Prison for Martha - Stock Up 40%

After the news about an hour ago that Martha Stewart has been sentenced to a 5 month prison sentence, a 5 month house arrest and a $30,000 fine, shares of stock in her company, OmniMedia, had risen 40% as of 10:54 EDT.

In speaking to a crowd of onlookers after receiving the sentence, the minimum mandated by law, Martha Stewart thanked her supporters and apologized to her employees before pitching her magazine and products, telling the audience that she didn't mean to turn her comments into a sales pitch. "I am very, very sorry that it has come to this, that a small personal matter has been blown out of proportion..." Stewart said.

While advertisers have pulled out of Martha Stewart Living Magazine, readers appear to be unphased by Martha's legal troubles. K-Mart recently signed an agreement with her company to extend their partnership through 2009 and its stock is up 200% YTD. It's clear that Martha Stewart's ultimate customers have not abandoned their loyalty to her ideas, content and products.

Martha Stewart is expected to appeal the case based on several issues, including perjury by a key government witness and failure to address the gender-based motives for this arrest. Count Nine and an erroneous perception that Stewart was accused of stock manipulation by insider trading are also expected to play a role, as will new precedents set since Stewart's original conviction.

Ironically, had Martha not tried to work with government officials, the outcome might have been different. Thinking about the success of her company in providing jobs and enhancing the lifestyles of her customers, it's not surprising that those who read her magazine and watch her shows will stand by her.

Ultimately, the advertisers will need to return if the customers don't leave, or risk alienating them by their absence. Abandoning Martha when the chips are down if the consumers don't will hurt rather than help those advertisers who do pull out. It's clear that those who remain loyal to Martha agree that this case has been blown way out of proportion, and, if nothing else, doesn't affect Martha's expertise and talent at showing them how to create an elegant lifestyle.

This case has been blown out of proportion on so many levels, it's not surprising that fans remain loyal.
 
Another thing that has also puzzled me in this situation has been the whole series of events surrounding the ImClone product approval process that started this whole mess.  After shares plunged on the failure to win approval, the approval came at a later date and, of course they rebounded.   I wonder where that money trail would lead. Probably to someone who made much more than $30,000 on the deal. . .