The Five Dumbest Things on Wall Street This Week
07/27/07 - 06:31 AM EDT
Colin Barr
5. Shrewd Negotiators
The guys at WCI Communities (WCI Quote - Cramer on WCI - Stock Picks) know how to drive a hard bargain. Shares in the Bonita Springs, Fla., homebuilder plunged 21% Thursday to $9 a share after the company said it had failed to find a buyer. WCI admitted that "deteriorating conditions and uncertainty in the homebuilding and debt markets have made the sale process more challenging." The sale process could have been easy, of course. Carl Icahn offered in March to buy WCI for $22 a share, reasoning that the company's value has been obscured by mismanagement. "We believe that the board and CEO of WCI have not enabled the company to maximize the potential of its unique set of assets," Icahn said March 13. As if to prove the point, WCI chief Jerry L. Starkey and Chairman Don E. Ackerman decided not to accept Icahn's sweet bailout plan. Instead they fired off a barrage of letters questioning his motives and ridiculing his offer. A May 11 letter advised shareholders that in contrast to Icahn, the WCI board "has both experience and a plan to maximize value for all shareholders." The WCI board remains in place, but value hasn't been maximized. Instead, WCI shares have plunged 55%. The fact that the stock has sold off certainly undermines Starkey and Ackerman's claim that the Icahn offer was "inadequate." Inadequate's too kind a word for these guys.
Dumb-o-Meter score: 79. "WCI's current directors are highly qualified with substantial
experience in the home-building industry, as business leaders, and as directors of public and private companies and other organizations," the May 11 letter claimed.
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