According to Breakout: Tuesday morning embattled electronics retailer Best Buy (BBY) reported second quarter earnings well short of expectations. Income from continuing operations was $124 million or 20 cents a share — 11 cents light of estimates and nearly 50% lower than the same period last year. The news sent BBY shares below $17, which is well below the $24 - $26 per share buyout price offered by Best Buy founder Richard Schulze earlier this month.
According to Lee Munson, author of "Rigged Money" and founder of Portfolio LLC, Best Buy's value is more sentimental than financial. Munson says Best Buy is another tale of physical stores giving way to the new world, and he asks, "Is there anything there for investors? I would say no."
Of course, investing and trading are different animals. Schulze's bid for Best Buy would require billions in debt financing, or junk bonds. The only thing that makes a deal remotely possible is that the offer comes at a time when it has never been cheaper to issue billions in dicey paper. As Munson puts it, "There's so much demand for yield, and there's absolutely no regard for the quality of it." Schulze advisers at Credit Suisse (CS) reportedly say they wouldn't have any problem raising enough to fund the bid. There's no reason to doubt them….