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: