TPX: Tempur-Pedic Investor’s Distribution Removes Overhang

By William Trent, CFA of Stock Market Beat

Stock Market Beat Small Cap Watch List and Mid Cap Watch List member Tempur-Pedic (TPX) issued the following news release this morning:

Tempur-Pedic International Inc. (NYSE: TPX), the leading manufacturer, marketer and distributor of premium mattresses and pillows worldwide, confirmed that it was informed last night by TA Associates, Inc. (TA) that investment funds managed by TA (TA Funds) have made distributions to their partners totaling approximately 5.3 million shares of Tempur-Pedic International common stock.Following this distribution, the TA Funds hold approximately 4.5 million shares of the Company’s common stock. The Company further noted that the TA Funds acquired these shares in connection with their original investment in the Company in November 2002.

Investors may wonder what this means. Did TA sell the shares, and might they sell the remaining ones?

What actually happened was TA gave its investors the underlying shares to do with as they please. Some of them may sell them, others may hold them. But the good news is that any selling that will be done will be spread among many different investors with different objectives. The sellers will add liquidity to the market for TPX shares without the undue pressure of TA trying to sell all of its shares at once.

We consider it to be a positive development for Tempur-Pedic investors.

The author may hold a position in the securities discussed. The author’s current holdings are as follows: Long: Union Pacific (UNP) put options; Air Products (APD) put options; Bookham (BKHM; Ballard Power (BLDP); Syntax Brillian (BRLC); CMGI (CMGI); Genentech (DNA); Ion Media Networks (ION); Three Five Systems (TFS); IShares Japan (EWJ); StreetTracks Gold (GLD); Starbucks (SBUX); U.S. Oil Fund (USO); Plantronics (PLT) call options; Short: Landstar (LSTR) put options; Plantronics (PLT) put options;

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