Carl's Not-So Sour Grapes
Excuse us for chuckling, Dumbest fans, but we simply cannot suppress our amusement over Carl Icahn's joke of a Tom Joad impression following his so-called Dell (DELL) defeat.
The billionaire activist investor announced on Monday he will discontinue his bid to derail Dell's near-$25 billion takeover by company founder Michael Dell and private equity firm Silver Lake Partners, after a string of legal rulings and decisions by Dell's special committee tasked with selling the struggling PC-maker turned against his competing proposals. Icahn's decision to throw in the towel essentially cements Michael Dell's and Silver Lake's takeover of the PC-maker, in what stands to be the biggest leveraged buyout since the financial crisis.
"I realize that some stockholders will be disappointed that we do not fight on. However, over the last decade, mainly through 'activism,' we have enhanced stockholder value in many companies by billions of dollars. We did not accomplish this by waging battles that we thought we would lose," wrote Icahn in a letter to Dell shareholders. Cut the crap, Carl. You didn't lose at all and you know it. The fruit of your Dell wrath is over $70 million smackers, according to the WSJ. So don't try and act like you are slurping sour grapes when everybody knows you're sucking down pricey champagne. As for your snide remark that you intend to call Michael Dell to wish him good luck because "he may need it," well, that certainly belies your stab at nobility. Or at the very least, it comes off as less than caring considering all the jobs soon to be shed at the struggling company you ostensibly were leading a charge to save. Ah, who are we trying to protect Carl? Let's be honest since you won't be. You didn't want to own Dell. You wanted a higher price without getting your hands dirty and that's exactly what you got when Michael bumped up his price to $13.75 a share and added that special 13-cent dividend. So please spare us the heartfelt concession speech. In fact, you wanted to own Dell as much as you wanted to own Yahoo! (YHOO) when you similarly stampeded into that humbled tech giant. Or, in other words, not one darned bit. We all know your tricks, Carl, and operating a company in earnest is not one of them. The only difference is that your dustup with Michael Dell ultimately took root and blossomed into lovely, verdant greenmail (albeit through a circuitous route via a Delaware court), while your battle with Jerry Yang turned out as dry as an Oklahoma dust storm when he refused your wish to sell the company to Microsoft (MSFT). Which brings us to our favorite line in Carl's farewell to Dell note, the one that harkens back to John Steinbeck's tale of itinerant woe. "If you are incensed by the actions of the Dell Board as much as I am, I hope you will choose to follow me on Twitter where from time to time I give my investment insights. I also intend to point out what I consider to be unconscionable actions by boards and discuss what remedies shareholders may take to change the situation," pronounced Icahn. Take heed, all you ordinary Americans out there, driving in your beaten-down cars across this hard land from sea to shining sea, Carl Icahn is there for you. Like the fictional, yet all-too-real migrant worker Tom Joad who vowed to fight social injustice "wherever you can look -- wherever there's a fight... wherever there's a cop beatin' up a guy," Carl Icahn will be there, too. He'll be standing by yours and Tom's side wherever a corporate board hoards cash and whenever a CEO attempts to take a company private with a lowball bid. Lest we forget Herbalife (HLF), his most wrathful pursuit of all. Yes, fellow citizens, Carl Icahn will be there for you wherever Bill Ackman is on the other side of the trade.
First Solar Stupidity
Remember the radio program where Paul Harvey would famously tell listeners "the rest of the story"?
Here's a 5 Dumbest version featuring our friends at First Solar (FSLR).
Back on Sept. 21, 2011, shares of the solar energy systems provider plummeted 7% after select analysts covering the company were informed it would not seek a $1.9 billion federal loan for its 550-megawatt Topaz project, one of the largest solar projects ever to be constructed. First Solar stock fell an additional 6% the following day, after it confirmed through a press release that the Topaz project would not receive a government loan guarantee. Because the institutions were able to act on the Topaz information prior to the general public, TheStreet reporter Eric Rosenbaum alertly asked the question on that second day of the selloff of whether First Solar had violated the Securities and Exchange Commission's Fair Disclosure Regulation, known on Wall Street as Reg FD, which stipulates that an officer or director of a company cannot make any disclosure of a material nature about its business on a selective basis. "Solar market insiders say that as many as five analysts were called on Wednesday by the head of First Solar investor relations, Larry Pollizotto, and told beginning Wednesday morning that First Solar might not get Topaz, but they felt good about the other two projects receiving loan guarantees," wrote Rosenbaum on Sept. 22, 2011, in a column titled "Did First Solar Just Walk a Fine Reg FD Line?" So what happened to First Solar in the two years since TheStreet broke the news that First Solar was keeping ordinary investors in the dark? That is, other than the stock going on a rollercoaster ride from $80 to $12 to $40? Well, last Friday the SEC charged Polizzotto, who is no longer with the company, with violating Reg FD on the matter. (For the record, Rosenbaum is no longer with TheStreet either.) Polizzotto agreed to pay $50,000 to settle the SEC's charges, without admitting or denying the findings. The SEC did not bring an enforcement action against First Solar because of "the company's extraordinary cooperation with the investigation among several other factors." (Also for the record, that's a load of crap.) "Polizzotto offered previously undisclosed information to select analysts and institutional investors and left the rest of First Solar's investors in the dark," Michele Wein Layne, director of the SEC's Los Angeles Office, said in a statement. "All investors, regardless of their size or relationship with the company, are entitled to the same information at the same time." And now you know the rest of a very, very dumb story.
Rick's Appeal
If you ask us, Rick's Cabaret (RICK) CEO Eric Langan ought to walk a mile in one of his dancers' 4-inch stilettos before whining about paying them minimum wage.
A federal judge ruled Tuesday that exotic dancers at Rick's midtown Manhattan strip club should be paid a minimum wage, proclaiming that the club unfairly classified Rick's dancers as independent contractors as opposed to club employees. A group of Rick's finest sued a subsidiary of the company in a class action in 2009, saying they received "performance fees" of $20 a pop for lap dances instead of salaries, despite adhering to the strict guidelines set by the company.
The ruling follows a string of similar decisions regarding the rights of topless talent and opens the door for 1,900 current and former Rick's Cabaret dancers to seek back wages from the club. Rick's is appealing the decision and moving that the class be decertified. Shares of Rick's, which owns and operates over 40 jiggle joints and restaurants across the country, sank nearly 2% Wednesday. "Unlike shoe-shine employees at an airport, topless dancers are the 'main attraction' at a topless nightclub and obviously very important to the business of the nightclub," wrote U.S. District Judge Paul Engelmayer, adding that Rick's draconian rules forbade chewing gum, "bad attitudes" and body glitter. We heartily agree, your honor. And we can only imagine the difficulty you faced in visualizing this case, especially when you were forced to examine exhibits A through double D. Rick's legal team contended that the cash earned for lap dances counted as wages. Langan also argued that dancers who can stuff up to $1,000 dollars in their pockets, er, panties on a good night are too well compensated to deserve the minimum wage. Engelmayer, however, didn't buy Rick's wage argument and he actually cited Langan's own pretrial deposition statement that "the most important thing to the Rick's Cabaret brand is that it has entertainers" in his decision. "Without the girls, we're just selling overpriced beers at a sports bar with bad TVs," said Langan in his testimony. Nice going, Eric, way to sink your own case. Here's a tip for you: Pay the money and let it go. You've already changed your corporate labor practices so this type of occurrence won't happen again. And as you mentioned in your press release, this verdict affects a subsidiary of yours, not the parent company. The only thing you are doing by pushing this case any further is directing attention to yourself and not your company's asses, er, assets.
Ova And Out
Note to the geniuses at OvaScience (OVAS): Overlooking the FDA when launching a new drug is generally not a keen idea. In fact, it's overwhelmingly dumb.
The biotech company's stock was overrun by sellers Wednesday, sinking over 21% to $11 after the company said federal regulators are inquiring about the status of its fertility treatment Augment. The FDA instructed OvaScience to file an investigational new drug application for the product, which would require additional rounds of testing and will likely keep Augment off the U.S. market for years.
In a press release, OvaScience announced it was suspending enrollment of Augment trials in the U.S. while it has further discussions with the FDA. In the meantime, the company said it is moving forward with plans for enrollment outside of the country. Put simply, OvaScience believed Augment was a cellular- and tissue-based product, also known as a 361 HCT/P, and, as such, could be marketed commercially without FDA oversight or review as drug. As a result, the company -- knowingly or unknowingly -- neglected to ask the FDA if it agreed with its characterization of Augment and proceeded until the FDA shut it down. Or, in even simpler terms, OvaScience tried an end-around, but its FDA overlords put an end to it. Worst of all, the company's stock was in overdrive prior to its being sucked under. OvaScience shares closed Tuesday at $14.28, up more than 70% for the year. Also, just last week Wedbush analyst Zarak Khurshid initiated coverage of the company with an "outperform" rating and a $20 target. That very same day, the company's CEO Dr. Michelle Dipp triumphantly rang the opening bell at the Nasdaq. We have a feeling that Khurshid is thinking that OvaScience outperform over right now. Don't you think?
This weekend is the fifth anniversary of Lehman Brothers filing for bankruptcy. To mark the less-than-auspicious occasion, we are reprinting the Lehman entry from our Sept. 19, 2008 list. Enjoy the trip down Dumbest lane! Lamenting Lehman
"It's a tragedy ... Bobbie (Lehman) is spinning in his grave."
That's what long-time Lehman Brothers partner Herman Kahn said following the firm's sale to Shearson/Amex in 1984, according to Greed and Glory on Wall Street: The Fall of the House of Lehman by Ken Auletta. If he was rolling over then, one can only imagine what Bobbie's doing now. He should be haunting former CEO Dick Fuld for driving the 158-year-old firm into the ground. With so much stupidity still swirling around Lehman's sudden demise, the Five Dumbest Lab selected a few items too good to pass up before saying our final goodbyes: Leaving on Top: Institutional Investor awarded Lehman Brothers the top spot this week in its annual All-America Fixed Income Research Team rankings, defending its title for the ninth straight year. Bove's Bungle: "I still believe that this is one of the best companies on Wall Street and that it has value well beyond its current stock price. Therefore, the stock remains a buy," said Ladenburg Thalmann analyst Dick Bove on Sept. 11 with the stock's price at $7.25 and sinking. Asleep at the Board: What's especially revealing about Lehman's demise is the average age of its 10-member board: 74.3 years. Their backgrounds are even more revealing. Counted among the board are such business bastions as a theater producer and a Navy admiral. Anyone still wondering why things fell apart? We won't even ask if anyone believes they earned the $360,000 in average compensation they received. Waxman Pathetic: "Our hearings will examine what went wrong and who should be held to account," Henry Waxman, the Democratic congressman from Los Angeles, said Wednesday when he announced hearings that will include Dick Fuld and former AIG (AIG) CEOs Robert Willumstad and Maurice "Hank" Greenberg. That's the kind of decisive response we've come to expect from Congress. Fuld's Farewell: "The past several months have been extraordinarily challenging. For some of you, the firm has been your home for decades. For others, less than a year. For all of us, it has been far more than a place of employment. It has been a source of pride." Email from Richard Fuld, CEO of Lehman Brothers, 1994-2008. Yes, Dick, you've got plenty to be proud of. -- Written by Gregg Greenberg in New York Follow @5gsonthestreet
Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.
