XBRL – It’s Closer Than You Think

Within the next month or two, the SEC will finalize rules that mandate XBRL-based submissions for collecting financial reporting information for all domestic and foreign SEC reporting companies.  For those of you wondering, XBRL stands for Extensible Business Reporting Language.  Proponents of  XBRL believe it will allow for more accurate, relevant and scalable analysis of financial information, as well as create greater transparency that can result in a lower cost of capital.  To read more about the SEC’s phase-in plan, click here to access Bowne & Co’s plain English summary.

 

PondelWilkinson, investor@pondel.com
 
 

Paper or Plastic?

You have carefully selected and planned the contents of your media kit, but when asked paper or plastic…which should you choose?
 
In today’s technologically advanced world, should we still use the traditional paper approach and stuff kits with an array of collateral materials? Or should we combine everything into electronic files and offer them as downloads and take-away CDs?
 
On one hand, electronic press kits save printing and paper costs, as well as offer companies more freedom to digitally enhance their presentations with animation, sounds, and other sensory stimulations that plain paper is lacking.  Furthermore, CDs and downloadable links are relatively easy to distribute.
 
However, what if someone wants to compare a fact sheet with the company’s management biographies side-by-side?  Or perhaps an executive has limited access to the Internet or a computer but needs to immediately peruse the kit.  The fact that paper kits are free from the virtual handcuffs of a hard drive makes paper a much easier and more reliable source for those who need to quickly access a kit.
 
So what should we do?  Double bag it.  Use paper first and use plastic to enhance and provide the main source of support.
 
While each style has its unique advantages and disadvantages and plenty of overlap, perhaps it’s better to combine the best of both worlds and just let the overlaps…well, overlap.
 
Keep a smaller supply of traditional paper kits handy to cut down printing, paper and shipping costs.  Have them ready to mail out, ready to update and replace outdated materials while maintaining the main electronic version with digital enhancements online or in CD format for daily users.

 

PondelWilkinson, investor@pondel.com
 
 

Banking on Oedipus

Before his birth, it was prophesied that Oedipus would murder his father, the king of Thebes, and marry his queen mother. To avoid this catastrophe, the baby was abandoned for death, only to be adopted and raised elsewhere.  Once an adult, Oedipus left home and along his journey, he killed a man in a roadside scuffle.  It was later discovered that Oedipus had killed the Theban king, so he was named the new king, married the widowed queen, and therefore fulfilled the prophecy of his birth.
 
Though not nearly as melodramatic, but perhaps just as perturbing, bank runs can also be seen as a self-fulfilling prophecy.  Starting with rumors that a bank is performing poorly, hundreds of customers will withdraw their money, and the bank will consequently be pronounced dead.
 
The recent failure of IndyMac Bank, FSB can be considered an example of this phenomenon.  Though IndyMac reported consistent losses in the year before its demise, it was the public release of letters written by the Chairman of Congress’ Joint Economic Committee that sent IndyMac customers into a flurry of panic.  The Senator’s letters, released June 26, 2008, opined that the collapse of IndyMac was a possibility.  In the two weeks to follow, IndyMac customers withdrew more than a billion dollars in deposits, sending the bank into a liquidity crisis.  With that, the FDIC overtook the bank, and on August 1, 2008, IndyMac filed for bankruptcy.
 
Could IndyMac’s collapse have been avoided?  If the Senator’s letters had remained private, would the bank still stand?  There’s no doubt that the bank would still have to deal with a slew of problems, but I’m sure that the day before the letters were revealed, government takeover and bankruptcy seemed like a fat chance.

 

PondelWilkinson, investor@pondel.com
 
 

SEC Continues to Cut Shorts Off at Knee

The SEC today announced that it is temporarily prohibiting short selling in 799 “financial companies.”  The Financial Services Authority in the U.K. took a similar action yesterday.
 
The move is intended to preserve fair and orderly markets, and curb sudden and excessive artificial fluctuations in securities prices primarily driven by rumor, innuendo or collusion.  The new list of 799 “financial companies” is an expanded list of the original 19 companies that were restricted as part of an emergency orderannounced in July.
 
The SEC also has “concluded that it is necessary to require certain institutional investment managers to
report information concerning daily short sales of securities.” In effect, this requires Form 13(f) filers for the calendar quarter ended June 30, 2008 to file a new form – Form SH – on the first business day of every calendar week immediately following a week in which it effected short sales.  The filing must include: “disclosure of the number and value of securities sold short for each section 13(f) security, except for short sales in options, and the opening short position, closing short position, largest intraday short position, and the time of the largest intraday short position, for that security during each calendar day of the prior week.”  Exceptions to this exist and are discussed in the SEC order at the above link.
 
The new SEC order is effective at 12:01 a.m. EDT on September 22, 2008. The SEC requires the first Form SH to be filed on September 29, 2008.  The order is in effect until 11:59 p.m. on October 2, 2008 unless further extended by the Commission.
 
Not only will this begin to reveal to many companies who might be betting on their company’s demise, it also should keep their respective SEC legal counsel on their toes. And while the cost of being a public company continues to rise, gaining insights into who is shorting your stock may be priceless.

 

PondelWilkinson, investor@pondel.com
 
 

Grounded Accommodations

If your travels (business or otherwise) happen to take you to Stockholm in the near future, consider this new and interesting place to stay.  It’s very convenient to the airport.  In fact, it’s in the airport…in an old Boeing 747.
 

Jumbo

Jumbo Hostel accommodations can even be found in the cockpit. Or have lunch in the body in a retro cafe!

Swedish businessman and entrepreneur Oscar Dios is converting a grounded 747 into a 25-room hotel called Jumbo Hostel, according to CNN.  The plane, which used to carry more than 350 passengers, is being renovated to provide accommodations for up to 85 guests. Jumbo Hostel is scheduled to open in December 2008.
 
A basic room at the hotel will cost approximately $150 per night.  At only 65 square feet it is said to be large enough for three adults (perhaps when the bed is stored in the upright position). For about $700 per night, you can book the top deck which includes the cockpit suite, a private bathroom and panoramic views of the airport’s takeoffs and landings.
 
Even if you don’t want to spend the night on board you can visit the café suite for a couple of hours for $35 (a bargain considering you can walk out onto the plane’s wing to view the airport from a unique vantage point).  Unfortunately, there’s no business center!

 

Laurie Berman, Senior Vice President, lberman@pondel.com
 
 

SEC Cracks Down on Naked Shorting

The Securities and Exchange Commission issued three rules today to strengthen investor protections against “naked” short selling. The rules take effect at 12:01 a.m. on Thursday, September 18.
 
A short sale occurs when a short seller essentially borrows a stock and sells it with the understanding that the loan must be repaid by buying the stock in the market at a later date and hopefully at a lower price.
 
Naked short selling is the practice of selling a stock short without first borrowing the shares or ensuring that the shares can be borrowed as is done in a conventional short sale.

 

PondelWilkinson, investor@pondel.com
 
 

The Right Stuff

NIRI (the National Investor Relations Institute) recently reviewed the investor relations Web sites of the 100 largest publicly traded companies in an effort to develop a set of best-in-class practices.  The results were presented in a comprehensive Executive Alert distributed to members.
 
Some highlights to keep in mind when reviewing or building your own IR site:
 

  • Provide direct contact information for the IR team (include both internal and external contacts).
  • Use common names for standard pieces of information to make them more easily identifiable to users.
  • Don’t burry important company messages in your FAQ.  Create separate sections for key information such as shareholder services.

  • Avoid having the site launch new windows as a way of accessing content or functionality.

 
Additionally, certain core elements were found among the Web sites that were reviewed:
 

  • 92% contained earnings press releases;
  • 92% contained stock quotes/charts;
  • 89% provided transfer agent information;
  • 87% offered webcasts;
  • 82% offered e-mail alerts;
  • 80% gave dividend information;
  • 77% included a historical stock price lookup feature and a history of stock splits; and
  • 62% included an investment calculator.

 
If you haven’t looked at the content on your investor relations Web site recently, now is a good time for a check-up.  As we reported here on August 5, 2008, the SEC recently released new interpretive guidance that could give companies the ability to use their Web sites as an appropriate full disclosure outlet.  The more up-to-date and feature rich your site, the better chance you’ll have of meeting the SEC’s Web site disclosure guidelines.

 

– Laurie Berman, Senior Vice President, lberman@pondel.com
 
 

Just Say No

In the mid-1980s, Nancy Reagan introduced a national anti-drug campaign that essentially told kids to “just say no” when asked by a drug dealer whether they would like to partake in drugs.  The problem was that some kids began just saying no when their parents tried to soothe their stomachs with Pepto Bismol and other so called drugs, even though they were not of the mind-altering variety.
 
What an apropos scenario when public companies consider whether to talk to hedge funds.  Should we just say no when fast money tries to communicate with a public company?  Or are we inadvertently warding off potentially loyal investors who may actually help soothe volatility during a rough market?
 
Quite frankly, it is difficult to decipher whether a hedge fund is going to help induce an all-time high in a company’s stock price or whether that high will be short lived.  One rule of thumb is to do a little due diligence on a prospective investor before communicating with them, regardless of whether they make the “shark list.”  Talk to the sell side and arm yourself with as much information as possible.
 
Do not hesitate to ask an investor questions when engaged in conversation.  After all, it signals that you are as much engaged in your story as you are in your investors’.  And that will signal to the Street that no matter what new highs or lows an investor takes your stock, you are not resigned to “just saying no” and blindly warding off medicine that may actually be good for a company’s stock valuation.

 

Evan Pondel, Vice President, epondel@pondel.com