How one simple phone call is causing me to sell and possibly short a stock in my real portfolio / CNBC Gossip
Last night was fairly hectic in my household. It was already past both of my sons' bed times and I had just gotten back from the drug store picking up medicine for the younger one's ear infections. In the midst of getting my two little ones ready for bed the phone rang. My wife answered it and said "Honey, its those investment people again. You'd better take it." Apparently this is the third time over the past several days that the caller had tried to get in touch with me.
Assuming it was some sort of cold call from a broker or something equally annoying, I took the call. To my surprise it was a representative of a company that I actually do own in my wife's IRA. So I listened to what she had to say.
The woman on the line sounded as though she was from some sort of Indian call center. She has been harassing my wife trying to get her to vote our shares of the company that she represents in line with the Board of Directors' recommendations.
This was a new one for me. While I have heard that companies that are trying to push through acquisitions do occasionally call shareholders to urge them to vote in favor of the deal, in all my years of investing I have never encountered this sort of thing. The caller was extremely aggressive in trying to get me to vote with the board. Saying things like, "We've already postponed the vote twice by waiting you're wasting the company's and your money" and "The vote is tomorrow so you need to tell me right now if you agree with the board of directors' recommendations for what is best for the company.", etc...
The aggressiveness of the caller really turned me off. It was almost as if she thought that I was stupid and that she could trick me into saying, "Yeah, yeah, I'll do whatever the board of directors wants." This went on for a couple of minutes when I finally said, "Look, I'm not just going to give you my OK to vote my shares for something when I don't even know what I am voting for."
I'm not even sure how this company got my phone number. I certainly didn't give it to them. They must have gotten it from Charles Schwab. This whole thing is sending up some major red flags in my book.
After digging around I found a filing stating that the company is allowed to place this sort of phone call, but technically they are only supposed to "remind" shareholders that there is a vote today, not attempt to persuade them to vote in line with the Board of Directors, the chairman of which also conveniently happens to be the company's CEO.
My quick initial research also uncovered that the main issue here is that the company wants the ability to issue more shares at less than its stated NAV. This theoretically is dilutive to existing shareholders because XYZ Corp. is currently trading at a 25% discount to its "stated" NAV. After sniffing around I have some serious doubts about how accurate that number is. I have a sneaky suspicion that the NAV is currently way overstated and that the company is trying to issue more shares ASAP before it has to take additional significant writedowns...if it ever even admits the drop in value.
This desperation to issue more shares leads me to believe that this company is having liquidity problems. This vote has already been postponed twice before when it became apparent that the board's requested actions might not pass.
Paying someone to harass shareholders on the telephone when they have never even given the company their telephone number seems to be a TREMENDOUS waste of company funds to me. This company harassed the wrong person. After looking into it a little more deeply I am now uncomfortable with its management and plan on selling all of my shares in about five minutes.
In fact, after some of the dirt that I have been able to dig up after looking around for only a few minutes I am seriously considering a complete 180 and shorting this company. This is why it will remain nameless for now. After my waiting period is over I will share the name of the company and what I have been able to find out about it.
Note, it's 9:30 and the shares are gone. I will wait on shorting it for now, it might be more fun to write about it.
I have missed my share of macro calls in the past two years, but my radar is usually pretty good at picking out companies that have problems. There are so many apparently squeaky clean companies out there that are trading at great valuations right now that there's no need for me to stick with a company that I'm getting a bad vibe about.
As if the above soap opera wasn't juicy enough I have another tidbit for everyone this morning. Love it or hate it, chances are that anyone who is interested in investing has spent a significant amount of time watching CNBC. Most of the shows on the network make me sick, but Squawk Box is actually pretty good. Carl Quintanilla is likable and I love Joe Kernan.
Perhaps I have been reading my wife's People Magazine too much lately because I found this "news" item that I stumbled across on Page 6 of the NY Post yesterday interesting.
SQUAWKING SEASON AT CNBC
Apparently co-anchor Becky Quick dumped her husband and stole a 38 year-old producer of the show away from his wife and two kids. The two quietly got married recently and there is some rumbling that she is receiving preferential treatment. It's official, I no longer like Becky Quick. She comes across as a homewrecker who's trying to sleep her way to the top.
I say they replace her with Trish Regan, who's much hotter than she is anyhow. I know that sounds sexist, but let's face it anyone who takes real investment advice from the talking heads on CNBC is in real trouble. If you're not listening to the anchors' advice and they're not funny (Becky Quick is pretty darn dry), they might as well be nice to look at. If you are a woman who's reading this post, I have no problem if you'd rather replace the male anchors on CNBC with Fabio ow whoever you think is hot.