The Five Dumbest Things on Wall Street This Week
The Five Dumbest Things on Wall Street This Week
Colin Barr
06/03/05 - 07:01 AM EDT
1. Mr. Dash
Elan (ELN) was sounding a little less self-assured this week. The Irish drugmaker has been hit hard by the safety problems of its key drug, the multiple sclerosis treatment Tysabri. Elan and partner Biogen (BIIB) yanked Tysabri on Feb. 28 after a patient died of a rare brain infection. "Tysabri is probably dead," a Morgan Stanley analyst wrote in March, summing up a view widely held on Wall Street. Questions about the drug haven't silenced CEO Kelly Martin, though. He raised eyebrows in February by saying a realistic timeline would put Tysabri back on the market in the third quarter. Then Martin pushed the stock up 11% one day last week by reiterating that he expected Tysabri to revive. But Elan was showing a little less dash Thursday. The stock plunged 15% after The Boston Globe reported that a fourth patient using the drug may have contracted the brain disease, which is known as PML. Thursday's report halted a monthlong run-up. It also left Elan in a less talkative mood. "As per previous statements, we don't comment on rumors or individual cases going through the safety evaluation process," Elan told Reuters and Bloomberg on Thursday. Martin might do well to keep his trap shut altogether.| Hanking Privileges Greenberg goes loudly |
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2. Hankering
Believe it or not, AIG (AIG) investors just got another reason to thank Hank.Yes, former chief Hank Greenberg believes he is worthy of some overdue praise.
AIG restated five years' worth of financials Tuesday, wiping out some $4 billion of earnings over that period. The news came on the heels of an accounting scandal that led to Greenberg's ouster.
Greenberg left this spring after regulators took aim at the company's accounting. Last week, New York Attorney General Eliot Spitzer filed a suit charging Greenberg with orchestrating a series of accounting tricks to help prop up AIG's stock price.
The accounting scandal and the battle with Greenberg had threatened to destabilize the company. But new CEO Martin Sullivan lauded AIG's workers for hanging in there despite the uncertainty. "I am pleased that we have completed our internal review and filed our 2004 Form 10-K, which reflects the results of our detailed and thorough review of AIG's major business units globally," Sullivan said in Tuesday morning's press release. "I want to thank our 92,000 employees who have worked so hard throughout this period serving our customers and building new relationships, as well as those who conducted and assisted in the review process." Meanwhile, Greenberg has a distinctly different view of who deserves credit for AIG's success. "We believe that today's 10-K confirms that AIG remains in every respect a highly successful and financially solid company reflecting the significant contributions made over many years by former management," Greenberg's lawyers said Tuesday. Our hat's off to you, Hank. To view Colin Barr's humorous video take on the former AIG CEO's hankering for praise, click here.
| Can't You SEC? Watchdog, watch thyself |
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3. Pocket Change
Maybe timing isn't Bill Donaldson's strong point.The Securities and Exchange Commission chairman said this week that he'd step down after 28 months on the job. His office trumpeted his efforts at "improving disclosure and transparency," "protecting investors" by stamping out conflicts of interest, and "deterring wrongdoing and securities fraud." Why, Donaldson set out with the aim of "transforming the SEC to reach a new level of effectiveness," the release says.
Indeed, his SEC oversaw the completion of Sarbanes-Oxley rule-making, reformed the mutual fund industry and adopted a rule forcing hedge fund managers to register with the government. Apparently some business types thought Donaldson overreached with some of those plans. But what's worse is that in the last week the SEC has also uncovered a $48 million budget shortfall tied to new buildings, and been nipped by a congressional watchdog over its weak internal controls -- the very issue the SEC has flogged big companies over in recent years. The SEC seems to have reached a new level of something, but we're not sure effectiveness is it.
| My Mother the Car Lots and lots of company in GM's family |
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4. Red Carpet
When all else fails, roll out the welcome mat.Stocked with a hefty supply of last year's vehicles, General Motors (GM) unveiled a new sales strategy this week. Like many of GM's previous strategies, the one unveiled Wednesday calls for steep discounts.
Unlike the other plans, however, this one has bigger implications. It kicked off with a press release reading, "GM is Proud to Invite America to be Part of its Family." Sound like a little too much commitment? Not to worry. The idea is to give buyers preferential employee-discount rates and simplified pricing. "We firmly believe that once consumers have the opportunity to drive a GM vehicle, they'll know what we, and millions of loyal GM customers, already know about the value represented by the cars and trucks that we build," said GM marketing exec Brent Dewar. You can't blame GM for trying something new. The company posted a 12% sales drop for May. Earlier, it reported a huge first-quarter loss that led to several recent trips to the bond-rating junkyard, as analysts fretted over the company's pension obligations and financial position. Yes, sounds like just the sort of big happy family everyone is itching to join.