The 5 Dumbest Things on Wall Street This Week: April 13
5. Zhongpin's Little Piggies
Here's a twist on an old Wall Street aphorism: Bulls make money, bears make money and really dumb pigs illegally trading pork stocks get their accounts frozen.
A half a dozen Chinese citizens purported to have unlawfully purchased shares of Chinese pork processor Zhongpin(:HOGS) had their accounts restricted last Friday by an emergency court order. The move arrives only two days after the Securities & Exchange Commission alleged that these individuals illicitly pocketed $9 million as a result of buying Zhongpin stock prior to the company announcing a bid to take it private.
On March 27, Zhongpin Chairman and CEO Xianfu Zhu personally offered $13.50 per share for the enterprise, causing shares in Zhongpin to soar 22%. The SEC claims the six less-than-slick characters spent the two weeks before the announcement swine-ishly snapping up stock and call options on the company, even though most of the crew had never traded the stock before.
How hilarious is that? The first time these little piggies go to market they get busted for insider trading!
"The defendants in this action -- all with seemingly limited resources -- suddenly and inexplicably purchased more than $20 million in Zhongpin securities just before an important public announcement," said Merri Jo Gillette, director of the SEC's Chicago regional office, in a statement.
And to paraphrase our good friend Porky Pig, "That's not all folks!"
In addition to freezing the accounts, the SEC said plans to seek permanent injunctions and financial penalties if the gang is found guilty of insider trading.
What a sad situation. But still, let it be a lesson to all you potential piggies out there. If you find yourself with non-public information, just stay home and eat roast beef, or the SEC will go "Wee Wee Wee" all the way home.
4. Sony's Memory Lapse
Sony's(:SNE) massive earnings revision this week had us reminiscing about the days when the Walkman maker ruled the earth. Sadly, it also reminded us how far the Japanese giant has subsequently stumbled.
So as a tribute to the once-proud PlayStation maker, let's play a little 5 Dumbest memory game, shall we?
First, think back to February -- yep, we know it's a long, long time ago but please play along -- when our good buddies at Sony projected an annual loss of 220 billion yen, or $2.7 billion, mostly due to feeble TV sales and the flood in Thailand.
Next, while keeping those figures in mind, fast forward to this past Tuesday when Sony said its annual loss would actually be 520 billion yen ($6.4 billion), as a result of a massive tax charge.
Now compare the two numbers. Do you get a 300 billion yen difference in barely 2 months like we do?
Excellent! That wasn't so tough, was it? Simple math, and simple short-term stupidity. Nothing new for Sony.
The next question revolves around years, not months, of ineptitude, so it may be a little tougher on the old noggin. Here we go: In what year did Sony last turn a profit?
The answer is 2008, when it posted net income of 369.4 billion yen. Including this week's 520 billion yen loss, Sony has bled 919.3 billion yen in red ink over the past four years.
Alright, for the last one let's really stretch those brain cells and go back over a decade of dumbness at Sony.
After Tuesday's 9% sell-off, the company's market cap stood at $18.3 billion. How much was the company worth in 2002?
Check this out: In March 2002 Sony's market value stood at $42.4 billion, more than double its current level. And as you may or may not recall, that was down by two-thirds from its March 2000 peak of more than $125 billion. Meanwhile, Sony's rival Apple(:AAPL) has seen its market value grow from $8.3 billion ten years ago to almost $600 billion this past week.
We wouldn't mention that last fact to Sony CEO Kazuo Hirai however.
We have a feeling he'd rather forget it.
3. Molina's Messy Monday
Hold everything! Stop the presses! The Buckeye state has produced yet another political casualty, and boy is this one a real knock-out blow.
We're not talking about Mitt Romney vanquishing his rival Rick Santorum in last month's Ohio Republican primary of course. Heck, that's ancient history at this point. No, we're referring to the state's Medicaid decisions which totally floored a once-prominent provider.
Seriously, forget "Super Tuesday." It was "Molina(:MOH) Monday" that was the real game changer this week.
Shares of Molina Healthcare sank almost 27% Monday after the state of Ohio neglected to include it on the list of companies selected to administer its Medicaid program for more than 1.5 million people. Also snubbed by the state was fellow provider Centene(:CNC), which saw its stock drop 15.4% on the news.
Among the companies making the cut were Aetna Better Health of Ohio, CareSource, Meridian Health Plan, Paramount Advantage and United Healthcare Community Plan of Ohio. And to add insult to injury, Aetna and Meridian Health are new entrants to the Ohio program while the incumbent Molina, now mulling an appeal, has been in the state for years. Molina generated more than $1.2 billion in premiums in the state, or about 22% of the company's total revenue and reportedly 30% of its profits.
Perhaps Citigroup analyst Carl McDonald summed up Molina's situation best in his note to clients when he wrote, "Ouch."
Ouch indeed. We don't have to put that up for a vote.
2. Nokia's Population Problem
Poor Nokia(:NOK). If only the world had more Finns then perhaps the former telecom giant might not be so close to being finished.
Shares of the flailing phone-maker sank 16% on Wednesday to $4.20 a share after it warned that competition will hammer its first- and second-quarter results. The company's stock has lost more than half its value in the past year and over 80% of its market cap in the past 5 years.
Nokia didn't really offer much in terms of guidance for Wall Street analysts to chew on either, merely offering that operating margins in Q1 were "approximately negative 3%, compared to the previously expected range of 'around break-even, ranging either above or below by approximately 2% points."
Whatever that means.
Nevertheless, Wall Street's fortune tellers don't really need a crystal ball, let alone clear estimates to figure out Nokia's future anyway. Apple's(:AAPL) iPhone and Google's(:GOOG) Android pretty much sealed it a long time ago, and the company is now betting its continued existence on its new Windows-based Lumia smartphone.
Quick joke: How do you say Research in Motion(:RIMM) in Finnish? Answer: Nokia. (And vice versa of course for all you Canadian speakers. EH! You hosers!)
But that's not the only chuckle we got when we were perusing Nokia's less than amusing release. We also got a snort when the company cited "multiple factors" as negatively impacting sales of cellphones "particularly in India, the Middle East and Africa and China."
So, in other words, the company that hails from a tiny nation of just over 5 million souls is having a tough time selling its products in countries with populations that add up to approximately 4 billion people.
That's a serious problem in any language.
1. Dunn And Over
There's something silly going on surrounding the sudden departure of Best Buy(:BBY) big wig Brian Dunn. We don't know exactly what it is yet, but trust you us, when a CEO steps down as a result of "personal conduct" issues you can rest assured it will eventually hurtle down our very dumb alley.
The good news for shareholders, we suppose, is that Dunn's shenanigans were "unrelated to the company's operations or financial controls", according to Best Buy's external spokeswoman.
So at the very least Best Buy investors concerned with the fact that Dunn jumped ship prior to the end of an audit committee investigation can rest a little bit easier. Or at least as easy as investors who have seen the value of their stock sliced in half over the past 5 years can rest.
And since we don't know precisely what Brian Dunn did, we won't even wager a guess and risk the disappointment that the real story doesn't match up to the juicy stuff now circulating through Wall Street's rumor mill. (Ah, bless you Mark Hurd for making CEO resignations sexy again.)
All that said, we do know what Dunn didn't do, and that is successfully run his company during his three-year tenure in the top spot.
Once the electronics retailer to beat, Best Buy has rapidly devolved into what many gadget shoppers refer to as "Amazon's(:AMZN) Showroom." And when Dunn tried to fight back against the Internet retail juggernaut, he failed miserably as evidenced by the company's catastrophic performance last holiday season when it proved unable to deliver gifts ordered online before Christmas morning.
Most recently, Best Buy posted fourth-quarter results that missed Wall Street's revenue forecast. It also announced the closure of 50 of its U.S. stores in fiscal 2013 as part of a plan to cut $800 million in costs by fiscal 2015.
Put it all together and its quite clear that Dunn should have cut himself out of the picture a long time ago.
"I have enjoyed every one of my 28 years with this company, and I leave it today in position for a strong future," said Dunn in a press release.
That's all well and good Brian. But until we hear the whole story, we don't think you're done just yet.
Written by Gregg Greenberg in New York.