You Know Things are Bad When

…a headline reading, “Citigroup $2.5 billion loss soothes investors” appears on your computer screen.
 
Yes, this loss was better than expected, but how bad have things become when a $2.5 billion loss from any company is something to cheer about?

 

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

Update: Buffett Lunch for $2.1 Million

Whether Zhao Danyang needed a doggy bag is unknown. What is known is that the investment fund manager paid a little more than $2.1 million for lunch with Warren Buffett at the famed meatery Smith & Wollensky in Manhattan. In the previous blogpost it was noted that the Glide Foundation was hosting an auction on eBay for lunch with Buffett to benefit the charity.

 

PondelWilkinon, investor@pondel.com
 
 

Berkshire Special: Buffett Lunch for $650,000

Last year’s charity lunch with Warren Buffett, the CEO of Berkshire Hathaway and arguably one of the world’s best-known and most knowledgeable stock investors, cost a California-based investor $650,000.  For that sum, the Californian and seven of his closest friends had lunch with Mr. Buffett at Smith & Wollensky, a storied New York City steakhouse.
 
The bidding on eBay for this year’s charity lunch, also to be held at Smith & Wollensky, began yesterday and ends on June 27.  At present the lunch is being valued at $41,100 (the highest of five current bids).
 
All proceeds raised from the auction will go to the Glide Foundation, an organization that is working to alleviate human suffering and poverty in the San Francisco Bay Area.  Mr. Buffett’s charity lunches have raised more than $2.0 million for the organization since going online in 2003.
 
Personally, I think this would be the opportunity of a lifetime, but few of us have enough disposable income for a $650,000 steak (and maybe a glass of wine and a side dish of potatoes au gratin).  Even split eight ways, that’s a hefty $81,250 per person.  I guess I’ll just have to log on the Internet for free after the event to see how it went and whether Mr. Buffett provided any sage investing advice for today’s climate.
 
Given the extreme turmoil in the financial markets of late, how much would you pay for the ability to hear what Mr. Buffett has to say?  Tune back in after June 27 to see the winning bid.

 

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

Russell’s Annual Index Reconstitution

On June 27, after the market close, Russell Investments will rebalance its entire family of indexes, including its 25 U.S. indexes.
 
Russell undertakes this Herculean task every year to “maintain true representation of global equity markets and avoid capitalization and style slippage.”
 
There are a few important dates to watch for:
 

  • Friday, June 13 – Announcement of preliminary additions and deletions to the Russell Global Index and the Russell 3000®.
  • Friday, June 20 and Friday, June 27 – Updates made to the list of preliminary additions and deletions.
  • Friday, June 27 after market close – Indexes are reconstituted.
  • Monday, June 30 – Final index membership lists posted.

 
Index memberships and rankings are determined using a company’s total market capitalization.  Although we won’t know the size of the largest and smallest companies in each newly reconstituted Russell index until June 30, here’s a look at some statistics for the current indexes
 

  • Largest company in the Russell 3000® Index: $468.5 billion market cap.
  • Smallest company in the Russell 3000® Index: $261.8 million market cap.
  • Largest company in the Russell 2000 Index: $2.5 billion market cap.
  • Smallest company in the Russell 2000 Index: $261.8 million market cap.

 
What does this reconstitution mean for public companies?  According to Nasdaq, the day Russell’s indexes are reconstituted is generally one of the heaviest trading days in the U.S. equity markets, as index and other asset managers reconfigure their portfolios to reflect the new composition of Russell’s indexes.  If your company is included in any of Russell’s indexes, be prepared for heavier than usual volumes at the end of this month.

 

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

M&A Advice You Rarely Read About

The New Yorker—my all-time favorite magazine and the one I read to steal myself away from business news—had an insightful piece about mergers and acquisitions.
 
Tucked inside the Financial Page column (June 9 & 16, 2008 issue), which focused on CBS’s recently announced acquisition of CNET Networks, were some hidden gems of advice for acquirers of companies:
 

  • It is not necessary “to own a company to make money from its properties. Much of what mergers are supposed to accomplish can be achieved through partnerships and alliances.”
  • Mergers “that rely more on cost cutting from such actions as combining back-office operations and eliminating redundancies than on promises of vast growth are more likely to be successful.”
  • “Acquisitions of smaller, younger private companies are usually wiser than acquisitions of publicly traded firms,” where the acquirer must typically pay a steep premium to an already known public valuation.
  • While acquisitions may “boost a company’s growth rate, they too often make it bigger without making it better.”

 
The article’s author, James Surowiecki, aptly quoted Warren Buffett: “Executives see the companies they acquire as handsome princes imprisoned in toads’ bodies, awaiting only the ‘managerial kiss’ to set them free. Unfortunately, most toads turn out to be as warty as they look, and magic kisses are harder to bestow than executives think.”
 
Surowiecki has written a well-received book, The Wisdom of Crowds—Why The Many Are Smarter Than The Few And How Collective Wisdom Shapes Business, Economies, Societies And Nations, which describes systematic ways to organize and aggregate the intelligence available in organizations in order to arrive at superior decisions—often better than those that individuals would make, even if they are ‘experts.’

 

Roger Pondel, President, rpondel@pondel.com
 
 

Eye of the Storm

A friend of mine recently curated the “Eye of the Storm” photography exhibit at the Reform Gallery in West Hollywood, featuring images from enlisted combat photographers in the U.S. military.
 
PondelWilkinson did a little pro bono public relations work for the exhibit, which was created to raise awareness and provide funding for The Wounded Warrior Project, a non-profit that helps severely injured soldiers transition to civilian life. The Los Angeles Times, Newsweek and others have written about the show, and the curator would be honored to host any friends of the firm who would like to take a personalized tour. Of course, you are more than welcome to peruse on your own time as well.
 
If you are interested in checking out the exhibit, Reform Gallery is located at 816 N. La Cienega Blvd., Los Angeles, CA 90069. For more information, you are also welcome to call the exhibit’s curator, Dane Jensen, at 323.632.2909. Or, check out the Eye of the Storm Web site. 

 

Evan Pondel, Vice President, epondel@pondel.com
 
 

Whose Line is it Anyway?

I was quite surprised by a new set up at LAX when traveling to New York for a meeting last week.  Signs at the security checkpoint asked me to choose a line depending on my travel status.  Was I an expert traveler, a casual traveler or a traveler with a family?
 
Clearly, as it was 5 a.m. and my family was still at home tucked in bed, I could tick off family traveler.  But, since I was going to New York for both a business meeting and for a personal commitment, I had trouble deciding which “label” fit best.
 
A recent Wall Street Journal article confirmed that I am not alone in my confusion.  Many people find the signs unclear and are not sure if choosing the correct line is mandatory or voluntary.  However, the Transportation Security Administration says the program is working better than originally anticipated and that traveler aggravation is being minimized.  Many people like the new system and believe they are getting through security quicker and with less hassle.
 
According to the TSA, the “Black Diamond” program, named for the ski-resort term for expert trails, is aimed at improving security by creating a less stressful experience.  The program, which is currently in operation in a handful of airports today, is slated for expansion to additional airports in the near future.
 
So, which line did I ultimately choose?  Given my familiarity with security procedures and having mastered the art of taking my jacket and shoes off while removing my laptop, I decided I was indeed an expert traveler.  It didn’t speed my wait time any, but I suppose during peak travel hours it’s a plan that just might work.

 

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

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, epondel@pondel.com
 
 

Tacos and Beer

I don’t drink that much beer, but I do enjoy an occasional light brew when tacos are present. It’s a very nice complement, kind of like mondel bread and coffee.
 
The media is shedding light on a different kind of complement these days. I am referring to blogs and PR. The Wall Street Journal recently devoted more than 20 inches of copy to a beer blog that Miller Brewing Co. recently launched.
 
The blog is written by a former Advertising Age staffer who channels his sudsy muse into an analysis of the beer industry. Of course, I suspect the blog doesn’t break news about the very brewer that pays for its existence. But to Miller’s credit, the company is completely transparent about its relationship with the blog.
 
As more companies attempt to ride the wave of blah-blah-blogging (ours included), I find Miller’s approach refreshing and full bodied. They are taking the foam out of foam. They are tapping the proverbial keg and making themselves look smart, as opposed to drunk and stupid.
 
So, here’s to Miller Brewing Co. for drumming up a savvy PR program. The question is whether a similar program could be applied to a publicly-traded company.
 
My advice is to proceed with caution. Don’t get me wrong, I think blogs can be valuable for public companies. However, public companies must not forget that they are blogging on behalf of shareholders, too.

 

Evan Pondel, Senior Associate, epondel@pondel.com
 
 

WPM

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.
&Nbsp;
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, epondel@pondel.com