Reed Hastings skips a post on Facebook $NFLX $FB

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Reed Hastings CEO of Netflix (Nasdaq:NFLX) has skipped a post or two on his Facebook (Nasdaq:FB) page. Recently he got into some regulatory hot water by praising some key marketing types for reaching a milestone in number of users. The milestone while impressive was widely expected and came as no big surprise. Reg FD Nazi’s maintain he did not issue an olde school press release therefore it was insider. The regulator is now grappling with the pervasiveness of social media.

So it was kind of cute that when Reed Hastings got a very nice increase in salary he did not post it on his Facebook page. So if anyone missed it here is the new deal:

“On December 29, 1012 it was revealed in an SEC filing that Netflix will substantially increase CEO Reed Hasting’s paycheck in 2013. Hastings will receive cash and stock options of $2 million each, up from $1.5 million in options and a $500,000 cash portion in 2012, resulting in the largest cash payment Hastings has ever received.”

Not only did they slip this tid bit out during the Christmas holidays they released it on a Saturday just before New Years Eve when even high frequency trading starts to take a break.

Happy New Year Reed Hastings. Who covered the champagne!

George Gutowski writes from a caveat emptor perspective. Follow him on twitter@financialskepti as well as his evil twin brother who is writing a Wall St murder thriller at twitter@georgegutowski

Netflix Bad Ass Disclosure. SEC Leadership by Inquisition $NFLX $FB $TWIT #REGFD #SEC #CORPGOV

Netflix (Nasdaq:NFLX) CEO Reed Hastings is huddling with lawyers over the SEC Wells notice which raises the issue of just what is fair disclosure and what are the best practices for Reg FD. So this is what Reed Hastings did about 90 days ago. On a Facebook page (Nasdaq:FB) he posted that Netflix had reached a billion hours of viewership and congratulated a key marketing executive in reaching the symbolic milestone.

The SEC is alleging the billion hour milestone should have been announced as a material event so that everyone would know. I’m told Reed Hastings has a 200K plus following on his Facebook page. So while a press release was not officially filed with the SEC no one can say this was a secret tidbit shared with a few special friends. If you followed Facebook as an investor you probably friended him. If you were an investor who followed an internet investment without internet tools than you are stupid and no amount of regulation will help you.

Officially Reg FD is designed to allow the general investing public the same access to information as a few insiders or powerful institutional investors. Hard to argue with the intent. So Reg FD compliant tools make sure you have mass dissemination of information onto the financial press and trading terminals such as Bloomberg.

Facebook is new. Twitter is new. Other stuff will be newer. Provocatively they may be more efficient than all the old tools put together. They are called disruptive technologies.Right now if you post a twit with a $ and the corporate stock symbol you will usually link to stock twits and share your idea. Real time. Inexpensive. Open to big and small investor. Social media links back and forth. Investors retwit and relink and repost at will.

The Wells notice while serious is more an indictment of the SEC. They have a regulatory responsibility and they may have been overwhelmed with advances in technology. Not good I say.

A Machiavellian part of me wonders why this Wells notice was filed during an inter-regnum period at the SEC. Perhaps some diligent staffers tired of no real direction used the tools at hand to explore the boundaries of the regulatory framework.

The new SEC chairperson may be faced with a judicial fait accompli. Or maybe a runaway case file that needs to be considered more rigorously.

In any event it is highly unlikely that Reed Hastings will be found guilty of any form of malfeasance. The financial press has already pointed out the powerful arguments that  investors assumed NetFlix was close to the milestone and that sell side analysts had published public commentary assuming the milestone was at hand. So when Reed Hastings said we got there is was not truly material.

The SEC will find a backdraft if they chose to not pursue the Wells notice. The investment community closely followed be a predatory litigations community will want to know how social media is to be incorporated. And while we’re at it why can’t a CEO say something on his Facebook page or Twitter feed. Chances are it will be less varnished than starchy corporate communications and therefore more genuine and therefore more useful and therefore more engaging and therefore a better trust building tool.

Hey that stuff should be pretty good. Lets try it SEC.

I do not know Reed Hastings personally. but those of you who do should buy him a beer because he is taking one for the team.

George Gutowski writes from a caveat emptor perspective. Follow him on twitter@financialskepti

Netflix gets a fuzzy picture $NFLX Big Dogs have no skin in the game.

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Netflix (Nasdaq:NFLX) has a leadership team with very little skin in the game. CEO Reed Hastings salary doesn’t depend on Netflix’s business performance.  Netflix has taken the unusual move of granting its named executive officers only fully vested stock options. Who runs the compensation committee?

Reed Hastings makes $500K per annum. His stock options were cut back in 2011 but he made $43 million that year by exercising 190,500 of stock options earned in times past. He and his henchmen probably do not have fire in the belly.

The stock is around a 34 trailing PE and has a short interest of 28.87% of the public float. Money flow is an anemic 1.04.

It looks like the boys do not have their eye on the ball.

George Gutowski writes from a caveat emptor perspective. Follow him on twitter@financialskepti

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

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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.

Microsoft Stinks Up The Joint

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Microsoft (MSFT) stunk up the joint today with a double-barreled press release.

Firstly, their board elected Reed Hastings, founder, chairman and CEO of Netflix Inc.,as the lead independent director. Netflix is revolutionizing the movie business. Where will this guy’s heart and mind be as he tries to be independent on Microsoft issues? Not a good fit as a board member in the first place. Just remember how well Eric Schmidt from Google (GOOG) worked out on the Apple (AAPL) board. Time bomb ticks very loudly.

Secondly, the board will no longer use a wire service to disseminate financial information. They will now use an RSS feed from the investors relations component to their website. This will disadvantage the concept of wide dissemination. You have to be digitally tracking. The entire manner of explaining information to the market place is quickly changing. Investors will most likely not benefit.

Disclosure:  George Gutowski writes from a caveat emptor perspective. I hold no positions in stocks mentioned in this post.