Levine on Wall Street: Chrysler's Unwanted IPO
Chrysler would just as soon you don't invest in its IPO
Chrysler filed papers for an initial public offering yesterday but made it plain that it didn't want to: Its retiree health-care trust, which owns 41.5 percent of the company, demanded the IPO under its registration rights agreement. Fiat, which owns the other 58.5 percent, wants to buy the trust's shares and not go public. The trust thinks Fiat's price is too low and is trying to get a higher valuation by selling some shares publicly. The game theory here for potential investors is fascinating -- if you buy Chrysler shares, you're just a plaything in Fiat's game with the trust -- but then there is also the fact that Chrysler's chief executive officer is Sergio Marchionne, who is also Fiat's CEO. As Chrysler's CEO he is tasked with leading a successful IPO. As Fiat's CEO he is tasked with buying Chrysler at the lowest possible price. The IPO filing is full of warnings about conflicts, but none is more eloquent than this quote from the Bloomberg News story:
Marchionne plans to handle the presentation to investors himself, saying this month: “I’ll work my buns off to get the best possible reception in the equity market, but there’s a limit to my talents.”
Noodles wants you to feel welcome in its IPO
Another hyped IPO is the one for Noodles Inc., a restaurant chain that I assume serves noodles? Here is a story about how Noodles refers to its customers as "guests," as one does. "Following guest step down," someone doubtless chirps. Noodles tried to extend this terminology to its IPO prospectus, reasoning I suppose that some investors and/or guest ... omers would be confused if the company called them "guests" in the restaurant and "customers" in the prospectus. The SEC had none of it:
“Please refrain from referring to your customers as ‘guests,’ ” the SEC wrote in a letter dated in April. “We note that ‘customers’ denotes persons who pay for goods or services.”
Noodles fought this and lost. I for one applaud the SEC for taking a stand against corporate buzzwordery. You don't see "venti" in Starbucks's filings, do you? (No.) Securities filings: corporate America's last refuge from silly jargon. Wait what?
Or you can invest in companies with even sillier names than "Noodles Inc."
Yesterday was the first day of "general solicitation," in which new SEC rules allow hedge funds and other unregistered investment opportunities to advertise to the general public. It was a bit of a dud for hedge funds -- I at least haven't seen any ads -- but as Felix Salmon points out it was a gold rush for crowdfunding platforms: "the Web is now being overrun with companies like Crowdfunder and RockThePost and CircleUp which offer a whole new world of opportunity when it comes to separating fools from their money." These platforms are basically ways for start-ups to raise a lot of equity from strangers on the Internet with a catchy pitch and not much else; there are no financials (how could there be?), no due diligence and not much monitoring of what the start-ups say about themselves. AngelList's page of investment opportunities adorably specifies whether the team for each company "Went to Stanford," "Worked at Bonobos," "Went to Harvard," "Went to NYU," "Worked at Intel," "Worked at LivingSocial" -- you get the idea. "Worked at Yahoo!," ugh. Anyway, stick to mass-advertised hedge funds probably.
Oil and gas company executives have a lot of fun
Here is another in a series of amazing Reuters stories about conflicts of interest in the oil and gas industry, which is a pretty nutty industry. This one is about Mike Liddell, who was until recently the chairman of Gulfport Energy, a public oil and gas company, and who also "served as an advisor for energy investments by Wexford [Capital LP], a $4.3 billion Connecticut investment firm." Wexford owned a bunch of oil-field services firms, and it gave Liddell "millions of dollars in equity interests at no cost in more than a dozen firms that have done business with Gulfport," possibly for reasons having nothing to do with Liddell getting those firms contracts with Gulfport, though also possibly not. Gulfport thought -- correctly! -- that there was no need to disclose this to shareholders, because "SEC rules only require disclosure of compensation earned by Liddell for work on behalf of Gulfport," not I guess compensation for work against Gulfport.