In the theme of Christmas and the spirit of giving, I plan to use the next week leading up to Christmas continuing to count down the 12 Days of Christmas in all its Foolish glory. In my rendition of this Christmas tale, you won't be hearing about turtledoves or French hens, but you'll probably hear about great ways to save money in 2013 or about CEOs who laid rotten eggs in 2012.
In the previous "Foolish Days of Christmas," we've looked at:
As always, I ask you to sing along with me: "On the fifth day of Christmas my true love gave to me..."
The five biggest CEO gaffes of the year!
CEOs making bad decisions is really nothing new -- in fact, I made a pledge to highlight questionable CEO actions each week. Today, we'll take a look at the five worst offenders of 2012 in the hopes of avoiding investing in companies whose CEOs make choices like these!
5. The Facebook fiasco
There simply wasn't a more anticipated IPO in 2012 than Facebook (NASDAQ: FB ) . Unfortunately for investors, the hype proved far greater than the actual result. Between CEO Mark Zuckerberg's insistence that more shares should be brought to market and the IPO price pushed higher; numerous faulty trades from Nasdaq OMX Group (NASDAQ: NDAQ ) that left investors in the dark as to whether or not their orders had executed (in some cases for more than a day); and lead underwriter Morgan Stanley (NYSE: MS ) lowering revenue estimates on Facebook just hours before its debut, Facebook's IPO went off filled to the brim with hitches!
Ultimately, the Facebook IPO cooled off the IPO market only temporarily, but it did serve to remind investors about the dangers of investing in companies that are transitioning from secondary markets to publicly traded platforms, and of buying into "the next big thing."
4. Joe Ratterman, CEO of BATS Global Markets
What could possibly be worse than the botched Facebook IPO? How about a really botched IPO that had CEO Joe Ratterman of BATS Global Markets pulling a mulligan on investors!
BATS, the third-largest stock exchange operator and a company known for processing high-frequency trades, fell victim to the glitch of all glitches during the worst possible time: its first day of trading. Shortly after 11 a.m. ET on its first day of trading, BATS' BZX Exchange went "batty" and had trouble relaying information to its BYX Exchange. The miscommunication led to wonky trades being executed for every stock between the letters A and BF. BATS, being within this letter combination, saw 1.26 million shares traded at (last chance to swallow your food before continuing...) just $0.0384 after pricing at $16. Furthermore, BATS darn near caused Apple shareholders a heart attack when a 100-share block executed and drove the price of their stock down 9% (nearly $50 billion) in an instant, and caused circuit breakers to trigger. Rather than fess up to its mess, CEO Ratterman instead chose to pull BATS' offering from the market entirely! You hear that, Happy Gilmore? Mulligans are alive and well!
3. Brian Dunn, former CEO of Best Buy
What does it take to top two really poor IPOs? How about an inappropriate relationship and a failure to anticipate a very evident shift in the retailing industry!
Brian Dunn, now the former CEO of big-box retailer Best Buy (NYSE: BBY ) , resigned in April as news arose that he'd had an inappropriate relationship with a 29-year old leadership intern. What's worse is that shareholders weren't initially given the truth and were told that both Dunn and the Best Buy board had reached a mutual agreement for him to resign. Don't feel sorry for Dunn, either -- he received a $6.65 million severance package!
Even worse than Dunn's actions were his inactions when it came to the rapidly shifting trend toward online retailing. Best Buy sat on its laurels for far too long while e-tailers like Amazon.com undercut big-box retailers' prices and turned them into nothing more than showroom stops for consumers.
2. Mark Pincus, CEO of Zynga
Are you really surprised to find the winner of The Motley Fool's Worst CEO of the Year in the top two biggest CEO gaffes of the year?
Zynga (NASDAQ: ZNGA ) may be a newcomer to the market in 2012, but Pincus is well on his way to becoming a lifetime member of the gaffes list following his dump of 16 million shares of his personal stock just weeks before Zynga's quarterly report "farmed" about half of the market value out of Zynga's stock. Things have gotten even worse since that report, with Zynga and Facebook restructuring their relationship, and with the amount of paying users falling despite an increase in unique game users.
Perhaps the defining moment of Pincus' year, outside of the insider trading allegations, or its ridiculously overvalued purchase of OMGPOP, which has already been written down significantly, is the mass exodus of executives from Zynga to literally anywhere not named Zynga. In total, Zynga has now lost 10-plus high-level executives.
1. Sean Menke, former CEO of Pinnacle Airlines
And the winner of all losers is... Sean Menke of the now-bankrupt Pinnacle Airlines! Back in early April I noted that I'd seen some questionable pay raises in my time, but this one may take the cake as the head-scratcher of them all. Despite filing an extension with the Securities and Exchange Commission reporting that Pinnacle's quarterly filing would be late, Menke filed an 8-K indicating that he'd be receiving a 60% boost in pay to $675,000 from $425,000 -- despite the fact that his airline was far from profitable.
Now here's where things really got interesting. Just 11 days after his pay raise was filed with the SEC, Pinnacle filed for Chapter 11 bankruptcy protection -- on April Fool's Day, no less. I couldn't make this stuff up if I wanted to! Furthermore, activist shareholders had made an attempt to get board representation on Pinnacle in prior years, as management had, in their eyes, not looked out for their best interests -- but they were eventually denied by the board.
More expert advice from The Motley Fool
After the world's most-hyped IPO turned out to be a dunce, most investors probably don't even want to think about shares of Facebook. But there are things every investor needs to know about this company. We've outlined them in our newest premium research report. There's a lot more to Facebook than meets the eye, so read up on whether there is anything to "like" about it today, and we'll tell you whether we think Facebook deserves a place in your portfolio. Access your report by clicking here.