Cypress Semiconductor
(NDAQ:CY) shares rose over three percent yesterday after Daniel Loeb's
Third Point disclosed a 5.1 percent stake and demanded that the company
address its undervaluation sooner. The activist investor insisted that
the value of the company's semiconductor business has eroded an
additional 15 percent and suggested that the company explore immediate
options to unlock value.
Daniel Loeb believes that the company's
shares are undervalued by as much as 50 percent, based on key metrics
such as price-to-sales, price-to-earnings and free-cash-flow-yield as
compared to its relevant semiconductor peers. Consequently, if the
company were to take action to unlock this value, shares could rise as
much as 25 percent in the near term.
Meanwhile, Cypress has
already agreed to sell off its stake in Sunpower (NDAQ:SPWR) but set a
timetable of no later than 2009. Daniel Loeb insists that there are
tax-efficient ways of expediting this process to realize the value of
this stake before 2009 and the company should immediately explore them.
Since Sunpower makes up approximately 80 percent of the value of
Cypress' stock, it is extremely important for them to find a way to
effectively diversify their stake.
In the end, Cypress continues
to be a great company dragged down by a chronic undervaluation.
Shareholders are hoping that Daniel Loeb can successfully convince the
company to sell its stake in Sunpower and unlock value for
shareholders. This makes CY a stock
worth watching!
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