Too frequently companies execute M&A transactions not because a given acquisition strengthens the acquiring company's competitive position or enhances customer value, but because the acquired company could help boost CEO compensation of the acquirer by driving some combination of higher total revenue growth, higher EBITDA, higher bookings and/or a higher stock price. Today's announcement that … Continue reading When CEO Compensation Is The Primary M&A Driver
Talk about an overlooked investment decision-making variable. Nothing is more overlooked by investors than the Quality of Management. Define "quality" how you will. At present, Quality of Management seems to be an afterthought amongst many investors. Even peddlers of financial knowledge such as the CFA Institute (remind me what practical value the CFA institute provides?), … Continue reading Quality of Management
It does not matter what the Fed does with the Fed Funds Rate at this point, the global economy is softening and is likely to get worse. Whether the Fed ultimately takes rates to 3.5% or 4.0% will have little effect on the macroeconomic backdrop (QT is a different story). More job cuts. Large Tech … Continue reading The Economic Genie Is Out Of The Bottle
As Technology companies prepare to report earnings we expect that a number of companies will curb share repurchase programs given the cost of debt has increased since the Q1 earnings reports of April and May. This will provide less downside protection for Technology names. Treasury yields for the 2-year, the 5-year and the 10-year are … Continue reading Less Downside Protection From Share Buybacks
As growth slows and interest rates climb, management teams will command a greater weighting in investors' due diligence processes as compared to the 2009-2022 period of ultra-low interest rates and Quantitative Easing ("QE"). While it is too early to call peak inflation and far too early to talk about a Fed pivot, it is never … Continue reading Management Teams Will Matter More To Investors
Pinterest has a new CEO. Google needs to simplify its Payments strategy. The two are related. On June 4th we wrote (article HERE), that Google's Payments strategy is confusing given the company's three-pronged approach to consumer-facing payment apps - Google Pay, G-Pay and Google Wallet. Much of our surprise was due to the fact that … Continue reading What Does Pinterest’s New CEO Mean for Google?
If we have said it once we have said it a thousand times: "G" is what matters in ESG investing. The "G" stands for Governance. Nothing is more determinant to a company's success than the people who lead that company, beginning with the CEO (which of course is the reason why we started CEORater 5 … Continue reading “G” Matters. Throw Out The “ES”.
CEOs and Institutional Investors should not count on strategic acquirers or PE firms to bail out underperforming stocks (or private company holdings for that matter). Not only is the cost of capital significantly higher for would-be acquirers, but target company revenue and profitability forecasts have substantially less visibility and therefore more risk today than they … Continue reading Don’t Count On M&A To Bail You Out
A general piece of advice that we have provided to CEOs and CFOs over the years is to make your company's story easy for investors to understand. One can not overstate the importance of simplicity when communicating a company's story to investors. It is important for management teams to succinctly describe: the market opportunity;the customer … Continue reading Make It Easy For Investors
Prior to the 2008-2009 Financial crisis, stock buybacks were typically used by management teams to offset options dilution and to acquire undervalued company shares. Today, companies primarily use stock buybacks to goose the value of CEO options packages as well as to goose the value of shares held by CEOs and large institutional holders. The … Continue reading The Stock Buyback Scam