Facebook’s Sudden Realization That Stockmarkets are the Ultimate Social Media $FB $GOOG $SOCL


facebook (Photo credit: sitmonkeysupreme)

Facebook (Nasdaq:FB) may be coming to a sudden realization that the stock market is the ultimate social media form. It has long been said that markets are conversations. Buy and sell decisions are honesty personified with a collateral validation of cold hard cash.

Instead of gathering information on users Facebook is the raw meat of investor opinion. It’s not how many likes you score. It’s all about there being more buy than sell.

Not sure if Team Facebook understands the point.

George Gutowski writes from a caveat emptor perspective.

Facebook’s Board Do They Have What Facebook Needs? $FB $MSFT $MS $WPO $WMT

Image representing Facebook as depicted in Cru...

Image via CrunchBase

Facebook (Nasdaq:FB) has disappointed. Nothing like a $10 @ share drop in value. $38 to under $29 is atrocious. That’s something like 24% in a blink of the eye. Now everyone is soured. So what should the board do? Not Zuckerberg who probably still cannot find his way to Barney’s. But the board. They have ultimate responsibility.

Lets take a look at the make up.

Reed Hastings also sits on Microsoft’s board (Nasdaq:MSFT) Not that long ago the connection provided credibility. But today Facebook needs to stand on its own two feet so some sort of de facto imprimatur has no further value. Any close connection between Facebook and Microsoft will be scrutinized closely by regulators and competitors with big legal budgets. Also Facebook reputedly has gone to Scandinavia to find a new browser. You can use Bing to search for more information.

Erskine B. Bowles started his career at Morgan Stanley (NYSE:MS) and after a career in financial wheeling and dealing and politics he now sits on Morgan Stanley’s board. Does he recuse himself from portions of board meetings that deal with Facebook issues. I’ll bet Facebook might be on at least an informal never happened agenda discussion. you know drinks after work at the Four Seasons. it’s not far away. Continued value as a director to Facebook; up for discussion.

Donald Graham CEO of Washington Post (NYSE:WPO) which counts Warren Buffett of Berkshire Hathaway fame (NYSE:BRK.A) is there why? Old media advice for the most anticipated high tech IPO is a major non sequitur. He does not sit on any other boards. Big media barons always raise eyebrows when they play outside of their sandbox.

James W. Breyer who hails from the venture capital community is also the lead/presiding independent director for Wal-Mart (NYSE:WMT) which has a snoot full of governance problems in Mexico. While there is no evidence that he has any personal involvement how is this going to help Facebook shareholders.

The remaining directors are venture capitalists who are watching their nest egg very carefully. Not sure if they want or could sell at well under the IPO price as it would only validate generalized market concerns that something was radically wrong with the IPO.

So basically Facebook needs to revamp their Board. Given the low market price of the stock the stock option portion of directors compensation should be very attractive. So attractive that it may become embarrassing and therefore not possible.

So your investment is still in the hands of a twenty something geek who just got married and has little experience in generating sustainable profits and cash flow.Good luck with that.

George Gutowski writes from a caveat emptor perspective.

Chesapeake Annual Meeting Becomes a Shoot Out in Not OK Corral $CHK

Chesapeake Energy

Chesapeake Energy (Photo credit: Wikipedia)

Chesapeake (NYSE:CHK) will attempt to hold something called an annual meeting on June 8, 2012. Normally annual meetings are very close to Kabuki theater. Chesapeake would love to experience a Kabuki theater moment. Kabuki theater is highly predictable and without surprises, or so I’m told. Carl Icahn has walked onto the stage with an activist agenda wanting to replace four directors. CHK is responded they want to find a chairman first. Not sure who would want the job to be very frank about it. Snakes everywhere and declining energy prices.

The entire situation has been dysfunctional so expect the dysfunctional.  Here are a few possible problems that may arise.

  1. Board may adjourn claiming extraordinary situation.
  2. Activists may seek to postpone the meeting until only God knows when.
  3. Enough directors resign seeking to flee continued personal responsibility.
  4. Courts may rule annual meeting should be adjourned.
  5. Annual meeting may actually be held and no one will be happy with outcomes.

In any event Friday June 8, 2012. Bring your heavy artillery.

George Gutowski writes from a caveat emptor perspective.

Post Holdings Serves UP Soggy Cereal No Snap Crackle or Pop $POST $KFT $RAL

Post Holdings (NYSE:POST) released Q1 results and you have to start shaking your head. Just recently spun off from Ralston Purina (Xetra:RAL) after it was purchased from Kraft (NYSE:KFT). Revenues are off in part because of competition. What, because of competition. That’s what they said “Management believes the category volume decline is largely attributable to higher every day and promoted average prices and increased competition from cereal substitutes such as quick service restaurants and other breakfast items. Hey buddy that’s not a good explain of the situation. What are you doing about it.

Source: PR Newswire (http://s.tt/1cHLD)

George Gutowski writes from a caveat emptor perspective.

Facebook Buyers Remorse Is Morgan Stanley Guilty of Something? $FB $MS

Image representing Facebook as depicted in Cru...

Image via CrunchBase

Facebook (Nasdaq:FB) finally went public and did not double or triple over night. Boo hoo boo hoo. Lots of investors if you can call them that want to blame Morgan Stanley (NYSE:MS). This white shoe firm is surely at fault because investors could not double their money over night. And that as we know is Morgan Stanley’s grievous error. Please note that some 33 other firms that were part of the underwriting syndicate are keeping a low profile and desperately trying to keep their names out of the financial pages. OK so the most anticipated IPO in recent financial memory seems to be crapping out. What to look for who to blame?

Morgan Stanley and 33 other large Wall Street investment banks were hired to bring the company public. Their contractual obligation is to Facebook. Their fees will be paid by Facebook. Certain expenses will be paid by Facebook. So we can assume their primary fiduciary responsibility is to Facebook. Search the underwriting documents and I seriously doubt if there is a responsibility to ensure investors double their money over night. In fact there was a lot of boilerplate about risk which many investors even at large sophisticated investment funds probably do not read or contemplate.

Morgan Stanley’s own internet analyst  Scott Devitt came out in the last-minute and warned about lower revenues than first anticipated. A nice touch for any lawyer defending Morgan Stanley. This move probably saved Morgan Stanley from a lot of lawsuits. I couldn’t help but check out Morgan Stanley’s recent price history. It has done well. Facebook has been very good to Morgan Stanley.

What is the duty of senior Facebook executives? Maximize the valuation. They seem to be successful. I have always been disturbed by underwriting which soar in price once shares start trading. why could not the CFO get the best possible deal for the company he works for.  Why could the CFO not maximize the amount of valuable cash being raised. Tech giants need enormous amounts of cash. soaring share values in the secondary market do not fill the corporate treasury.

The Morgan Stanley performed admirably in this case. They wrenched the last nickel out of the market. This by the way maximizes their own fees and would therefore give investors an insight into probable behaviours. They were able to increase both the initial offer price as well as the total amount of shares being offered. In the underwriting world this is like dying and going to heaven. This only happens when investors with cash in hand are scream buy buy buy.

Internet valuations have always defied conventional old school investment logic. Facebook was clever, they hired a very prestigious name to stand behind them. They then assembled an equally prestigious posse. Then they let the investors do it to themselves. This may be a tipping point for the market. The internet mania still continues to attract short-term speculative thinking and trading. Now Facebook and others to come may be priced at more realistic levels. Allowing saner money the opportunity to just dip their beaks once in a while.

George Gutowski writes from a caveat emptor perspective.

$JPM Chairmanship Issues. Why Jamie Dimon Cannot Be Replaced Just Yet $XLF $HON $JNJ $YUM

Jamie Dimon - Caricature

Jamie Dimon – Caricature (Photo credit: DonkeyHotey)

JP Morgan (NYSE:JPM) lost a lot of money almost by accident. Jamie Dimon who holds both the position of Chairman and CEO has become the subject of much criticism. A lot of other executives would be understandably sucking their thumbs by now. Corporate governance activists point to his holding both the Chairmanship and CEO posts claiming it’s a prescription for problems. Right now that line of reasoning looks and sounds very good. Perhaps impeccable.

If you strip Jamie Dimon of one of the posts in the context of the $2 billion trading debacle you would acknowledge his responsibility in the affair. If he is culpable than he should not be employed in any fashion. Splitting the two positions for now would not really do it.

Take a look at he Board. They ultimately have final authority and responsibility. While you have many very accomplished people on the board none of them have any substantive experience in running a financial institution or even a part of one. No one has any experience in trading financial instruments or derivatives. I suspect no one has a substantial math back ground that could ground your ability to understand derivative trading strategies. You have a Lee Raymond who was the former Chairman and CEO of Exxonmobile (NYSE:XOM) who may know a thing or two about trading of oil and gas but its not close enough.

So the board’s experience level is low on banking and high on reliance on Jamie Dimon. Not necessarily a good thing because if Jamie Dimon gets it wrong you can lose a lot of money which is exactly what went wrong.

Looking at the board you have a lot of members who were both Chairman and CEO back in their day. So from a governance point of view they probably do not see it as a problem. We just mentioned Lee Raymond in that category. We can add David Novak of Yum Brands (NYSE:YUM),  William Weldon of Johnson and Johnson fame (NYSE:JNJ) ,  and David Cote of Honeywell (NYSE:HON)  all of whom were both Chairman and CEO/President.

The corporate governance conundrum was predictable.

George Gutowski writes from a caveat emptor perspective.

Google Wets Its Pants In China. Chinese Puzzle – Act Global or Look Backward $GOOG $MMI

Drawing of an early Chinese soldier lighting a...

Drawing of an early Chinese soldier lighting a rocket (Photo credit: Wikipedia)

Google (Nasdaq:GOOG) is trying to buy Motorola Mobility Holdings (NYSE:MMI) primarily to scoop up a huge treasure trove of patents and intellectual property. Anti-trust regulators around the world have in turn signed off on the deal. Except for the Chinese. China the worlds second largest economy seems to be officially sitting on its hands. They are holding up the deal. Google’s track record in China is poor. Let me rephrase that. Google’s track record of governmental affairs in China is poor. The whole world knows it.

The past cannot be undone. When the decision to buy Motorola Mobility was made Google’s board probably did not say “What about China”. Today its “What about China” Its not an accident that China waited until the end. This may be Google’s moment to fix things in China and develop access to the huge market. Certainly there are back room conversations. Chinese sensibility needs to save face and appear to extract something from Google. China also should understand that if they block the deal they will appear to be backward and not modern thereby losing more and bigger face.

Google will be taken out back to the Chinese wood shed and dealt with. Google is still immature globally and is probably wetting its pants in anticipation. If you are truly in the business of maximizing shareholder wealth my advice to Sergey Brin and Larry Page is cut a deal. Get into the China game. The market is too large to be ignored. You cannot have geo-political gaps in your global coverage. Hire Henry Kissinger if you need to. As a matter of fact why haven’t you done so already.

China needs something also. If they block the deal when the rest of the world has given it the imprimatur stamp they look foolishly backward. They run the danger of incurring an international backlash for a parochial approach. Not a preferred option for the Chinese. So Google make the grand gesture. The Chinese market is too large to ignore. You need to drive EPS. Your competitors have access and can use China as leverage against you. Time is money. If you make the Chinese blink first to save face you just build up a huge tab.

George Gutowski writes from a caveat emptor perspective.

Groupon Major Global Technology Integration Initiative Has Started. Why Do They Need This Already? Silence on Costs! $GRPN

Logo of Groupon

Logo of Groupon (Photo credit: Wikipedia)

Groupon Inc.  (Nasdaq:GRPN) announced some better results and encouraged the market to keep believing. Investor relations is subtly promoting the classic buy and hold lets us do the work approach to investing. OK so a new tech company out of the chute should be showing improvement that’s what investors have bought into, a rapidly improving story. Emphasis on “rapidly”.

In reading the conference call transcript  I was struck by a comment made by Andrew Mason CEO on the second page. He announced  Groupon had kicked off their first major global technology integration initiative. According the Andrew Mason there will be some foundational rebuilding in the short-term, but he believes that over the long-term, this project will allow Groupon to move much faster  and more easily apply technology.

Err excuse me. What does this all mean? Just what is a global technology integration initiative. You are a brand new tech company with a lot of answers supposedly. Everyone anticipated a global approach. Given that you are so brand new what has happened that you need a global integration initiative. What did or did not happen to your platforms.  Class action lawyers need to review the underwriting documents. Was this requirement identified.

At this point no mention of costs but Groupon does have the ability to say “As previously disclosed”. This gives them some wiggle room in the Reg FD challenged space. Not one analyst picked up on the point in the conference call. So we have no explanation as to the true scope and nature. Groupon can rightfully say we mentioned it in the conference call but no one wanted to talk about it.

Well Groupon in the interest of clarity and visibility why don’t you add more colour on that point. if it is important enough to mention from the CEO’s lips than it must have big costs and big impact. How can investors feel well-informed without understanding the scope, scale and costs.

George Gutowski writes from a caveat emptor perspective.

JPM Morgan Humpty Dumpty Moment $JPM $XLF

CEO of JP Morgan

CEO of JP Morgan (Photo credit: Wikipedia)

So by now even taxi drivers have heard. JPM Morgan (NYSE:JPM) lost $2 Billion in the last oh what was it about six weeks. Lots of speculation about the issue. This one will not go away soon. The political ramifications are about to resonate. Jamie Dimon is a disgruntled democrat who does not appreciate President Obama’s demonization of Wall Street. At one point there may have been thoughts of Dimon becoming a second administration Treasury Secretary. Even after some verbal pugilistics with central bank governors he may have been a consideration. But now that he has presided over an embarrassing trading loss well lets just say Treasury Secretaries need to be winners not losers on Wall Street. At the same time he was starting to flirt with Republicans. Republicans will not want to embrace a Wall Streeter with controversial losses. Romney just lost Dimon’s cell phone number.

Six weeks eh! Six weeks and nothing was said. Counter-parties knew. The trading fraternity had a pretty good inkling and that’s how the rumours started. But for the average guy in the street investor and even for normally well-informed institutions there was no inkling. This is Reg FD challenged. When does $2 Billion become material enough to disclose. Speaking of which at what point in the last six weeks did you realize you had a problem? Could you not have curtailed it at some point less than $2 Billion. The Board of Directors will need to commence their own independent inquiries. There does not seem to be a lead independent director and maybe this will be a governance epiphany. Who knew what and when as they say?

Regulators are already planning informally as it were. In the UK the FSA has already had conversations. In the USA the Fed and Treasury will want some answers. Get ready for some major explaining. This being a presidential election year partisanship is not far away. Congressional investigation(s) will be held on this extremely important topic. Jamie Dimon may become a political football. Can he keep his job? Will he want to keep his job?

In any event the risks that Jamie Dimon craved and relished have come back as negative events. Jamie Dimon says they did not execute very well. Did someone forget to do something. Did the quarterback throw a bad ball? Like there are still more questions than answers. And now the speculation starts that the losses can be much higher.

So can all the kings horses and all the kings men put humpty dumpty together again. I think not.

George Gutowski writes from a caveat emptor perspective.


Berkshire Hathaway Dividend Flirtation. Warren Buffets Last Genius Move For Investors $BRK

Logo of the Bill & Melinda Gates Foundation. S...

Logo of the Bill & Melinda Gates Foundation. Source: Bill & Melinda Gates Foundation 2007 Annual Report (Photo credit: Wikipedia)

So after the big annual meeting Warren Buffett chief cook and bottle washer over at Berkshire Hathaway (NYSE:BRK.B) is starting to talk dividend. All this after being disdainful of dividends from Berkshire and wanting to invest all the cash because he could do the best job. Now that the end is near, even with a mild form of prostate problem, Warren Buffett is facing his own mortality and wondering what can be done to keep his money machine going.

Buffett watchers know he has donated the bulk of his holdings to Bill and Melinda Gates Foundation. You can hear the IRS crying right now. Anyway the money will not go to Washington DC. When you think about it it’s almost tea-party like in avoiding government and doing as you wish. Anyway Bill and Melinda Gates will be spending their funds on a vast amount of hopefully worthwhile projects. If the stock does not pay a dividend than you will eventually have to sell significant portions. The foundation becomes a net seller and the market sees them coming with an onbalance sell program which will depress prices or at best keep the share prices from appreciating.

Solution: declare dividends which hopefully increase over time quelling the desire to liquidate. Genius move for the long-term investor. The charitable foundation looking for liquidity events can find one every ninety days as dividends are deposited into their bank accounts.

A little bit of Buffett hubris comes into play. You see under that old dog Warren Buffet you did not need or look for a dividend. You let it ride all the way. It was a statement of support to forgo the dividend. Now with the new managers coming on board the dividend becomes important and Buffett does not say trust them. He did say trust me. But he is not saying trust them.

But this is still all speculation. The dividend is a conversation about next years possibility. The investment world will change. But the shareholder interests will eventually need to be aligned. Wonder if Warren and Bill were talking it over in that Netjets ad where they sit in a very comfortable executive jet eating jelly beans. If either of you two read this post a response would be most appreciated.

George Gutowski writes from a caveat emptor perspective.