Stupidity is contagious. It gets us all from time to time. Even respectable companies can catch it. As I do every week, let's take a look at five dumb financial events this week that may make your head spin.
1. The wedding zinger
Not every corporate combination is a good one. SINA (Nasdaq: SINA ) is buying Focus Media's (Nasdaq: FMCN ) digital outdoor advertising businesses for 47 million shares of SINA. The new stock will then be handed over to Focus Media shareholders.
The market hated the news, sending shares of SINA and Focus Media lower by 17% and 16%, respectively. It's not too often that you see both companies in an acquisition get blasted.
Investors fear that online giant SINA's push into slower growing real world advertising is a sign of maxing out in cyberspace. That's a ridiculous notion. The real impetus is that SINA's growing base of advertisers will now be better served across real and virtual platforms.
However, the market really got it wrong with Focus Media. Reacting to the news, investors knocked shares of Focus Media to a price below the value of the SINA shares it will be receiving and its nearly $3 a share in cash. That is absurd when one considers that Focus Media will still have a fast-growing online advertising business that it acquired for $225 million to $300 million last year and a few real world billboards and a movie theater advertising network.
2. The singer slinger
Good luck finding music videos from Warner Music Group (NYSE: WMG ) on YouTube. The record label's videos were pulled from the site, supposedly over a licensing dispute.
YouTube partners get a piece of the action through revenue-sharing deals with Google's (Nasdaq: GOOG ) leading video-sharing site. It may not amount to much for a corporate giant like Warner Music, but isn't the point of releasing a video to stimulate CD and digital download sales to begin with? YouTube is providing a highly trafficked hub for self-promotion, hosted for free, and Warner Music is going to walk away from the incremental money maker?
CD sales were fading long before three guys launched YouTube a few years ago. Taking down the clips won't send music fans to another site. It will only lead them to non-Warner artists.
3. The e-journalist stinger
Companies owe it to their investors to defend themselves when the media attacks. Does that mean that companies should attack themselves when the media praises them? That is sort of what happened this week with Garmin (Nasdaq: GRMN ) .
Shortly after e-journalist site DigiTimes posted a story about Garmin having strong Black Friday sales and being likely to ship 18 million GPS units this year, Garmin issued a press release disputing those claims, saying that the article "contains a number of inaccuracies in both sales figures and product rollout schedules."
Garmin goes on to rain on its own parade, with its CFO warning that the December sales environment is "weaker" than Black Friday results may seem to suggest.
One can always applaud Garmin for keeping expectations low, but when you go about issuing press releases bashing your fans, it's more than just bad show: It also sets a precedent for the company to nip any future speculation in the bud.
Why is it that I can see where this is all heading but a GPS giant doesn't?
4. Plastic wingers
A Bankrate poll showed that 40% of its respondents would not be upset if their credit cards went away. This is naturally bad news for MasterCard (NYSE: MA ) and Visa (NYSE: V ) .
The two stocks are trading well below their 52-week highs, but they haven't been sporting the kind of carnage typically seen in the financial services sector. As credit card enablers, they have been spared the credit risk that the issuing banks take on. However, if folks do begin scaling back on swiping plastic it will definitely leave a mark on companies like MasterCard and Visa that feast on transaction fees.
5. The wordplay finger
I took a look at this year's five dumbest CEO quotes this week. Who said that a pending merger would "create tremendous value for stockholders," only to see his company's share price plunge by 96%? Who awakened a cloud-computing giant by suggesting that "nobody uses those things" when asked about a rival's product?
I can tell you, but the real fun is checking all five quotes on your own.
See you on the other side in 2009 next week.
Let's beat the dumb drum:
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