses under IRS rules "would be substantially limited" if an ownership change put more than 5 percent of the stock in the hands of one person or group. The plan adopted by the board would dilute the economic interest and voting power of any person or group that acquired 4.9 percent or more of outstanding shares over three years without board approval.
Dee DePass
Right on the money
Doug Ramsey, chief investment officer of Leuthold Weeden, predicted a couple of weeks ago that the stock market was in near-term trouble thanks to expectations for rising interest rates combined with record high valuations achieved earlier this year, China's stock-market swoon and soft S&P 500 earnings in the second quarter.
"August is National Eye Exam Month, but this is the rare year we can confidently recommend that you skip it," Ramsey wrote in his firm's August publication. "Warnings of stock market trouble have become clearer to see without thick lenses or squinting. We can, just barely, make out the big 'E' at the top of the eye chart, and suspect it means 'Exit.'
Neal St. Anthony
