This Week's Carnival of The Capitalists
Again, these are just my preferences - yours may be different, so look around. There's always a wide variety of things at the COTC.
The finance classroom meets the outside world (and vice-versa). Back away slowly from the computer with your hands up and your mind open, and with luck nobody gets hurt.
As the boom in corporate takeovers continues, unusual trading in obscure investments or via offshore accounts is raising concerns about insider trading.
Suspicious trading patterns -- including increased activity and well-timed bets -- have cropped up in several companies' securities in advance of news of their involvement in big transactions, suggesting Wall Street's deal-making machine may be leaking confidential information.
The list includes deals both mammoth and modest: the just-announced $21 billion leveraged buyout of hospital operator HCA Inc.; the $1.7 billion buyout of Petco Animal Supplies Inc.; the $2.6 billion sale of Maverick Tube Corp. to Tenaris SA; and Anadarko Petroleum Corp.'s $21 billion offer for both Kerr-McGee Corp. and Western Gas Resources Inc.
Some of the trading is in a corner of the financial markets that hardly existed during past takeover waves, which featured questionable trades mainly in plain-vanilla stocks, bonds and options. In advance of the HCA deal, there was a notable uptick in trading in financial contracts tied to HCA's bonds -- derivatives known as credit-default swaps.
Worldwide in June, more companies withdrew or postponed their initial public offerings than in any other month since March 2001, according to Dealogic, a firm based in London that monitors the new-issue market. That March 2001 trough came less than halfway through the 2000-2 bear market, leading many investors to worry that the current gloom in the new-issues market is a harbinger of much lower prices for stocks.
But the stock market's continuing decline in the months after the March 2001 I.P.O. bust was probably an anomaly, says Jay R. Ritter, a finance professor at the University of Florida who specializes in I.P.O. research.
An analysis of initial offerings market since 1980 suggests that, all else being equal over the next 12 months, the market between now and the summer of 2007 is likely to produce above-average returns.
Abnormal Returns talks about the problems with benchmarking and "Radical Diversification "And from the non-business side of things:
Equity Private has another great analogy - this time between Narcotrafficing and Private Equity. And the Debt Bitch puts in another memorable appearance here (always worth reading).
Jack Sielieski of the Accounting Observer tells companies to Stop Giving Earnings Guidance.
The always-worth-a-read James Hamilton at Econbrowser has a primer on the the expectations hypothesis and its relationship to the yield curve. I wish I could explain things half as well as him.
Dan Melson at Searchlight Crusade discusses Zero Cost Loans, Good Faith Estimates, and Truth In Lending And APRs.
Floyd Landis was accused of doping following his Tour-de France win. Lynne Kiesling provides some statistical commentary on these tests.Ah - I feel much better now.
Alex Tabarrok of Marginal Revolution gives us the market for butts.
From the Onion: Professor Pressured To Sleep With Student For Good Course Evaluation.
A review of Standard & Poor's ExecuComp data for 1,800 leading companies indicates that from Sept. 17, 2001, through the end of the month, 511 top executives at 186 of these companies got stock-option grants. The number who received grants was 2.6 times as many as in the same stretch of September in 2000, and more than twice as many as in the like period in any other year between 1999 and 2003.Read the whole thing here (online subscription required).
Ninety-one companies that didn't regularly grant stock options in September did so in the first two weeks of trading after the terror attack. Their grants were concentrated around Sept. 21, when the market reached its post-attack low. They were worth about $325 million when granted, based on a standard method of valuing stock options.
Barry Ritholz at The Big Picture has some harsh (and, in my opinion, overheated, words to describe the executives:
What the more recent group of execs did is probably legal. It certainly isn't ethical, and it reveals them to be "lacking in moralAnd Steve Bainbridge takes the other side:
turpituderectitude." I wonder if there's a morals clause in any of their employment contracts.
What a pathetic group of weasels. Brain cancer is too good for these shitheads. They -- and their lapdog Boards of Directors -- should all be fired.
First, virtually all stock options are subject to multi-year vesting requirements. Executives would not make a dime on the stock options until the options were exercised years after they were granted. Second, executives would only profit from stock options if their company's stock price eventually recovered. Granting executives stock options under the circumstances thus can be seen as a way of incenting the executives to work especially hard post-9/11.For this one, I'd tend to agree with the good Professor.
We estimate that 18.9% of unscheduled, at-the-money option grants to top executives during the period 1996-2005 were backdated or otherwise manipulated. The fraction is 23.0% before the new two-day filing requirement took effect on August 29, 2002, and 10.0% afterward. For the minority of grants that are not filed within the required two-day window, the fraction backdated remains as high as 19.9%. We further find a higher frequency of backdating among tech firms, small firms, and firms with high stock price volatility. In addition, firms that use smaller (non-big-five) auditing firms are more likely to file their grants late. Finally, at the firm level, we estimate that 29.2% of firms manipulated grants to top executives at some point between 1996 and 2005.
You may have heard about the guy who traded a red paper clip for a house. Leslie Carbone at LeslieCarbone tells us about it in One Red Paper Clip and the Power of the Market.As always, browse around. There's a lot of interesting things to read at a Carnival.
The always-worth-a-read Dan Melson at Searchlight Crusade tells us our options When The Appraisal Is Below The Purchase Price for Real Estate
Finally, FMF at Free Money Finance presents a no-brainer way to Earn 20%, Guaranteed
"Where do you get the data for most of your studies? Do you use the same sources most of the time, or is it different depending on the study?"That's are a couple of great questions. The answer to your second question is "Yes". There's a lot of variety in the types of data that finance researchers use in their studies. Not surprisingly, the data used depends on the research questions you're trying to answer. For example, if you work in a narrowly defined area, your research projects could easily end up using the same data again and again.
3. The biggest tool in any negotiation is the willingness to get up and walk away from the table without a deal.Read the whole list here.
13. There is no such thing as a "final offer."
14. Try to let the other person speak first.
22. People don't plan to fail, they fail to plan. Top negotiators debrief themselves. They keep a book about themselves and their opponents. You never know when that information may be gold.
And my personal favorite is Mackay's Moral 25: When a person with money meets a person with experience, the person with the experience ends up with the money and the person with the money ends up with the experience.
Searchsleuth.com will focus on investigative journalism, seeking to find unsavory companies and share the tales behind their malfeasance, Carey says. The stories will take an "anti-fraud, pro-investor point of view and will likely steer away from the 'he-said, she-said' approach of much contemporary journalism."Apparently, Cuban will attempt to profit from the information he uncovers by shorting the stocks prior to unveiling the stories. At the time of Cuban's announcement, there were a lot of questions as to whether this approach was legal or amounted to insider trading (for a law professor's analysis of the issue, see Larry Ribstein's TCS story here).
Read the whole thing here.The election of directors is arguably the most fundamental aspect of corporate governance, yet little empirical analysis of this issue exists. The objective of this research is to examine the determinants and efficacy of director elections using a large sample of post-SOX elections. Our tests provide strong support for the firm performance, director performance and shareholder rights hypotheses and limited support for the efficacy hypothesis. Specifically, we document that shareholders express their dissatisfaction with governance and with the poor performance of their firms and directors through their votes. However, shareholder votes result in only minor changes to performance and governance of firms and are not associated with reputational effects to directors. These results provide important benchmarks for the current debate about reform of the election and voting process
With all the media attention lately, it wouldn't be a COTC without a post on options backdating, so Sox First gives us Options Scams: Timing is EverythingAs usual, look around. There's always lots of interesting stuff at a Carnival.
Searchlight Crusade goes into the ins and outs of buying distressed propoerties in Foreclosures: A Good Investment?
Gongol gives us Traffic Rankings for Major Business and Economics Websites. It's a nice way of putting website traffic in perspective.
Finally, Ask Uncle Bill discusses pensions in Pensions - The Not So Good Old Days