[5/22/17] The Disappearing Public Company

Is it a plague or a pandemic afflicting American stock exchanges, or something else decimates public companies? What are the reasons for the 50% drop in the number of public companies traded on U.S. exchanges? And, most importantly, should we worry about that? Answers below, but first several salient facts (courtesy Kathleen Kahle and Rene…

Should You Buy Amazon Shares Now?

The continuous rise in Amazon’s share price (see below from Yahoo!) raises in many investors’ minds the question: Should I buy Amazon now, or is it too late? Is there still room for growth of share price, or are all the growth expectations of Amazon “baked” already in its elevated share price? Traditional valuation indicators…

Forget the Consensus Estimate: Quarterly Earnings Don’t Matter Much Anymore

On April 18, 2017, the Wall Street Journal reported that IBM’s first quarter EPS came at $2.38 against analysts’ consensus of $2.35. A three penny consensus beat which should have exhilarated investors. Alas, the Journal reported: “IBM shares fell 3.9% in after-hours trading.” How can this be? Don’t consensus meets (hitting the analysts’ estimates) and…

Surprise: Investors Like Non-GAAP Earnings

By  Feng Gu and Baruch Lev Another earnings season is over, and the controversy about non-GAAP earnings—those alternative earnings numbers disclosed by companies—rages on. “Wishful thinking! Kool-Aid! Outright deception!” say the detractors. “Should have been banned by the SEC long ago!” “Not so quick,” counter the supporters: GAAP earnings—those statutory performance measures calculated according to…

FASB Graded and The Grade Is Ugly

Who evaluates the FASB’s performance?  The performance of business enterprises and investment managers is closely monitored by investors, often on a quarterly basis. Such close scrutiny significantly enhances the performance of these enterprises by keeping managers and directors on their toes, and triggering needed changes (CEO turnover, board changes) by takeovers or hedge fund interventions….

Bungling the Oscars Isn’t the Worst of Accountants’ Mishaps

Everyone knows by now that the Oscars’ worst snafu ever was caused by PricewaterhouseCoopers’ partner Brian Cullinan handing the wrong envelop to clueless Warren Beatty. Sad. The only attempt of accountants to be hip and glamorous came crashing down when the LaLa Land winner announcement was found out, albeit embarrassingly late, to be a mistake….

Share Buybacks, Good News?

Posted on February 24. On Tuesday, February 21, 2017, HSBC, Europe’s largest bank, reported a whopping 4th quarter loss of $4.23 billion; a substantially larger loss then the $1.33 billion a year earlier. 2016 revenue, at $48 billion, was 20% lower than the 2015 figure. Seems like an unmitigated disaster, and yet, the Wall Street…

Should Companies Report Estimated Climate Change Losses?

  On December 14, 2016 the Wall Street Journal reported that a panel of financial and business executives chaired by Michael Bloomberg recommended that “Companies should publish an assessment of the losses they could suffer through climate change as part of their routine financial statements.” The panel believes that “… investors need better information to…

Should You Invest in Multiclass Share Companies?

Last March, Under Armour (UA) issued a new, Class C, shares to all existing shareholders. All the company’s share has the same economic interest in the company, but Class C shares have no voting rights. UA has two other share classes: A shares with one vote, and B shares, owned by the company’s founder, having…

Buyers’ Remorse? The Tesla and SolarCity Merger

On Thursday, November 17, 2016, shareholders of Tesla Motors and SolarCity Corp. approved by a big margin Tesla’s $2.1 billion all-stock offer to acquire SolarCity and create one company under Elon Musk. Tesla’s stock reacted positively to the good news: share price rose 2.7%. Evidently, everybody was happy with the merger, despite the media skepticism….

Conservative Today, Aggressive Tomorrow

The Wall Street Journal (October 26, 2016) reported on Apple: “Profits, though down from 2015, were actually bolstered by a decrease in deferred revenue compared to a year ago. That’s because the decrease in deferred revenues increased operating margins and hence profits for 2016. … Deferred revenue is accounted for as a liability on a…