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.



Mullin’s Musing on SEC Order

Our friends at Sheppard Mullin weighed-in on the SEC’s emergency order issued last night regarding easing restrictions on issuers to re-purchase their securities during the current market conditions.



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.



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.



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,

A Good IDEA?

Today, the Securities and Exchange Commission unveiled the successor to the agency’s EDGAR filing database, called IDEA (Interactive Data Electronic Applications).  The 1980s-era EDGAR database is being replaced by a Web-based system that the SEC says should give investors better and more up-to-date financial disclosure in a new, easy-to-use format.  The move to IDEA follows several SEC discussions about the mandatory use of XBRL in public company filings.
According to the Washington Post, while advocates believe public companies will benefit through increased filing automation, others point out that public companies will have to face the burden of transition and implementation costs.
Although we may face some growing pains as IDEA and XBRL become reality, transparency and access to better information benefit all constituencies over the long-run.
The SEC plans to run IDEA and EDGAR concurrently over the next several years, after which EDGAR will come an archive for older filings.


Laurie Berman, Senior Vice President,

the great mIgRation

IR folks come from all walks of life.  From CPAs to CFAs to MVPs, IROs come in all different shapes and sizes.  It appears the most recent IRO migration derives from the sell side.  Bedraggled by long hours and marketing trips, sell side folks are finding their way to IR like divining rods in search of a water source. With beads of sweat building up on their brow, they seek solace in the halcyon world of IR.
The question is whether they are merely seeking a mirage or a practical career change.  Quite frankly, I don’t know.  But what I do know is that the more diversified an IR agency’s skill set, the better off the agency is in facilitating clients’ needs.
To encourage diversification in our field, the following is a top ten list of occupations that I believe serve as the most appropriate preludes prior to joining an IR firm or serving as an internal IRO.

10. Psychic

9.  Linebacker

8.  Buoy

7. Anchor

6. Quantum Theorist

5.  Existentialist

4.  Lion Tamer

3.  Anesthesiologist

2.  Masseuse

1.  The little stuffed rabbit that dogs chase at the track


Evan Pondel, Vice President,


Executive bios are a dime a dozen. Like instant cake mix, you add a couple of ingredients, some water, and stir until the lumps (or time lapses between jobs) fade into a silky smooth consistency. But I recently stumbled upon an ingredient I haven’t seen for a long time called “WPM.”
No, I’m not talking about weapons of plausible meaningless. I’m talking about words per minute. When was the last time you saw a resume with “50+ WPM” listed as a special skill? I reckon it’s been a long time.
I’m pretty sure that most corporate executives can type at a clip of at least 50+ WPM. But does it really matter? Should the C-suite disclose special skills like WPM in their bios? Perhaps, but only if they’re typing at Guinness-book levels.
I do think it’s OK to disclose interesting factoids.  For example, if a CEO plays cello, has a knack for fine art, or is a connoisseur of kishke, I say go ahead, add a little color to perk up those staid, old bios. But WPM is a different story. Unless you’re measuring the Width of your Profit Margins.


Evan Pondel, Senior Associate,

PondelWilkinson Turns 40

Firm Spreads Insight with Formal Launch of Blog
In 1968, when Mel Rifkind launched his then eponymous specialty public relations firm on April fool’s day, some of his friends looked askance.
Mel may have been a bit nervous that day, but he was no fool. He opened his doors in a small office on mid-Wilshire, with a goal of building a firm that would stick to several guiding principles:  operate with the highest degree of integrity; provide thoughtful counsel; hire smart people; take on quality clients slowly and selectively; and always deliver results—guidelines that the firm continues steadfastly to follow today.
More than half of the current staff, including Principals Roger Pondel and Rob Whetstone, were students when Mel founded the company—Roger was in high school, Rob was finishing kindergarten. The other half were either in diapers or not yet born. One of Mel’s first clients, Bell Industries, is still active with us today.
In commemoration of the firm’s anniversary, we are launching, our new blog that will focus on items of relevance for those who are employed by, and advise, publicly traded companies. We hope you find some of the items useful in the months to come and that you will click on the Subscribe button to automatically receive new postings.
To all of our clients and friends, thank you.  We deeply appreciate your business, are grateful for your friendship and support, and will continue to work diligently to maintain your loyalty and trust.


Roger Pondel and the entire team at PondelWilkinson

Know Your NAICS/SIC Code

You may not be aware that in 1997, the North American Industry Classification System (NAICS) was adopted as the standard for classifying business establishments.  Developed jointly by the United States, Canada, and Mexico, NAICS provides new comparability in statistics about business activity across North America.  NAICS replaced the old Standard Industrial Classification (SIC) system.
Each company’s code is determined by that company’s primary business activity – the one that generates the most revenue for the company.  This code is then used by various government agencies to collect, tabulate, analyze, and disseminate statistical data describing the economy of the United States. Generally, a company’s code is derived from information that the company has provided on administrative, survey or census reports.
This methodology can be somewhat challenging if your business model and revenue generating activities change, as your company will likely continue to be classified according to old data provided to the Census Bureau.
While there is currently no official procedure for having a company’s SIC or NAICS code changed, if you strongly disagree with your company’s classification, you can contact the agency that has assigned your code.  Various government agencies maintain their own lists of business establishments and assign classification codes based on their own programmatic needs.


Laurie Berman, Senior Vice President,