Originally written by Ari Kuchinsky Ari Kuchinsky and posted at TheReformedBroker
What if Tim Tebow was a stock? Most importantly, Tebow would bring pride to the
ticker $TBOW. It has been hijacked by Trunkbow International ($TBOW) (a Chinese
IPO from February 2011 and down 61% YTD). The Chinese stole his ticker and he
should be pissed.
How would it have played out so far? Tebow would have started trading on April 23,
2010—the day after the 2010 NFL Draft. Most draft gurus projected Tebow as a mid-
round draft choice. The valuation of $TBOW would have been more polarizing than
the valuation of Apple. We’ve seen Apple fanboys. Imagine $TBOW disciples flooding
Twitter, Stocktwits and the blogosphere.
We learned it only took one buyer to set the value of $TBOW. The Broncos valued
Tebow at $9.7 million. In a thin market with only 32 franchises, valuation can be volatile.
It doesn’t matter if some franchises thought $TBOW had no value—the highest bidder
sets the price. Similarly, Groupon ($GRPN) showed that if you only sell a few shares, it
is easy to find a few buyers and support the stock at an ungodly valuation.
So while valuation is volatile and imprecise on the first sale, eventually performance
matters. Presumably, after riding the bench behind Kyle Orton in 2010, $TBOW would
have gone down in value. Meanwhile, Merril Hodge was announcing his thesis for
shorting $TBOW. Perhaps Hodge should have learned from Whitney Tilson. Tilson was
right about Netflix being doomed, but he was way too early and then gave up on his short
position at exactly the wrong time. Now Tilson is long $NFLX. Likewise, Hodge is now
backing off his $TBOW short. It sounds like Hodge may even be getting long $TBOW.
I’m thinking $TBOW would have bottomed on the news that he was the third string QB
behind Orton and Brady Quinn. Some might even have said that $TBOW was teetering
on bankruptcy. At this point, the expectations became really low. $TBOW might have
been held in a “left for dead” portfolio with $RIMM. The consensus was that the best
days (his college days) were behind $TBOW.
With super low expectations and Merril Hodge getting short squeezed, $TBOW was up
huge the day that Denver announced the replacement of Orton with Tebow. The $TBOW
shorts cried that $TBOW was being manipulated. Tebow looked terrible on the field
and was being outplayed by not only Orton, but also backup Brady Quinn. The $TBOW
shorts vowed that “the short term gaming of the $TBOW stock would not shake them out
of their short position.”
Through most of Tebow’s first game against Miami, it looked like the shorts would be
right. Hodge had a smirk on his face. Then out of nowhere, Tebow had a miraculous 4th
quarter comeback against the Dolphins. In the next day of trading, the “Miami miracle”
did not move the $TBOW stock much. The market discounted the win as being lucky and
against the lowly Dolphins.
The next week, $TBOW stock took a beating after Detroit beat the Broncos 45-10.
Players from Detroit mocked Tebow. It seemed that Hodge and his band of shorts were
right. Hodge became emboldened after seeing Denver squeak by a poor Miami team and
get pounded by an above average Detroit team. He added to his short position. After such
a poor performance, there was talk that Tebow might be benched again. $TBOW stock
plunged back to its prior low.
Just when it seemed like a sure thing to be short $TBOW, the market laughed. Tebow has
now won 6 games in a row. Hodge has had to cover his short. All of this occurred within
two months.
So where will $TBOW stock go? Hodge now believes “it's as if he's been touched by a
force that says bad things happen to those who go against him. ... The boy has clearly
been touched.” Market sentiment has completely changed. There is now a distinct
possibility that Tebow will make the Pro Bowl. The disciples believe that 7 games is a
track record and that he might be better than Brady and Manning. Most of the haters have
thrown in the towel. Rick Reilly even did a comparison of Tom Brady and Tim Tebow.
$TBOW is a dangerous stock to own right now. Expectations are now very high. Yet, the
combined record of Tebow’s opponents thus far are 47-57. Three of his wins are in OT.
The average margin of victory is just 5+ points. The comebacks have been entertaining
and show a lot about what Tebow is made of. But every week can’t be a comeback
victory. It isn’t sustainable. As an investor in $TBOW, I need to know that Tebow’s
game is sustainable. To win over the long term, he’ll have to start getting it done in the
first quarter and notching some signature victories. Today would be a great start.
Longer term, the more interesting bet may be whether $TBOW will stay around longer
than $RIMM.
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