Re: The details of my Big Bet against Krispy Kreme
A few responses to todays comments
1) I don't believe in the risk reward ratio of shorting. And even if I did I doubt I could cheaply short KKD, I think the short interest and cost is very high.
2) I don't have any risk management because I don't see any way to cheaply hedge my risk. If KKD actually has enough liquidity to avoid going bankrupt, and it has a real path to profitability, it's still going to be a long time before it's even worth todays price ($700M-ish enterprise value). So the idea of buying some OTM calls doesn't seem very useful.
3) The May options expire three weeks after KKD is forced to file 2005 financials. We are going to find out a great deal, at that point, and it's likely to be bad news. KKD's trading history has no bearing on how it will trade after this news, if I'm right it's not going to "skim" $5, it's going to plunge right past it.
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