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How one simple phone call is causing me to sell and possibly short a stock in my real portfolio / CNBC Gossip

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January 20, 2009 – Comments (6)

 

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.  

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Becky Quick

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.

Trish Regan

Deej

6 Comments – Post Your Own

#1) On January 20, 2009 at 10:53 AM, angusthermopylae (40.13) wrote:

Deej,

I've been thinking about writing an analysis on one of the funds I own that has a stated NAV of 14% above their share price--a quick look at their holdings also makes me wonder about its actual value and future prospects

The reason I wanted to write about it was not an endorsement, but because I have considered it one of my "safe havens," a place to put my money while I figure out what else to buy.  I noticed that CAPS writers haven't really addressed the subject, and I thought it my be worth my while to figure out if I'm making a bad call on this or not.

They haven't harassed me with phone calls, yet, but I agree that  this would make me very nervous--if they are resorting to these tactics, then something very fishy is going on.

Another thought:  Either the board has spent tons of money supporting an outsourced call center to do this kind of work, or they spent  a good chunk in one go for this "advertising" campaign---wasted money.  Doesn't sound like they are being good caretakers.

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#2) On January 20, 2009 at 11:58 AM, ByrneShill (77.21) wrote:

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.

This is where the Fool's disclosure thingy just s*ck. Imagine if I have the same stock but didn't receive the phoney phone call. If the shares plunge before you can disclose the company name, I might very well lose a bunch of $ because of that disclosure agreement. You should be able to disclose the company as long as you disclose your transactions.

Trish is cute.

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#3) On January 20, 2009 at 1:24 PM, Tastylunch (29.33) wrote:

Regarding the Becky Quick thing, which I found deplorable as well, I view that sort of behavior as largely unavoidable for many in their line of work.

People in the media  and Hollywood spend  so so much time at work with the costars/coworkers they barely ever see their spouses/family. Throw in the fact that many of these people are usually physically attractive (even if you might not think so, the fact that media treats these people as attractive it probably starts to seep in for most ovetime I think. Personally I view tv hotness like fake fruit, It looks nice but you wouldn't actually to enjoy it in real life :-) )  and financally well off and you have greater tempatation to cheat and less inhibition to stay faithful.

It's no wonder they are more prone to workplace temptations. I do not believe the statement abscence makes the heart grow fonder over continual regular long term abscence.While that might be true for trips and what have you, being absent 18 hours out of the day just lets people detach and move on emotionally.That's a bad mix for a healthy marriage I would think.

It certianly doens't excuse the behavior at all, but I think it does explain it. It also is why I choose to be a SBO, and didn't go to work on wall street like some of my friends. I want a healthy work/life balance. What's the point of work if you can't enjoy the fruits of it with the ones you love?Another perk of my work is that I work with my family so I do get to spend more time with them than most people ever get to. It's the best (and worst!) part of being a Mom & Pop op.

oh and I agree with you on that cold call, they must be really desperate whoever it is. They doth protest too much methinks. You made the right call dumping that crap.

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#4) On January 20, 2009 at 4:06 PM, FoolishChemist (97.17) wrote:

How much of the company did you own?  If you owned 5% then it would make sense.  For them to be calling people trying to get ~0.01% increase seems ridiculous. Anyway don't they send out voting forms ahead of time?  Also I thought it was usual for non-votes to go the way the board wanted.

Does that nondisclosure preclude you from giving hints?  Sounds like, makes...?  Must be a little wiggle room.

Oh well, uess I better start reading through the SEC filings.

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#5) On January 20, 2009 at 5:14 PM, DemonDoug (60.67) wrote:

Trish Regan

Short that crap to zero btw.  Go on my son!

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#6) On January 20, 2009 at 5:30 PM, cubanstockpicker (21.03) wrote:

Guess she has taken it upon herself to live by her name.

As for disclosure of the company, I dont see where the problem is. does caps have a specific rule about stock disclosure. Obviously if the company is calling you its calling most shareholders of some quantifiable amount of shares. However, This is a blog and we are allowed to speak as freely about anything as long as you are not an insider unless you own 5%.

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