This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Greenberg: Responding to ADT's Response

This article originally appeared on Feb. 1, 2014, on's Columnist Conversation.

SAN DIEGO (TheStreet) -- Last week I wrote a piece headlined, "Why ADT is Appalling."

What's more appalling is the company's response, which was inserted at the end of the story after it was published -- almost immediately after I heard from the company.

Here's the question I asked, via email:

Must Read: Greenberg: Why ADT Is Appalling

I'm working on a piece about how ADT's (ADT - Get Report) stock has fallen in the wake of its earnings miss -- and its comments that it has "implemented actions" to "regain subscriber traction."

But this is the same company that spent money buying back billions of dollars in stock at prices well above its current price in a share repurchase program that was instituted after Corvex disclosed a 5% stake.

Corvex then went on the board -- and then got bought out at a high price just before this bad news hit.

The obvious question: Why was Corvex given special treatment, and as a board member what did they know prior to selling?

ADT's response:

1) The repurchase from Corvex of a large block of ADT common stock (almost 5%) allowed us to retire more than 10mm shares in one transaction at a set price (market price of Nov 22 closing), giving us speed and certainty of execution. This had an immediate beneficial impact on our EPS that was shared by all our shareholders.

2) Buying at the market price was the most fair and cost effective way for ADT to retire a large portion of our stock.

3) Additionally, repurchasing shares directly from Corvex enabled ADT to retire the shares without incurring transaction costs.

I appreciate their response, but my first reaction: Try telling that to all of the shareholders who didn't get special treatment.

Reality: Had the company not bought the shares back from Corvex and had not been on the buyback campaign to end all buyback campaigns, its earnings per share would have fallen by 25% rather than 11%.

Revenue growth of 3.7%, while above a year ago, is below the prior quarter and is nowhere near where the company (by it's own concession) wanted it to be. Why? Maybe they were spending too much money buying back shares instead of investing in the business.

P.S.: I bought an ADT system a few months ago. I chose buying directly from the company rather than a dealer, because when I called the dealer, after getting a coupon in the mail, I felt I needed to shower when I got off the phone. The price from the company or the dealer was so low I would have been foolish not to take it. It was so much cheaper than anybody else's. They keypad they installed? I curse it every time I use it. Now, with these results, I know why. They're burning the furniture to keep the fire lit.

Take a look at the balance sheet: Cash is tumbling while debt (to buy back shares, including Crovex's) is spiraling higher. Not the best combo -- low rates or no low rates.

-- Written by Herb Greenberg in San Diego

Herb Greenberg, editor of Herb Greenberg's Reality Check, is a contributor to CNBC. He does not own shares, short or trade shares in an individual corporate security. He can be reached at

Get More Investment Ideas:


Chart of I:DJI
DOW 17,798.49 -14.90 -0.08%
S&P 500 2,090.11 +1.24 0.06%
NASDAQ 5,127.5250 +11.3820 0.22%

Herb's Tweets

Select the service that is right for you!

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
Real Money Pro

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Trifecta Stocks

Trifecta Stocks analyzes over 4,000 equities weekly to find the elite 1% of stocks that pass rigorous quantitative, fundamental and technical tests.

Product Features:
  • Model portfolio
  • Trade alerts
  • Recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Growth Seeker

Chris Versace, using sophisticated stock screening and fundamental research, identifies potentially explosive small and mid-cap stocks.

Product Features:
  • Model portfolio
  • Small-cap and mid-cap focus
  • Intraday trade alerts
  • Weekly roundups
Daily Swing Trade

Master swing trader Alan Farley uses his sophisticated software screens to review thousands of stocks each day for you, to find just the handful that meet his demanding criteria.

Product Features:
  • Daily commentary and coaching on swing trading
  • Technical charts and analysis
Top Rated Stocks Top Rated Funds Top Rated ETFs