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. Too little, too late
Sony
First it was Sony, slashing prices on its e-book hardware. However, not only does the move come two weeks after Nook and Kindle markdowns, but Sony's price cuts aren't nearly as steep and aggressive as its early bird rivals.
However, the real "dumb" card here goes to Borders. It finally got around to launching an online bookstore this week, and somehow is going public with its goal to own 17% of the market within a year. Really? This is already a cutthroat market with a pair of tech darlings leading the way. It's unlikely that Borders will be anywhere close to that goal by next summer, and the debt-saddled retailer is in no position to invest intensively in marketing or enhancing its e-book marketplace relative to the competition.
I know how this novel ends, but I won't ruin it for Borders.
2. The bigger they are, the harder they stall
Tesla Motors
The maker of zero-emission electric cars may have wowed the market when it went public at $17 last week, trading for more than $30 at one point the following day. However, it's been a different story this week. The stock broke below its original $17 price on Tuesday, and closed at an underwriter-humbling $15.80 on Wednesday.
Investors should have seen this coming. All three of the Motley Fool analysts that wrote about Tesla's debut last week concluded that the shares were flat out overpriced.
Tesla has managed to get over a thousand owners to fork over six figures for a snazzy yet eco-friendly car, but it's still two years away from rolling out its more accessibly priced sedan in large enough volume to even broach the subject of profitability
Most of this year's hot IPOs have faltered after their opening day gains, so investors need to be careful when they go tailgating Wall Street debutantes.
3. Hit me bebe one more time
Shares of bebe
Yield chasers flock to these one-time payouts as if it's found money. It's not. Stocks do go ex-dividend, leaving companies with less cash in the bank.
"Until it can fix its comps, it should be holding on to that money for the necessary refreshes to get back on track," I wrote after Hot Topic's springtime cash clearance.
The same statement applies to bebe. In fact, at the same time of the distribution, the company announced that it would be closing or converting its 48 PH8 stores. This was the concept that bebe uses to replace its Bebe Sport locations. Trust me, bebe may be tickled about being able to pass on auction rate security proceeds to its shareholders, but this is money that it's going to need to get back on track.
Oh, and PH8 isn't the only stinker here. The stock went on to give back most of those gains on Thursday after bebe announced that overall comps fell 3.4% in its latest quarter.
4. Who wants to sue a billionaire
Disney
Hollywood accounting has always been fuzzy, but Disney just looks bad here. Even if it appeals, the move will either sway content creators away from licensing their programs through Disney and forcing past partnerships to dig deeper into the Mickey Mouse accounting practices.
I'm just hoping Disney didn't shout back "final answer" after the verdict was read.
5. A chip off the old block
H&R Block
Smyth isn't to blame for the tax preparation specialist's decision to enter the subprime market several years ago or even its embarrassing accounting miscues. He has only been at the helm for a couple of years. H&R Block has had its challenges in this era of free online filing and dirt cheap accounting software, but at least Smyth's presence implied stability.
Well, it's a different ballgame now. H&R Block's CEO, CFO, and legal counsel have all left the company in recent weeks.
Is it too late to clean up H&R Block without triggering any wash sale rules?
Which of these five moves do you think is the dumbest? Share your thoughts in the comment box below.
