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The Five Dumbest Things on Wall Street This Week: Dec. 14

2. Spectrum's Shortsighted CEO

A slew of companies have been issuing special dividends lately due to the impending fiscal cliff. And with 2013 tax rates still unsettled, it's not difficult to understand why companies are doling out cash to investors prior to year's end.

That said, the same solid reasoning can't be applied to the special 15-cent dividend announced by Spectrum Pharmaceuticals (SPPI - Get Report) this past Tuesday. According to TheStreet's biotech ax, Adam Feuerstein, Spectrum CEO Raj Shrotriya is less a dividend play to enthuse loyal shareholders than a dividend ploy to keep short sellers at bay. In fact, Feuerstein asserts that Shrotriya has an unhealthy obsession with the shorts, who now represent about 60% of the company's freely traded shares.

Well, Adam, at least you can't accuse the guy of being paranoid, because with a short count that high, they really are out to get him.

Unfortunately, you can't call him a great CEO either, because based on his firm's recent results, they are out to get him for a pretty good reason indeed. Spectrum posted disappointing third-quarter revenue and sequentially flat product sales figures. Furthermore, the company's 2012 guidance implies paltry 3% revenue growth for the December quarter, which only serves to heighten skepticism over Spectrum's sudden payout. The stock, which popped almost 4% on the news, is down 24% this year and probably would be down even more if the shorts hadn't started piling into it like clowns into a Volkswagon.

"Recent Fusilev sales don't inspire confidence, with $25.4 million in October sales reported by Wolters Kluwer, down from $26.1 million in September, which was down from $29.7 million in August. That's a trend heading in the wrong direction," adds Feuerstein. "Don't forget, too, that Sagent Pharmaceuticals only recently began supplying the market with generic leucovorin, which could be stunting Fusilev growth."

Shrotriya obviously sees things differently from our buddy Adam. Spectrum's CEO released a statement saying that the special dividend is based on the company's "successful growth in revenue and profits this year" and is an "appropriate way to provide an additional return on investment to our many loyal shareholders."

Um, sorry Shotriya, but we don't see much loyalty when it comes to your stock. All we see is a whole lot of folks lending out their shares to people waiting for it to drop.

And if you keep focusing on these silly little tricks to scare them off instead of leading your company, you are only going to prove them right.
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