Sequential Brands Group, Inc.
Thesis
SQBG recently acquired Martha Stewart Living Omnimedia, which has a profitable licensing business that is underfollowed and undervalued. The company has opportunities to expand its licensing deals and international presence, and on a pro forma basis, it could earn $0.80-$1 per share, making it an attractive buy at under $8.
Did it work?
The long thesis rested on SQBG's licensing assets being undervalued, with pro forma earnings power of $0.80-$1/share justifying a price above $8. Instead, the stock fell 44.9% since the pitch, a decisive adverse move indicating the market rejected the undervaluation and earnings-power thesis. While the exact elapsed time is unknown, a decline of this magnitude against a long thesis suggests the thesis dynamics (licensing expansion driving earnings) did not materialize as expected.