This Week's 5 Dumbest Stock Moves

Stupidity is contagious. It gets us all from time to time. Even respectable companies can catch it. Let's take a look at five dumb financial events this week that may make your head spin.

1. Rolling downhill
What's dumber than a company offering to pay $5.25 a share for a faddish footwear company that has just posted a 76% year-over-year decline in quarterly revenue and has posted losses in three consecutive quarters? I would have to say that it would be the recipient of that offer -- Heelys (Nasdaq: HLYS  ) -- shooting down the Skechers (NYSE: SKX  ) offer this week.

Unaware of its own growing irrelevance, Heelys gets this week's "When I grow up I want to be on the short end of Microhoo" award.

2. You can steal cars in a video game, but you can't steal a video game company
How convenient. Electronic Arts (Nasdaq: ERTS  ) announced that it was withdrawing its tender offer for rival Take-Two Interactive (Nasdaq: TTWO  ) , just as its fourth fruitless extension was set to expire. EA suggested that it was going to be too late to incorporate Take-Two into its bloodstream in time for the pivotal 2008 holiday season.

EA has no one but itself to blame for that. In the first four tender offers, no more than 15% of Take-Two's investors signed off on handing over their shares to EA at $25.74 a pop. Why should they? EA was offering to buy a fast-growing company with several hot franchises for just 14 times this year's earnings. If EA was serious about landing Take-Two before the holiday rush, it should have been serious about making a legitimate buyout offer.

3. I'll meet you at the eBay food court
In a gutsy move, eBay (Nasdaq: EBAY  ) is dramatically lowering the insertion fees of its fixed-price items. It will also extend the length of the fixed-price listings. The final value fees are being nudged slightly higher, but overall, this is a strategy where eBay will have to make it up in volume for it to work out.

I suggested that this was eBay throwing in the towel on its auction business, since the site is about to be overrun by fixed-price items. I quickly got a response from eBay's corporate communications department, insisting that eBay still loves its auction business.

Maybe so, but I've been an eBay member long enough to see the unproductive circus that the site becomes a few days after Christmas, when the site offers free or dime listings. It's just noise or overpriced junk. Since the emphasis this time around is on fixed-price items that sit around for a month, the good stuff will be snapped up quickly, further sullying up the marketplace with the mismatched items that remain. I hope I'm wrong, but I'll hold my nose as I sit this round out.

4. Dumping Diller
BMO Capital Markets analyst Gerrick Johnson downgraded shares of Hasbro (NYSE: HAS  ) this week, fearing that a weak economy will sting the toymaker bellwether heading into the pivotal holiday shopping season.

The thesis has some merit, but his bearish profit targets call for Hasbro to earn just $2.00 a share this year and $2.05 in 2009. It is well off the consensus Wall Street guesstimates of $2.21 a share in 2008 and $2.54 in 2009. There's no foul in going against your peers, but Hasbro is a company that has beaten analyst estimates in each of the past five quarters. If you're going to go against that kind of momentum, you're either a brilliant contrarian or a chump. We'll see where Johnson comes in after the holidays.

5. Corporate sponsorship? Not that there's anything wrong with that
Jerry Seinfeld will be the new face of Microsoft's (Nasdaq: MSFT  ) $300 million marketing campaign to get its operating system back into the market's good graces. I love the pick. Seinfeld is a likable celebrity with multigenerational appeal. However, wasn't that an Apple computer in his sitcom apartment?

I just hope Microsoft really goes all out to turn the tables on Apple, hiring Wayne "hello, Newman" Knight to play the "I'm a Mac" guy.

Let's beat the dumb drum:

Microsoft is a Motley Fool Inside Value pick. Take-Two Interactive Software is a Motley Fool Rule Breakers recommendation. Hasbro, Electronic Arts, and eBay are Motley Fool Stock Advisor recommendations. Get total access to any of our Foolish newsletters, free for 30 days.

Longtime Fool contributor Rick Munarriz is a fan of dumb and smart business moves. Investors can learn plenty from both. Hdoes not own shares in any of the stocks in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.


Read/Post Comments (3) | Recommend This Article (2)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 22, 2008, at 9:53 PM, nichestorebldr wrote:

    The one thing press is missing is that eBay has dismissed many thousands of high volume, high earning affiliates this week as well.

    On Thursday morning, the eBay Partner Network sent out pink slips to affiliates who have built careers out of promoting eBay in their daily business.

    If you read the "ePN Forum", it does not take long to see that the affiliate program is a bust and will die quickly.

    When asked why the affiliates were let go, eBay response was: "We found your visitors were not engaged in eBay as a whole" - Explain that to the owner of a site who was cut... his site sent 12,000 daily visitors to eBay motorcycle auction category and sold more than 50 motorcycles every day through the eBay Partner Network.

    The change to fixed cost listings is barely news compared to eBay losing traffic and sales from more than 100,000 disgruntled affiliates worldwide, who will direct their traffic to other sites, and go out of their way to be sure their visitors buy nothing from the affiliate program with no transparency!

    Mark

    TheNicheStoreBuilder com

  • Report this Comment On August 23, 2008, at 8:31 AM, cohibastore wrote:

    "the good stuff will be snapped up quickly, further sullying up the marketplace with the mismatched items that remain"

    The article that shows writer does not understand ebay, the difference between auction and fixed price listing, store and core listings, vintage and new items, and where the growth in internet commerce is.

    He's even assuming folks only list on one day a month!.

    The simple fact is future growth will not be in auctions. Growth will be in fixed priced traditional shopping venues/listings. If that's not obvious the writer is a real fool, not just a motley fool.

    DVDs don't go bad and books don't have an expiration date. For fixed priced listing there is little difference between a 7 day and 30 day listing if they are all in core, except new lower listing fees.

    If the writer missed these critical points, can we trust the rest of his analysis?

    CS

  • Report this Comment On August 31, 2008, at 9:09 AM, ocdgirl2000 wrote:

    Ebay affiliates are nothing more than parasites and predators on the ebay sellers. They appear to have a great deal of control in the business now, and are now being noticed for what they are. Too bad ebay was taken in by them in the first place, the sellers that they feed on are the ones that sell the mass marketed merchandise like Walmart's at higher prices with so called free shipping and masses of pay per click advertisements on their listing pages and store fronts. How sad.

    Ebay used to carry the unusual and hard to find antiques and period collectibles. Now those auction sellers will go to niche businesses that are private and pay the higher store front fees for fixed priced listings that ebay could have had, if they had treated their sellers better than they do.

    Soon, Tia's Ruby Lane, and GoAntiques (just now bought by another company and recently was let go by ebay's live auction platform) will be making some nice new friends(ex ebay sellers) who have experience in selling the most sought after items by collectors and antiques lovers.

    Even though ebay CEO's say they still "love" the auctions they bury at the bottoms of all searches, they still offer no support or any type of customer service to it's sellers who rent space from them. And they have too many difficulties in their selling interface structures, that have been discouraging the listings being added, in general.That's not a good thing, and that will be their biggest downfall.

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