Often, poorly performing companies will hide their failure behind investor-friendly jargon, spouting such phrases as “shareholder value” and “strategic alternatives.” In an effort to help investors sort this out, here is case study of a press release from World Poker Tour Enterprises (Nasdaq: WPTE) from a few months ago. The company that develops poker television shows “World Poker Tour” and “Professional Poker Tour” was ever-so-briefly a high-flier, reaching a high of over 25 dollars amid a bizarre and quickly-disappearing takeover bid from poker legend Doyle Brunson. Since then, the stock has deflated to its current price of less than four dollars a share. In February, the company announced that it was putting itself up for sale, came back in September to announce they hadn’t found any buyers. But they didn’t really say that. Instead they said this:
LOS ANGELES, Sept. 5 /PRNewswire-FirstCall/ -- WPT Enterprises, Inc. today announced that following a comprehensive review of its strategic alternatives with the assistance of its financial advisor, it will remain independent and continue to pursue a stand-alone business strategy at this time. The Board of Directors and management believe that the successful execution of this strategy provides the opportunity to enhance shareholder value. WPTE announced on February 7, 2006 that it engaged Thomas Weisel Partners LLC as its financial advisor to assist with its evaluation.
Translation: We made such a mess (stock price down about 80% from its high) that we were paying other people to try to find someone to unload this train wreck onto. Unfortunately for you the shareholder, we found no such unwitting victim, and you are stuck with us. We’re ok, because we cashed millions in options when the stock was in the 20's, but if you’re counting on us for your retirement, you may want to consider a trailer park and Alpo.
Here are some key terms to remember for analyzing future press releases from equally optimistic executives/PR teams:
Enhance shareholder value- This became a buzzword during the LBO boom of the 1980's, as numerous CEO’s were accused of having interests not aligned with those of shareholders. CEO’s bandying this phrase about have about as much credibility with me as Michael Dukakis riding around on a tank in full uniform. I can’t find any instances of Warren Buffett bragging about “creating shareholder value,” but Lenox Group CEO Susan Engel (whose stock has declined over 70% in the past ten years) uses it regularly. Instead of listening to this phrase, look for these signs of an actual commitment to shareholder value: high insider ownership, stock buybacks,
Comprehensive review of strategic alternatives- This is where they try really, really hard to find someone to buy the company. This will include hiring expensive consultants and investment bankers, and putting together Power Point presentations to show prospective buyers why the company is such a great value, even though it can’t seem to make any money.
Continue to pursue a stand-alone business strategy at this time- ...only because they couldn’t find a buyer. If the stock price continues to lag, they may "explore strategic alternatives" again to give it a temporary boost.
LOS ANGELES, Sept. 5 /PRNewswire-FirstCall/ -- WPT Enterprises, Inc. today announced that following a comprehensive review of its strategic alternatives with the assistance of its financial advisor, it will remain independent and continue to pursue a stand-alone business strategy at this time. The Board of Directors and management believe that the successful execution of this strategy provides the opportunity to enhance shareholder value. WPTE announced on February 7, 2006 that it engaged Thomas Weisel Partners LLC as its financial advisor to assist with its evaluation.
Translation: We made such a mess (stock price down about 80% from its high) that we were paying other people to try to find someone to unload this train wreck onto. Unfortunately for you the shareholder, we found no such unwitting victim, and you are stuck with us. We’re ok, because we cashed millions in options when the stock was in the 20's, but if you’re counting on us for your retirement, you may want to consider a trailer park and Alpo.
Here are some key terms to remember for analyzing future press releases from equally optimistic executives/PR teams:
Enhance shareholder value- This became a buzzword during the LBO boom of the 1980's, as numerous CEO’s were accused of having interests not aligned with those of shareholders. CEO’s bandying this phrase about have about as much credibility with me as Michael Dukakis riding around on a tank in full uniform. I can’t find any instances of Warren Buffett bragging about “creating shareholder value,” but Lenox Group CEO Susan Engel (whose stock has declined over 70% in the past ten years) uses it regularly. Instead of listening to this phrase, look for these signs of an actual commitment to shareholder value: high insider ownership, stock buybacks,
Comprehensive review of strategic alternatives- This is where they try really, really hard to find someone to buy the company. This will include hiring expensive consultants and investment bankers, and putting together Power Point presentations to show prospective buyers why the company is such a great value, even though it can’t seem to make any money.
Continue to pursue a stand-alone business strategy at this time- ...only because they couldn’t find a buyer. If the stock price continues to lag, they may "explore strategic alternatives" again to give it a temporary boost.
