Francesca's Foolishness; Yahoo's CEO Silliness; Best Buy Strikes Out; More Avon Ugliness; GM Unfriends Facebook.
5. Francesca's Foolishness
Listen up Dumbest fans, because here's a little precautionary tale about one really big twit.
Last Friday, shares of women's specialty retailer Francesca's(:FRAN) inexplicably sold off late in the trading day, falling more than 15% at one point. Rumors abounded at the time that Francesca's, which went public last July, was going to sell additional shares in a secondary offering and thereby dilute the company's stock. Another gaggle of gossipers attributed the company's nosedive to pre-lock-up selling.
Not until this past Monday was it revealed that the real cause of the stock's shellacking was not a potential secondary offering but a primary idiot in the form of Gene Morphis, the company's chief financial officer, who was fired over the weekend for improperly communicating company information through social media.
Yep, good old Morph apparently got canned for tweeting too many non-public details about the company under the handle "theoldcfo." Of course, his nom de Twitter is even more apropos now that Francesca's has named a new CFO in Cynthia Thomassee, who hopefully has learned the valuable lesson that certain thoughts -- like, say, ones that the Securities and Exchange Commission may care about -- are better left unblogged.
Here, for example, is one of Morph's greatest hits. On March 7, he tweeted, "Board meeting. Good numbers=Happy Board."
Morph wasn't kidding. Not even a week later Francesca's shareholders were certainly cheery, driving up the stock after the company beat Wall Street's fourth-quarter estimates by a hefty 3 cents and raised its first-quarter 2012 guidance.
In other words, had some savvy investor been following Morph's blog they could have profited handsomely from his inability to control his opposable thumbs.
Perhaps most stupidly, not to mention ironically considering their diligence led to his firing, a quick review of Morph's Tweets shows that he was well aware of his board's attention to detail.
Back on Nov. 30, he posted, "Survived another audit committee meeting. Why couldn't I get one of those lazy audit committees I read about?". And then on December 9, he presciently told his followers: "Board meeting in NYC. See if I get to keep my job another ninety days."
Look on the bright side Morph. At least you beat your tweet.
4. Yahoo's CEO Silliness
So long Scott Thompson. It sure was nice getting to know you these past four months.
Yahoo!(:YHOO) added Thompson to its growing list of not-so-dearly departed CEOs Sunday. Thompson, who was sent packing for padding his resume, will pocket a tidy $7 million for his brief stint atop the internet giant.
Hey, it's good work if you can lie about your education credentials and get it.
Truth be told, Thompson's is just the latest Yahoo scalp to be claimed by activist shareholder Daniel Loeb, who, in related news, will be joining the company's board. The Internet giant named its current head of global media Ross Levinsohn as interim CEO while the company searches for an executive that will, let's be honest, pass Loeb's muster.
For those that have lost count, Levinsohn will be Yahoo's fifth CEO in the past five years, following in the failed, yet fleeting footsteps of Thompson, Tim Morse, Carol Bartz and Jerry Yang before him.
Congratulations Yahoo! You have officially broken HP's(:HPQ) Silicon Valley record for cycling through the most CEOs in the least amount of time. Heck, Spinal Tap drummers last longer than the average occupant of Yahoo's corner office.
With all those hirings and firings in mind, we thought we would offer a bit of advice to Levinsohn now that he has assumed the company's top position.
First, eliminate all known copies of your resume. The easiest way to avoid Scott Thompson's fate is to remove any trace that you existed prior to this past Monday. If anybody asks where you came from, just say Mrs. Levinsohn's belly.
Next, watch your mouth. Refrain from cursing entirely. We won't go as far and blame Carol Bartz's canning on her salty language, but let's just say she didn't help her cause too much when she was dropping F-bombs on everybody from Wall Street analysts, to technology reporters to the guy delivering the Poland Spring bottles.
Finally, and most importantly Ross, do not follow the examples set by your predecessors at the bargaining table. If anybody is dumb enough to offer you $47 billion for the company, just like Microsoft (:MSFT) did in 2008 when Jerry Yang was pulling the strings, then take it. Don't think twice. Just sell the company on the spot.
Even Dan Loeb wouldn't fire you for signing off on a deal like that without checking with him first.
3. Best Buy Strikes Out
It was only a month ago, as all you Dumbest fans surely remember, when the ignominious departure of Best Buy(:BBY) CEO Brian Dunn topped our list. At the time we didn't precisely know the "personal conduct" issues that led to his ousting, but we did predict that sooner or later "it will eventually hurtle down our very dumb alley."
Well, now the facts are coming out and boy did we roll a strike. And as it turns out, Dunn isn't the only pin getting toppled.
Best Buy announced Monday that its founder Richard Schulze is stepping down as chairman after an external investigation found out that he knew Dunn was inappropriately cavorting with a female employee, yet still failed to inform the firm's audit committee. Schulze, who has been a fixture at the electronics retailer since 1966, will be replaced by Hatim Tyabji, chairman of Best Buy's audit committee.
"In December, when the conduct of our then-CEO was brought to my attention, I confronted him with the allegations (which he denied), told him his conduct was totally unacceptable and contrary to Best Buy's policies and everything I, and the company, stand for," Schulze said in a statement.
Relax Richard. Now that you are resigning you don't have to stand at all. Frankly, if we were in your shoes, we would be kicking back on the beach right now as opposed to watching less-than-upright citizens like Dunn level your entire life's work.
Speaking of Dunn, he gets to keep his severance package worth about $6.6 million because, according to the report, he did not misuse company funds while he was involved with his underling.
Hey, he may have provided scads of favors to the woman, like procuring her tickets to concerts and sporting events, including one in Las Vegas where he solicited a free ticket for her. And Dunn may have been dial-happy when he used his company cellphone to call her over 200 times during two trips abroad last year.
Nevertheless, Dunn didn't jet her around on the company aircraft so he will be able to walk away with his millions, even though his stupidity caused Schulze to walk away from the company he created.
If that doesn't bowl you over, we don't know what will.
2. More Avon Ugliness
For a company that creates products that make its customers more attractive, Avon (:AVP) sure goes out of its way to make itself look downright repellent to investors.
Shares of the cosmetics company sank almost 10% Tuesday, after Coty yanked its $10.7 billion takeover offer on the grounds that Avon ignored its deadline to begin discussions. Last week, the privately held fragrance company raised its unsolicited, Warren Buffett-backed bid to $24.75 per share from $23.25 based on the premise that Avon would respond to Coty's overture by Monday.
In its defense, Avon did respond to Coty on Sunday, tersely saying that its board needed another week to chew on the deal. And considering how disorganized that board is -- heck, former CEO Andrea Jung is on it -- one can understand why it might take it a little extra time to get its act together.
Nevertheless, Coty would have none of it and told Avon brass to kiss-off in a letter saying, "Avon's total lack of engagement with Coty leads Coty to believe that Avon remain reluctant to explore a friendly, negotiated combination on a reasonable timetable. Two months is enough."
Aww. That's just heartbreaking. It really is true that there is nothing as sad as an unrequited hostile takeover.
Since Coty, for no sensible reason, was bidding against itself in the first place; it need not rush back with a higher offer should it change its mind. And if they do decide to take another run at Avon, it may even get a better deal next time considering that Avon stock is now trading below Coty's original bid.
As for our good friends at Avon, however, well, now they have to prove that they can do more than play hard to get. Avon shareholders may give new CEO Sheri McCoy a pass this time as she plots her own strategy for turning the company around, but they certainly won't forget this missed opportunity to cash out should the stock fall much further.
As we learned from Yahoo's bone-headed decision to spurn Microsoft's merger proposal just a few years ago, that's when things could get really ugly.
1. GM Unfriends Facebook
Look, we here at the Dumbest Lab have admittedly turned the knife a time or two, so we know full well the significance of a well-timed slur. And that's why GM's(:GM) smear of Facebook(:FB) prior to its big IPO this week really shouts out to us.
Seriously, we didn't think GM, which not too long ago was as good as roadkill, had it in them.
The recently bankrupt -- and still government-backed -- automaker announced on Tuesday its plan to cease advertising on Facebook because it deemed the social network's ads to be less than effective in selling cars. Of course, this is a big deal since GM reportedly spent $1.8 billion per year in ads in 2011, making it the third largest advertiser in the U.S. after AT&T and P&G.
"In terms of Facebook specifically, while we currently do not plan to continue with advertising, we remain committed to an aggressive content strategy through all of our products and brands, as it continues to be a very effective tool for engaging with our customers," said GM.
Talk about irony. GM is breaking up with Facebook by essentially using the old 'Let's be friends' line!
Not to be left out in the Facebook fun, Ford(:F) used the occasion to tweak its competitor by tweeting, "It's all about the execution. Our Facebook ads are effective when strategically combined with engaging content & innovation."
Snap! Sounds like Ford is using a variation on another tried and true break-up line, 'It's not you Facebook, it's you GM.'
Frankly, Facebook won't be losing much on its bottom line even if GM 'unfriends' the company, because it's not like GM was shelling out too much for its services anyway. The car and truck maker spends about $40 million on its Facebook presence, according to the Wall Street Journal, which broke the story, but only about $10 million of that is paid to Facebook for advertising, the rest goes to developing its fan pages.
That said, Facebook eventually needs a bigger piece of the automaker's massive ad budget, so the company can't entirely sneeze off GM's slight. And while Mark Zuckerberg could theoretically show GM his market might by purchasing the whole of GM for $35 billion after Friday's $100 plus billion IPO, this certainly would not be the smartest option either. (Although it would be a hoot, wouldn't it? And like we saw from his Instagram purchase, he wouldn't even have to tell his board to do it.)
Therefore, Zuck will have to suck it up for the time being, and hope that GM changes its mind sometime down the road.
--Written by Gregg Greenberg in New York.