Tag Archives: Company Coverage
by Liz Hester
In a fun turn of events for technology reporters and Wall Street, Dish Network decided to put together a $25.5 billion bid for Sprint Nextel, offering a competing bid to Japanese Softbank’s.
Here are some of the details from the New York Times:
The pay-TV operator Dish Network said on Monday that it had submitted a $25.5 billion bid for Sprint Nextel.
The move is an attempt to scupper the planned takeover of Sprint Nextel by the Japanese telecommunications company SoftBank, which agreed in October to acquire a 70 percent stake in the American cellphone operator in a complex deal worth about $20 billion.
Dish Network thinks it can do better. Under the terms of its proposed bid, Dish Network said it was offering a cash-and-stock deal worth about 13 percent more than SoftBank’s bid.
Dish Network values its offer at $7 a share, including $4.76 in cash and the remainder in its shares. The offer is 12.5 percent above Sprint Nextel’s closing share price on Friday.
“The Dish proposal clearly presents Sprint shareholders with a superior alternative to the pending SoftBank proposal,” said Charles W. Ergen, Dish Network’s chairman.
Mr. Ergen said a “Dish/Sprint merger will create the only company that can offer customers a convenient, fully integrated, nationwide bundle of in- and out-of-home video, broadband and voice services.”
The Wall Street Journal put the latest move by Dish into great context in this piece:
The unsolicited offer is Mr. Ergen’s most audacious attempt yet to move from the slow-growing pay-television business into the fast-evolving wireless industry. The satellite TV pioneer eased into the industry by amassing spectrum and winning approval from regulators last year to use it to offer land-based mobile-phone service. But he lacks much of the rest of the operation, including a cellphone network, which would be costly and time-consuming to build.
Combining his company with Sprint would allow Dish to offer video, high-speed Internet and voice service across the country in one package whether people are at home or out and about, Mr. Ergen said. People who don’t have access to broadband from a cable company would be able to sign up for Internet service delivered wirelessly from Sprint cellphone towers to an antenna installed on their roof, Mr. Ergen said.
Taking over Sprint would be a big bite. The wireless carrier booked $35.3 billion in revenue last year, compared with $14.3 billion for Dish. The combined company would carry more than $36 billion in debt, according to CapitalIQ, even before loading on the $9 billion Dish indicated it would borrow to do the deal.
Dish said it would be able to execute a definitive merger agreement after reviewing Sprint’s books. The satellite company said it is being advised by Barclays, which is confident it can raise the funding.
Earlier this year, Dish made an informal offer to buy Clearwire Corp. —a wireless carrier that is half-owned by Sprint and that has agreed to sell Sprint the other half. Dish has yet to move forward with a formal bid.
Mr. Ergen said the “deck was stacked against us” with Clearwire due to a tangle of contractual obligations. With Sprint, the only obstacle is a $600 million breakup fee that would be due Softbank. He said he is willing to pay that.
Bloomberg Businessweek wrote a frequently asked questions piece, which offered this info on regulatory and David Einhorn’s position in Sprint:
Are there regulatory issues?
Probably not. Given the power of Verizon (VZ) andAT&T (T), analysts don’t expect a Dish, Sprint tie-up to hit anti-trust hurdles. On the contrary, Dish says the deal would be particularly good news for rural consumers who don’t have access to traditional broadband. If there’s anything FCC commissioners like, it’s rural consumers.
How about that David Einhorn?
Right? Einhorn’s Greenlight Capital snapped up a bunch of Sprint shares as the company swooned in recent years. At the end of the first quarter last year, when Sprint shares were wallowing below $3, Greenlight had 68 million of them.
The Bloomberg wire story quoted an analyst as saying the deal had some merits despite the heavy debt load the potential company might hold:
The combined company will have an estimated $40 billion in debt, a heavy load, said Philip Cusick, an analyst at JPMorgan Chase & Co. in New York. Still, the long-term synergies and cash generation make the idea “very compelling,” he said.
“The next question is the response from the Sprint board and whether Softbank comes back with another bid, potentially using its balance sheet advantage with more cash,” Cusick, who has a neutral rating on Dish, said in a report.
Dish’s offer extends a frenzy of consolidation for the U.S. wireless industry. Smaller carriers are seeking out merger partners to help wage a stronger attack against the two dominant competitors, Verizon Communications Inc. and AT&T Inc.
T-Mobile USA Inc., the fourth-largest U.S. carrier, is closing in on a merger with MetroPCS Communications Inc. (PSC), which is No. 5 in the industry. Deutsche Telekom AG (DTE), T-Mobile’s parent company, sweetened its offer for MetroPCS last week in order to get reluctant investors to agree to the terms.
It’s going to be interesting to see which deal the Sprint board selects and what reasons they offer for their choice. Dish obviously has grand ambitions and sees some part of Sprint playing into its plans. But does the Sprint board agree? Only time will tell.
by Liz Hester
The New York Times analyzed Nike’s recent fall from the top of the advertising file in an interesting story Sunday. After the misstep congratulating Tiger Woods on regaining golf’s top spot, Nike is searching for share of buzz.
Here’s the story:
It was once common for consumers to express excitement about the latest marketing efforts for the athletic footwear and apparel sold by Nike. The company filled an advertising hall of fame with energetic, confident, often cheeky commercials that became so popular you only had to refer to them by repeating the slogans, which became cultural catchphrases: “Gotta be the shoes,” “Chicks dig the long ball,” “You don’t win silver, you lose gold,” “There is no finish line” and “I am not a role model.”
But recently, it seems, Nike has had a harder time standing out amid the clutter, bringing out fewer ads that are widely deemed hot, or cool.
Some point to the fact that Nike is an older brand as part of its problem marketing to youth.
Nike is now a behemoth with $24 billion in annual sales rather than an upstart that famously used unconventional marketing tactics to gain attention and favor. Nike spent more than $3.2 billion to run ads in major media from 1995 through 2012, according to the Kantar Media unit of WPP, including $115.7 million last year, an increase of 20.2 percent from $96.3 million in 2011.
“The maturity of the brand creates an inherent challenge because you’re no longer the new kid on the block,” said Mr. Swangard, and as a result Nike executives “run the risk of being the victim of their own success.”
Allen Adamson, managing director of the New York office of Landor Associates, a brand and corporate identity consultancy, said: “The bigger the brand, the harder it is to stay trendy and current. It’s hard to be cutting edge when you’re established.”
Also, being a leader, means that others will follow and that can dull the affect of your marketing.
Another problem facing Nike is that the way the brand speaks in ads is no longer that novel. Many marketers now emulate the company’s irreverent, assertive tone and tack.
“Nike really revolutionized the sports advertising industry, and sports, especially, is a copycat industry,” said Steve Smith, a sports lawyer who is a partner at the Bryan Cave law firm. “You see somebody doing something that works, you’ll do it, too.”
“It’s a tribute to Nike,” he added, “but I’m sure it puts pressure on Nike and its advertising agencies.”
Some brands that emulate Nike, like Adidas, Reebok and Under Armour, are also its competitors. Others, like ESPN, Old Spice and Red Bull, are in different fields.
Nike does seem to be using social media and other alternative marketing to reach different audiences.
And like all marketers, Nike is coming to terms with the biggest shift in the landscape: the fragmentation of audiences, and media, makes it difficult to get the proverbial “everyone” discussing the same ads at the same time as was the case decades ago.
“Fifteen years ago, people could have been reached primarily with TV, print, out of home and radio,” Mr. Grasso said, which represent “a fraction” of the media they consume now.
Here, Nike has excelled, uploading to YouTube big commercials for big events like the Olympics and the World Cup and maintaining a major presence in other social media like Twitter, where Nike has more than a million followers, and Facebook, where more than 12.6 million people “like” the brand.
In fact, the ad last month that congratulated Mr. Woods appeared as posts on Facebook and Twitter rather than television or print ads.
I found this story interesting and a good example of company coverage. It’s a great analysis of an older firm that’s struggling to reinvent itself in a different age. While Nike is still thought of as a great marketer, it’s an interesting take on the challenges that it will face going forward.
by Chris Roush
James Breiner, who teaches business journalism at Tsinghua University, writes about Loren Feldman, the small business editor at the New York Times, who writes a blog called “You’re the Boss: The Art of Running a
Small Business“ that appears in the small business section of the Times’s website.
Breiner writes, “Feldman started the blog from scratch in 2009. He had considerable experience with the small business niche as an editor of Inc. magazine and then web editor for Inc.com and FastCompany.com.
“It was at Inc. that he met Jay Goltz, a Chicago-based entrepreneur profiled in the magazine. Goltz launched into a critique of the existing small business publications. He thought they weren’t focused on the nuts and bolts that help business owners solve the problems they face every day. Goltz then proceeded to give Feldman dozens of story ideas that would be more relevant.
“Most entrepreneurs know how to do two or three things really well, Feldman says, but they might have no idea how to pick a law firm or how to run a payroll system or how to run a marketing campaign in social media.
“So when he came to the Times, Feldman decided that most of the You’re the Boss’s bloggers would be business owners themselves describing their own problems and how they tried to solve them. They would chronicle their mistakes and ask for help. He started with four and now has 13. (The bloggers are paid for their work)”
Read more here.
by Liz Hester
There were two similar stories in the Wall Street Journal and the New York Times on Thursday about the complexity of large financial firms and what they’re doing to simplify their structures.
The Journal story focused on the number of subsidiaries that many of the largest financial firms have and where they’re located.
Wells Fargo & Co. Chief Executive John Stumpf has described the bank’s business model as “meat and potatoes.” But the fourth-largest U.S. lender has 3,675 subsidiaries, up 8.6% from five years ago, according to an analysis provided to The Wall Street Journal by Swiss research firm Bureau van Dijk Electronic Publishing Inc.
Wells Fargo isn’t alone. In all, the six largest U.S. banks have 22,621 subsidiaries, according to the Journal’s analysis.
While that is down 18% in the past five years, regulators said they are getting frustrated with banks’ slow and uneven progress in streamlining their labyrinths of business units, offshore entities and other appendages.
Comptroller of the Currency Thomas Curry, whose agency oversees national banks, said in an interview that his staff intends to pay closer attention to “needless corporate complexity” and “whether it’s time to start cutting some of the brush out.”
The sprawling nature of the largest U.S. banks will be on display starting Friday, when Wells Fargo and J.P. Morgan Chase Co. report first-quarter financial results. A Wells Fargo spokesman declined to comment on the data provided by Bureau van Dijk “because we do not know its methodology” and said its filings show subsidiaries down by 23% since the end of 2008, to 1,361. The number of legal entities “is not an indicator of risk and Wells Fargo has a long track record of prudent risk management in all our businesses.”
Complexity in the banking sector has vexed regulators since the financial crisis, when troubles at big U.S. firms quickly spread throughout global markets. The U.S. government intervened to prop up the largest firms, prompting calls to break up those deemed “too big to fail.”
Regulators have introduced rules requiring banks to maintain a fatter financial cushion against losses than other institutions, accept strict limits on the biggest banks’ exposure to one another and submit a new set of plans showing how they would be unwound in the crisis.
And according to the Times, some of the largest firms are shifting assets and risk to other parts of the market, which may cause regulators to have a skewed picture of their capital.
Banks have been shedding risky assets to show regulators that they are not as vulnerable as they were during the financial crisis. In some cases, however, the assets don’t actually move — the bank just shifts the risk to another institution.
This trading sleight of hand has been around Wall Street for a while. But as regulators press for banks to be safer, demand for these maneuvers — known as capital relief trades or regulatory capital trades — has been growing, especially in Europe.
Citigroup, Credit Suisse and UBS have recently completed such trades. Rather than selling the assets, potentially at a loss, the banks transfer a slice of the risk associated with the assets, usually loans. The buyers are typically hedge funds, whose investors are often pensions that manage the life savings of schoolteachers and city workers. The buyers agree to cover a percentage of losses on these assets for a fee, sometimes 15 percent a year or more.
The loans then look less worrisome — at least to the bank and its regulator. As a result, the bank does not need to hold as much capital, potentially improving profitability.
Some regulators say they are concerned that in some instances these transactions are not actually taking risk off bank balance sheets. For instance, a financial institution may end up lending money to clients so they can invest in one of these trades, a move that could leave a bank with even more risk on its books.
Critics point to other reasons to worry. Most of these trades are structured as credit-default swaps, a derivative that resembles insurance. These kinds of swaps pushed the insurance giant American International Group to the brink of collapse in September 2008. Another red flag is that banks often use special-purpose vehicles located abroad, frequently in the Cayman Islands, to structure these trades.
Both these stories, while different in focus and tone, tackle the complicated issue of simplifying the banks and determining if they’re making progress toward complying with new laws. As the rules continue to be shaped, coverage of the banks and if they’re working to prevent a collapse will be increasingly important and likely to go on for years.
by Chris Roush
Two conversations I’ve had this week about board members of publicly traded companies have got me thinking about directors and business journalists.
The first conversation was with a student in my “Business Reporting” class.
Each student in the class has to write a final project paper on a publicly traded company here in North Carolina. I encourage them to talk to as many people as possible, from company executives to analysts to investors to customers to, yes, members of the board of directors.
The student told me that she had found a board member of her final project company was a business school professor. She had approached him for an interview, but he declined. She couldn’t understand why he didn’t want to talk.
The second conversation was with someone who has been on a number of boards, including at least one Fortune 500 company, over dinner and drinks last night.
He wondered why, in the coverage of the departure of the J.C. Penney CEO, there wasn’t any mention in the stories about its board of directors — whether any of them had retail experience and who among them was the leading force in making a change in the executive suite. He noted that he had yet to see a board member quoted.
All of this leads me to wonder why companies, especially publicly traded companies, put such a lid on having their board members talk to the media.
Board members, above anyone else, should be great people to put in front of business journalists. They are the ones who know the company’s strategy and what the CEO is trying to accomplish. Whether the strategy is good or the CEO is being fired, these board members — particularly outside directors — are the most objective sources that a company can have, or that a business reporter can interview.
Yet I know of few companies who allow their board members to talk freely to the media. Virtually all of the time that a business reporter called a board member, the director refers the journalist back to the public relations staff. As a result, they come off as being afraid to talk, or ignorant of what is really going on at the company.
Why would seeing board members quoted in stories be good? Let me give you an example.
In 1997, I covered the Coca-Cola Co. for the Atlanta Journal-Constitution. CEO Roberto Goizueta was diagnosed in September with cancer, which was a big story. He had been the CEO for 15 years and had led the company to great success. The question was what was going to happen to the company if he should die — and he did die two months later.
I called a Coke board member, SunTrust’s Jimmy Williams. He had visited with Goizueta in the hospital, and his comments to me, which I included in the story, were reassuring to investors in the company who were likely nervous about its future prospects.
That’s unlikely to happen today. In the 21st century, in the wake of Enron, WorldCom and other corporate scandals, directors don’t want to talk to the media. They’re afraid their comments might be misconstrued or that they will come off ignorant about what’s going on at the company.
I say that’s bunk. If you’re a board member of a company, you should be willing to stand up for it, talk about it with the business press. By doing so, the public will have a better understanding about what is going on at the company.
And the company’s relationship with the business media will be less adversarial.
by Chris Roush
The annual Investigative Reporters and Editors awards were announced on Wednesday, and two were business journalism.
In the large print/online category, David Barstow and Alejandra Xanic von Bertrab of the New York Times won for “Wal-Mart Abroad: How a Retail Giant Fueled Growth With Bribes.”
The judges wrote, “Their determined effort eventually led to 600 public records requests in Mexico, producing 100,000 pages of records, and 200 interviews with government officials. Part One revealed how Wal-Mart’s top executives shut down an internal investigation that had found evidence of systemic bribery. Part Two offered an in-depth examination of how the company used bribes to accelerate its growth in Mexico. The stories prompted investigations by the U.S. Department of Justice, the SEC and Mexican authorities. The stories also spurred the company to conduct an internal investigation that led to findings of potential violations of the Foreign Corrupt Practices Act in Mexico, India and China.”
In the book category, Kristen Grind won for “The Lost Bank: The Story of Washington Mutual — The Biggest Bank Failure in American History.”
The judges commented, “As banks across the United States failed through a combination of greed, mismanagement and circumstances beyond their control, Kirsten Grind became one of the first to publish a meaningful post-mortem. She dug into the collapse of Washington Mutual, the largest bank failure in America, with skill and determination, bringing characters and events to life with an effective use of records and interviews. With crisp writing befitting a novel, she recreates a frightening drama that should have served as a warning to legislators and regulators that too-good-to-be-true home loans would contribute mightily to the collapse of the economy.”
See all of the winners here.
by Liz Hester
The news that J.C. Penney replaced CEO Ron Johnson, who tried to remake the retailer into a one-price clothing store, means that activist investors won. And it also means the company is returning to the leadership of former CEO Myron Ullman.
The coverage was mostly complimentary. Here’s the New York Times basic take on the news:
After a troublesome 17-month run, Ron Johnson is out as chief executive of J. C. Penney, and with that, the most closely watched revival effort in retail in recent memory is in danger of disintegrating.
The company’s board said on Monday that Mr. Johnson, who engineered Apple’s retail strategy, is leaving Penney and that Myron E. Ullman III, who had been C.E.O. at the retailer for seven years until Mr. Johnson took over, has returned to the helm.
Talk of Mr. Johnson’s possible departure had been swirling in recent weeks as Penney’s troubles with sales and strategy mounted, and as William A. Ackman, the activist investor and board member who recruited Mr. Johnson to revive Penney’s fortunes, seemed to withdraw support for him late last week.
Still, it is a curious move to go back to Mr. Ullman. Most of the senior employees that he had assembled at Penney either left or were dismissed by Mr. Johnson. And it was dissatisfaction with where Mr. Ullman was taking the company that led Mr. Ackman to look for another leader in the first place. Though profitable, Penney was seen as a mediocre retailer that was losing ground to competitors like Macy’s and Kohl’s.
The Wall Street Journal took the angle of what the returning CEO will likely keep of JC Penney’s new retail strategy and what will likely be replaced in order to make up some of that lost market share:
The mini boutiques with which Mr. Johnson planned to pepper Penney are likely out the door, analysts say. And reestablishing relationships with vendors is probably a priority.
Investor concern remains high: In early trading Tuesday, Penney stock was down about 10%.
Mr. Ullman is likely to take a close look at the company’s biggest transformation project: its home department. The multi-million dollar project includes bringing in fresh merchandise and new stagings.
Mr. Ullman’s stamp isn’t likely to be too heavy handed at the start.
“One thing they can’t do is swing the pendulum back to the way things were under Mr. Ullman because that wasn’t working either,” said Kathy Gersch, co-founder of Kotter International, a leadership consulting firm. “As a management team, they have to take a look at who their customer is and what they want and move in that direction. And that can’t be Ron Johnson’s or Mr. Ullman’s.”
“Perhaps Mr. Ullman can take the best ideas from Mr. Johnson’s regime, such as the specialty shops—but where will the cash come from to execute it—and abandon the worst ideas, such as eliminating discounts and clogging the aisles with gelato stands, and return the company to its former glory,” said Carol Levenson, director of research at Gimme Credit, a corporate bond research firm.
There are also personnel issues that will have to be dealt with. For instance, there has been no word of the fate of Chief Financial Officer Kenneth Hannah, who Mr. Johnson brought in, or other of his top management hires that remain.
Mr. Ullman “is coming in, but he’s not coming back to the same leadership team he had when he left,” given Mr. Johnson having brought in his own people, said Ms. Gersch. “Mike Ullman needs to pull that team together because they have a short period to get things back in order.”
The Bloomberg coverage was the most drastic, saying the retailer may have to sell itself in order to regain its previous place in the market:
J.C. Penney Co. (JCP) made a radical break with tradition by hiring Silicon Valley wunderkind Ron Johnson as chief executive officer. With Johnson gone, the chain may have to pursue even more radical options, such as selling itself.
Ullman faces several tough choices. He’ll have to decide whether to continue Johnson’s strategy of turning the chain into a collection of boutiques or return to a more traditional department-store model. Ullman will also have to consider whether to sell the company or break it up, said Dave Larcker, a corporate governance professor at the Stanford Graduate School of Business in Stanford, California.
“The board is going to have to get much more involved in the strategy of the company,” Larcker said. “People may attack the board, as well, for how this happened. This was a high- profile hire. For it to unravel this quickly is kind of terrifying.”
The Plano, Texas-based chain was so damaged under Johnson that Ullman will struggle to turn it around. On Feb. 27, J.C. Penney reported annual revenue dropped to $13 billion, the lowest since at least 1987. Johnson alienated the company’s core customers by doing away with sales and promotions and only recently began trying to win them back by putting discounts front and center again.
“There is a tremendous amount of cleaning up and rebuilding that has to take place,” Howard Gross, managing director of the retail and fashion practice at executive search firm Boyden in New York, said in a telephone interview.
Johnson’s appointment as CEO in November 2011 was greeted with much anticipation by analysts and investors. After all, he had helped Steve Jobs prove doubters wrong by turning Apple Inc.’s stores into a success with unrivaled sales per square foot. Johnson was expected to work similar feats at J.C. Penney, which was struggling for relevance. The shares surged 17 percent on June 14, 2011, the day Johnson’s hiring was announced, for the biggest gain in more than a decade.
It looks like Ullman doesn’t have the same star power with investors. It’s interesting that the retailer would return to an ousted CEO in order to right itself. It’s likely to be a closely watched story in the next several quarters as the company sorts through strategy, management and what it’s going to look like in the future. I’m sure the press will chronicle each and every move, likely putting different spins on the news.
The next coup will be who gets the first interview with Ullman as he retakes the helm.
by Liz Hester
I’ll bet Jon Corzine wishes he never said yes to the top job at MF Global. After a pretty good run at Goldman Sachs and as governor of New Jersey, he could have written a book, milked the speaker circuit, or simply enjoyed his millions. But no, he had to run another company, but this time, he didn’t do such a good job.
Here’s the story from the Wall Street Journal:
A risky business strategy as well as “negligent conduct” by former Chief Executive Officer Jon S. Corzine and his management team contributed to the unraveling of MF Global Holdings Ltd., a new report said Thursday.
The report, released by Louis J. Freeh, the trustee for MF Global Holdings, laid much of the blame for the company’s 2011 bankruptcy at Mr. Corzine’s feet, accusing him of implementing trading strategies with minimal oversight and exceeding board-approved limits for some European trades the company made under his stewardship.
The brokerage Mr. Corzine was trying to turn around was doomed due to “inadequate systems” and a trading strategy that had “fatally flawed” capital and liquidity assumptions, said the 174-page report, filed in U.S. Bankruptcy Court Thursday morning.
Mr. Freeh planned to bring a lawsuit alleging breaches of fiduciary duty against former MF Global executives including Mr. Corzine, but held off to join settlement talks instead, according to the report and a person familiar with Mr. Freeh’s thinking.
Mr. Freeh agreed to postpone filing any suit until a mediator in a related MF Global civil case could complete his work, the person added. Mr. Freeh and other attorneys representing customers of the firm hope that settlement talks will result in faster distributions of payments to all parties.
The New York Times coverage took a slightly different angle, focusing on the potential lawsuits and legal actions that could be brought against Corzine and his team:
The 124-page report filed in federal bankruptcy court early Thursday leveled its sharpest critique at Mr. Corzine, the former chief executive who was once the governor of New Jersey. Expanding on similar reports issued last year by Congressional investigators and another bankruptcy trustee, Mr. Freeh claimed that the C.E.O. ignored warning signs that the firm was in a precarious position even as he placed a risky bet on European debt.
While the bonds were not by themselves to blame for felling MF Global, the bet unnerved MF Global’s investors and ratings agencies. And when the firm spun out of control in October 2011, it grabbed money from its customers in a futile bid for survival. Mr. Freeh argued that the breach, still the subject of a broad law enforcement investigation, could have been prevented.
“Corzine and management knew, or should have known, that these factors were contributing to a precarious liquidity position that ultimately spelled disaster for MF Global,” Mr. Freeh wrote in the report.
A spokesman for Mr. Corzine did not immediately comment. Federal authorities have not accused him of any wrongdoing.
But as Mr. Freeh weighs his next step, a range of legal avenues are available for him to pursue. He could join an earlier lawsuit against Mr. Corzine and other executives, teaming up with the firm’s customers and the trustee overseeing the return of money to customers. Alternatively, Mr. Freeh could file his own case against Mr. Corzine.
The lawsuit, which could help Mr. Freeh recover money for MF Global’s creditors, would likely hinge on what Mr. Corzine knew about the firm’s mounting problems. Mr. Freeh’s report suggests he knew plenty.
Bloomberg added these specifics on the financial collapse of the brokerage:
The parent company of brokerage MF Global Inc. filed for bankruptcy on Oct. 31, 2011, after a wrong-way $6.3 billion trade on its own behalf on bonds of some of Europe’s most- indebted nations. The company, once run by former New Jersey Governor and Goldman Sachs Group Inc. Co-Chairman Corzine, listed assets of $41 billion and debts of $39.7 billion.
During the last week of October 2011, MF Global needed to rely on its Operations, Risk, and Treasury Department systems, which were fatally flawed, Freeh found. Corzine and other members of his management team, including Chief Operating Officer Bradley Abelow and Chief Financial Officer Henri Steenkamp knew about their deficiencies many months before, and their failure to address them contributed to the company’s demise, Freeh found.
Freeh estimates the losses to MF Global and its finance subsidiary were from $1.5 billion to $2.1 billion.
That’s a lot of potential liability. While Corzine certainly isn’t talking, there was one piece of information missing in these stories. I want to know how many CEOs of bankrupt companies have actually had to pay anything to the trustee. I’m sure there are some examples out there. What about Enron or some of the other spectacular collapses?
The problem for the trustee and anybody else thinking of suing them is that it’s going to be hard to prove who knew what and when they knew it. I certainly don’t have high hopes for a successful lawsuit.
by Liz Hester
Business reporters have long had to monitor Facebook, Twitter and other social media sites to stay atop of the news on the companies and executives they cover. Now the Securities and Exchange Commission is weighing in on the practice, offering some clarity for CEOs as well as reporters.
Here are some of the details from the Wall Street Journal:
Executives with itchy Twitter fingers can rest easier after federal securities regulators blessed the use of social-media sites to broadcast market-moving corporate news.
In a ruling that portends changes to how companies communicate with investors, the Securities and Exchange Commission said Tuesday that postings on sites such as Facebook and Twitter are just as good as news releases and company websites as long as the companies have told investors which outlets they intend to use.
The move was sparked by an investigation into a July Facebook posting from Netflix Inc. Chief Executive Reed Hastings, who boasted on the social-media site that the streaming-video company had exceeded one billion hours in a month for the first time, sending the firm’s shares higher. The SEC opened the investigation in December to determine if the post had violated rules that bar companies from selectively disclosing information.
“An increasing number of public companies are using social media to communicate with their shareholders and the investing public,” the SEC said in its report Tuesday. “We appreciate the value and prevalence of social media channels in contemporary market communications, and the commission supports companies seeking new ways to communicate.”
The fair-disclosure rule at issue requires companies to disseminate information in a way that wouldn’t be expected to give an advantage to one group of investors over another. The SEC has said that filing a form, known as an 8-K, or holding an earnings call are both ways to ensure compliance with the regulation.
In 2008, the SEC said that companies could use their corporate home pages, under certain circumstances, to disseminate sensitive information.
The New York Times points out that the SEC may be loosening its standards on social media.
Now, the S.E.C. seems to be relaxing its stance.
After an investigation of several months, regulators said that companies could treat social media as legitimate outlets for communication, much like corporate Web sites or the agency’s own public filing system called Edgar. The catch is that corporations have to make clear which Twitter feeds or Facebook pages will serve as potential outlets for announcements.
“They did a really good job of splitting the baby,” said Thomas A. Sporkin, a former S.E.C. enforcement official and now a partner at Buckley Sandler.
In developing its rules, the agency also let Mr. Hastings avoid sanctions for his Facebook post. Neither the chief executive nor Netflix incurred any penalties after receiving a Wells notice from the agency in December.
Instead, the regulator issued what is known as a report of investigation, used on the rare occasion when it wants to issue broad guidance from a specific investigation. As part of its release, the agency reiterated its goal for Reg FD was making sure investors received information at the same time.
“One set of shareholders should not be able to get a jump on other shareholders just because the company is selectively disclosing important information,” George S. Canellos, the agency’s acting enforcement chief, said Tuesday in a statement. “Most social media are perfectly suitable methods for communicating with investors, but not if the access is restricted or if investors don’t know that’s where they need to turn to get the latest news.”
As Forbes points out, it might be a step forward, but the SEC has a ways to go.
The clarification updates existing wording, Regulation Fair Disclosure, that sanctioned corporate websites as an appropriate means to distribute information. The update will probably force links to corporate Facebook, Twitter and LinkedIn accounts to quickly appear prominently on investor-relations pages. Else businesses with tweet-happy executive could soon run afoul of regulators.
While the SEC seems intent on entering the 21st century, if at a belated pace, it still took the regulators about 20 minutes to tweet a press release about the regulatory update. So much for simultaneous disclosure.
by Chris Roush
News Corp. is seeking to sell its Dow Jones community newspapers, reports Keach Hagey of The Wall Street Journal.
Hagey writes, “Founded by James H. Ottaway Sr. in 1936, the community-papers group today includes eight general-interest daily newspapers and their related websites in California, Maine, Massachusetts, New Hampshire, New York, Oregon and Pennsylvania. In fiscal 2012, their average daily circulation was more than 188,000 and Sunday circulation was over 238,000, News Corp. has said in government filings.
“News Corp. acquired the papers when it bought Dow Jones & Co.., publisher of The Wall Street Journal, in 2007. It tried briefly to sell the papers at that time but pulled the papers off the market in 2008.
“Newspaper industry observers say potential buyers could include Warren Buffett‘s Berkshire Hathaway, which has bought dozens of local newspapers in the last year, as well as Halifax Media Group, which bought the New York Times Co.’s regional newspapers last year.”
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