As the August edition of AMD went to press, in advance of the unveiling of the 2015 Harleys, speculation was flying around the internet (that well known place where facts go to die) that the 2015 Harley model range will see a return for the Road Glide.
I am also writing this month's column just days before Harley's 2014 second quarter and first half year-to-date fiscals were unveiled. Currently stock market advisories are being kind to the Motor Company, so the expectation is of another modest, sequential step back towards pre-recession unit numbers and earnings.
However, some of the feedback I have had to my May piece ("Harley-Davidson could be vulnerable to the vultures"), also written just before Harley released numbers, their first quarter numbers, has been interesting.
They have varied from the "to all intents and purposes Harley is already owned by speculators," right through to "Harley would never let that happen."
In point of fact it may well be that Harley's race away from the bottom and the measures it embraced to get its earnings and balance sheet back in order suggest that making ready for a takeover, hostile or otherwise, may well have been part of the game-plan.
time really is money for investment capital
For those whose management contracts and investment advice are incentivized to benefit from a scrabble for shares, the short-term hurt for short-term gain school of management is exactly the one that is commonly deployed by corporations preparing themselves for acquisition.
We have already been seeing the sharks of mergers and acquisitions sector feasting on tasty morsels (in the scheme of things), and as the recovery deepens, the next stage of the cycle sees circling for tasty treats morph into the audacious - the kind of eat-all-you-can feeding frenzy that makes rock-stars out of the suits, the kind that makes their tribe purr in admiration, the kind that sets agendas and makes reputations.
As deals go, forcing Harley to the block would indeed be a headline grabber - just look at the mainstream reaction to the news about the 'LiveWire' going live. Sure, it was a slow news week, but nonetheless Harley coming into M&A play would indeed be news, and often that is the limit of the pay-off needed for venture-vultures to justify getting it raised up the flagpole.
Selling metal and delivering dividends aren't the only way for investors to make a buck - ROI only depends on stock price movement, not value. One often hears so-called analysts talking about this or that stock looking like it has "value" - in their context all that means is headroom, headroom in the context of the capital concerned, regardless of the realities of the business concerned.
Stock analysts and venture capitalists analyze "value" in the context of balance sheet math and investor sentiment, not in the context of list price per BHP or handling in the turn on a wet road.
To the vultures it matters not a jot that Harley-Davidson makes motorcycles, all that concerns them is that they can make a defined turn on the cash they use to buy stock within a defined time frame.
Where investment capital is concerned time really is money, and timing is the inexact science that divides the hero from the zero. The competitive pressure on an investment in a motorcycle manufacturer is much more likely to be coming from the projected ROI timeline in alternate investments in pharmaceuticals, aerospace or construction than from the competitive pressures being exerted by a rival motorcycle manufacturer.
On the day I wrote this, Harley’s stock price had been bouncing between $66.03 and $66.75, that's around a one percent variance on a pretty typical, average trading volume - meaning that at the time of writing it was pretty stable. For the prior 52 weeks though it had bounced between a low of $54.83 and a high $74.13 - that's a variance of around 25 percent - is that stable?
In mergers and acquisition terms Harley's market capitalization of $14.55 bn puts right bang in the middle of the M&A cross-hairs at this time - right in the "Goldilocks" zone ... neither tasty morsel nor eat-all-you can.
The high point for Harley's stock in the past twelve months came around the end of April, after its steady climb from an August 2013 low had been interrupted by some first quarter turbulence.
At present their stock price is enduring a three month downslide that, though leaving it closer to its high than its low, nonetheless represents that kind of graph that will have the watchers of such things starting to get twitchy about how close the company is to optimum opportunity.
Regardless of the realities of the balance sheet, the earnings history and potential, even if the time is not yet right, or the company not yet ripe for a bid, even if there isn't a fast buck to be had, Harley could just as easily fall prey to a fast headline for someone wanting to add lustre to their résumé.
