Heads In The Sand As Cyrk Sinks

Remember Cyrk International (CYRK)? On Nov. 28, this column reported that some big-money pros were heavily shorting the stock. Cyrk shares were then trading at 40, and the shorts were convinced the stock would collapse to 10 in a year. Boy, were they right. By May 2, the stock had already plummeted to 111/4.

Is the big decline finished? Hardly. The short-sellers, including Carl Icahn, who is said to have made $10 million on his position, are betting that the stock will fall to less than 5. They believe Cyrk, which designs and makes products such as baseball caps and T-shirts for use in promotional campaigns, will be in the red by the second half of the year.

Did the analysts ignore what had become obvious to the shorts? One analyst who kept on projecting bullish results for Cyrk was John Weiss of Montgomery Securities, which was the sole underwriter of Cyrk. (On Dec. 1, Montgomery Securities issued a secondary offering, of 2.5 million shares, to the public at 36.) As late as May 2, the day the stock dropped 18% in one session, Weiss sent out a fast report--with a "buy" recommendation on Cyrk. He conceded that first-quarter earnings of 5 cents a share "were below our 15 cents-to-20 cents estimate." One reason: Orders from its one major client, Philip Morris, were significantly below his rosy expectations.

Even so, Weiss doesn't see Cyrk losing money. He says Cyrk expects a purchase order from a large company in May. But he has slashed his second-quarter earnings estimate from a lofty 50 cents to 3 cents a share. And for all of 1995, he pared his estimate of $3.15 to 60 cents. Icahn and the shorts are unimpressed. They think he'll be dead wrong again.