Sam Waksal’s Revenge & Kermit the Frog

By Paul Kedrosky · February 13, 2004 · ·

It is an ironic end to a bizarre story. ImClone’s Erbitux cancer drug was approved yesterday, but trading had to be halted before the good news because the drug’s company’s stock fell 21%.

Yes, fallen. Why the tumble? Because daytraders were diligently spreading the word that Erbitux was about to be rejected by the FDA.

It wasn’t rejected, of course. But the errant rumor-mongering triggered yet another ImClone-related investigation — number 7,732, I think.

I wonder who this investigation will bring low, alongside Sam Waksal and Martha Stewart. Perhaps Kermit the Frog. I’ve always thought he looked shifty.

Filed Under: Uncategorized

Google Valuation

By Paul Kedrosky · February 13, 2004 · ·

Interesting George Colony piece on Google’s upcoming IPO. He argues fairly convincingly that the likely $10-billion-plus market capitalization will be wrong and destructive.

George is right, but trust me, it won’t matter. This is the right confluence of IPO, market, awareness, and time to produce something truly otherworldly. We should all be so lucky as to have Google’s IPO stay at the “sane” levels of $15-billion.

Filed Under: Investing

Trump Gets Downgraded

By Paul Kedrosky · February 12, 2004 · ·

While Donald Trump has been basking in the glow of the successful “The Apprentice” fake reality show, real reality keeps trying to intrude. His Trump Casino Holdings LLC had its debt downgraded this morning by S&P. The ratings firm put Trump Atlantic City Associates on notice that it too could see its debt rating cut.

The reason? A deal cut by Trump Hotels and Casino Resorts, the parent of the aforementioned companies, with Credit Suisse First Boston to “recapitalize” Trump Hotels. A CSFB unit will put in $400-million, and in exchange it will get majority ownership of the Trump’s company.

 

Filed Under: Investing

Comcast-Disney OpEd

By Paul Kedrosky · February 12, 2004 · ·

I ordinarily find Andy Kessler’s market comments fairly savvy, so I was somewhat disappointed to read his editorial in today’s WSJ on the Comcast-Disney deal. He points out that cable is a municipal monopoly, and then argues Comcast is buying Disney so that it has more cable channels, like ESPN, on which it can raise prices to other cable companies. His solution? The FCC and Justice lets the deal go through, preconditioned on opening up local markets to more cable competition.

Filed Under: Investing

Parsing Paul Martin

By Paul Kedrosky · February 11, 2004 · ·

Canadian Prime Minister Paul Martin is saying that the current financial scandal was limited to a small group of people of which he had no knowledge. That is possible, although it is hard to square with his concurrent tenure as Finance Minister, not to mention the warnings that there was something awry in the department that was eventually fingered.

Who to believe? Well, according this (unscientific) poll at the Globe & Mail site, Canadians are firmly convinced that Paul Martin knows more than he is telling. Whether founded or unfounded, that widespread belief is going to play electoral havoc if the ruling Liberals stick to their plan for a May federal election.

  Update: Not having seen a single story about this issue here in the U.S., I did a quick search under Canada at Google News. Here is one of the first headlines that came up:

“Vancouver tops in reported UFO sightings across Canada”

Filed Under: Uncategorized

Disney-Comcast

By Paul Kedrosky · February 11, 2004 · ·

This Disney-Comcast tieup is the best thing that could have happened to Michael Eisner. He solves his board problem, his succession problem, and his share-price performance problem courtesy of Brian Roberts at Comcast. He should be sending Roberts a thank-you card.

Just for interest, here is the FT’s list of the ten largest such deals extant. Factoid: Five of the ten come from media & communications.

Filed Under: Investing

How Not to Manage the Press

By Paul Kedrosky · February 10, 2004 · ·

The White House press conference today should be required reading among all crisis management consultants working with companies. Far from being an exemplar, it was instead among the worst-managed such things I have ever seen. Spokesperson Scott McClellan was fumbling and uncertain, and while it almost certainly wasn’t his fault, the press pounced on his unwillingness to answer simple questions.

Without taking a partisan tack, it is an interesting example of how violating Carville’s Rule of Scandals – tell it early, tell it all, tell it yourself — can turn even the most insignificant issue into a debacle. The current president is in good company in struggling to manage the media, and alongside him is a laundry list of ballooned business scandals, from the major, like Tyco, to the minor, like Martha Stewart.

Filed Under: Uncategorized

Was Canada’s Enron Canada Itself?

By Paul Kedrosky · February 10, 2004 · ·

The Canadian auditor general’s report is now out, and it is a whopper of a business scandal, albeit set in the public sector. A few quotes from A-G Sheila Fraser on the biggest faux pas detailed in the report, the government’s errant billion-dollar up-with-Canada advertising program:

“Our findings on the government’s sponsorship program from 1997 to 2001 are deeply disturbing. Most significant was the widespread non-compliance with contracting rules, …Rules were broken or ignored at every stage of the process for more than four years, and there was little evidence of value received for the money spent.”

 Ms. Fraser continues:

“In a small number of very troubling cases, sponsorship funds were transferred to Crown corporations by highly questionable methods. These methods were apparently designed to pay commissions to communications agencies while hiding the source of the funds. And the amounts were significant.”

Canadians have been congratulating themselves for having (largely) escaped having their own Enron. No longer. Not to put too fine a point on it, but it seems as if the Federal government nationalized the job.

Filed Under: Politics

Advertising Run Awry

By Paul Kedrosky · February 9, 2004 · ·

What do you call it when a very large advertiser hands out advertising contracts largely to cronies and pays no interest to the results? Well, that is what apparently happened in Canada over the last few years.

The report comes out tomorrow (Tuesday), and it will be bad news for Canadian advertising agencies, and worse news for the new Paul Martin government. Here is the sanitized overview, but insiders are saying that the full report is painful stuff:

Between 1998-1999 and 2002-2003, the federal government ran more than 2,200 advertising activities with contracts valued at about $793 million, making it one of the largest advertisers in the country. Our audit looked at whether in contracting for advertising services, the federal government ensured that it obtained best value for the Crown in a process that was transparent and gave equal access to suppliers of advertising services. We also looked at whether departments ensured that their advertising campaigns were designed to achieve the expected results.

An initial report back in 2002 said that the Canadian bureaucrats had “broken every rule in the book”, with some Canadian advertising agencies getting close to a million dollars for doing no work. The opposition party claims it has evidence the contracts were secret payments to firms for work they did for the Liberals in the 1997 federal election, which would be a violation of campaign financing laws.

The best part is how it is being played by the Paul Martin government. People close Prime Minister stress emphasize that this all happened during the 10-year reign of the prior prime minister, Jean Chretien. Critics correctly point out that Mr. Martin was finance minister for nine of those years.

Filed Under: Scandals & scams

Trend-spotting in the WSJ

By Paul Kedrosky · February 9, 2004 · ·

There is a nifty supplement in today’s WSJ on the joys of trend-parsing. As part of the piece various folks, from venture capitalists to portfolio managers, talk about how they keep an eye on what’s changing and what’s hot.

The trouble is, most of these people aren’t telling the truth. It’s not that they are consciously keeping their best “world hacks” to themselves; it’s that they simply don’t know how they keep track of change and make sense of it. They almost certainly think they know, but it is unhighly unlikely that they actually have such neat and highly-privileged acccess to their own mental processes.

One interesting classic paper on the subject is Nisbett, R., & Wilson, T. (1977). Telling more than we can know: Verbal reports on mental processes. Psychological Review, 84, 231-259.

Filed Under: Investing
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