Pay Attention to Oplink

The next three days will be very interesting for Oplink shareholders.

Oplink is a small company that manufactures optical networking components. The company has been a favorite of the KU APM portfolio for a while, due in large part to the company's large cash position, and the large stake in the company held by class founder Kent McCarthy.

McCarthy and the KU APM class (among other shareholders) have been pushing for Oplink to use their cash to buy back shares. Oplink holds more cash than they could possibly need for operations, and a share repurchase would both boost the share price as EPS increases, and prevent Oplink from making a bad acquisition with the cash.

Today Oplink announced that they are instead going to do a 1 for 7 reverse stock split. The reverse split will take effect tomorrow, that is a fast timeline.

It is also interesting because the next day (Nov. 10th) each board member receives 26,000 options. A quick reverse split the day before an options grant, interesting.

I have never bought Oplink shares, even when the stock was trading barely above cash. I have never had a good feeling about Oplink management, they have always seemed a little too self interested, and a little too antagonistic towards shareholder concerns. More importantly, I have never really felt like the company has a clear plan for the future, or a clear competitive advantage.

It this will definitely be an interesting week for Oplink shareholders, and I think that at the end of the week we will be able to tell if management is running the company for shareholders, or for themselves.

Timothy Burger
timothyb(at)timothyburger.com