Ubiquiti Network’s stock price and the Griz deal

Near as I can tell, a lot of the tongue wagging over Robert Pera’s bid for the Grizzlies – and some recent speculation that it might not actually come to fruition – starts with a look at the stock price of Pera’s company, Ubiquiti Networks.

It’s down about 30 percent since the beginning of the year. Pera’s net worth appears to come in large part from the nearly 60 million shares of Ubiquiti he owns (as of Oct. 2011), so I guess the assumption is that the money he’s lost on paper since the beginning of the year means that because Robert is worth less these days, maybe he won’t be able to consummate his $350 million deal for the team.

Thing is, the preceding paragraph includes a lot of faulty assumptions. But I’ve seen them made not just in the New York Daily News piece that attracted a lot of attention last weekend, but in other news accounts – and in private conversations.

I’m not going to go into all the reasons here why those assumptions are flawed. That analysis will be part of our continuing coverage in The Daily News. But here are a few thoughts –

Based on talking to people who know what they’re talking about (read into that what you like, but it means what it says), I have heard Pera’s actual net worth described as such that he could do the deal for the Grizzlies “a few times over” – by himself.

His stake in Ubiquiti, as of the moment I’m writing this, is worth a little less than $800 million. The way it was laid out to me, there’d be more of a genuine cause for concern over someone who’s rich on paper if that wealth is tied largely to an unprofitable company.

Ubiquiti, though, is profitable. Revenue was up 79 percent to $91.7 million in its most recent quarter, with adjusted earnings per share of $0.30. Analysts are expecting something similar for the next quarter – earnings per share of around $0.28.

The company grew headcount from 102 at June 30, 2011, to 131 at March 31 primarily because of increased R&D investment.

There’s a reason we’re seeing lots of worry these days over whether mom and pop investors are going to stay away from the stock market for a while, particularly in light of Facebook’s disastrous IPO:

Quite frequently, stock prices are influenced heavily by factors that don’t have a single thing to do with the fundamentals of a particular company. I’m not saying let’s ignore Ubiquiti’s recent performance – but let’s not let the company’s stock price be the primary driver of a conversation about whether Pera’s Griz bid will happen.

Dansette

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