As it is Valentine's Day, The Business Press Maven must do something to honor the fact that marriage rumors about a big company, which were started (and unsourced) in an obscure publication a few weeks ago, were seemingly put to bed a couple of days ago -- by an anonymously sourced report in a less-than-obscure publication.
I guess, as these things are starting to go, that will have to pass as progress, even if it smells like something a bit less.
But enough about Barely-Married -- uh,
. Let's talk about
, and listen up, yo.
Cutting Past the Fluff
We are starting to hit the point of absurdity when it comes to business-media coverage of potential takeovers. And while you know that I'm otherwise generally bullish, I see one
big danger this year in the form of the market eventually becoming too taken by poorly reported merger fluff. Look at a semicoherent
story from yesterday.
Buyers Taking a Shine to Alcoa?" teased the not so pun-ny headline. The subheadline made it seem like consummation of a deal was kiss-close: "The shares climbed Tuesday on a report
are planning a takeover of the aluminum giant."
Whoa! Someone spray a hose to cool off that headline writer. Actually, let's not pin the blame on one person. After all, look at what the lead intones: "Amid the current buyout wave, the targets appear to keep getting bigger. No sooner had real-estate giant
Equity Office Properties
been snapped up in a $39 billion deal on Feb. 9 than word came of another potential blockbuster. A Feb. 13 press report indicated that aluminum giant Alcoa could be takeover bait."
So, uh, let The Business Press Maven get this straight: Some REIT sold for a lot, which, um, by the natural progression of things, makes it stand to reason that a totally unrelated aluminum company in an absolutely separate industry might sell for even more. Will someone please bludgeon The Business Press Maven to death with a giant foam valentine?
No, no, because it's a day of love and The Business Press Maven has always been lucky in it, I'll let that lead pass. But what of that Feb. 13 report? I only ask because as business media outlets kept reporting and re-reporting on the Bristol-Myers "takeover talk" (note the condescending quote marks), they progressively lost sight of the fact that there were no sources to the original claim, which was published in a French newsletter no one knew.
Drop a few key words over time (like "unsourced" or "French newsletter") and a spurious claim looks inarguably serious.
Letting my fingers do the walking to
of London, I looked up
There were sources, I suppose, though they were unnamed and there was no sense of who these sources were. Senior company officials? Loose-lipped investment bankers? A hedgie looking to trade a rumor pawned off on a gullible reporter who needs a big headline to avoid the next round of layoffs? Do tell.
Well, they didn't. We only get mention that there were sources who were close to a
put together by
for new chief executives, which is "believed to" (I'm aping the article's cagey passive voice here) include BHP executives. In terms of an actual bid, "it is understood" (hey, there's that slyly used voice again -- don't trust it a bit) that BHP and Rio Tinto have done "feasibility studies." Before the article explains how feasible these studies are, we are off to the usual: the cataloguing of some mining-sector merger activity last year.
Past results don't predict future performance -- except in the field of mergers and acquisitions, where, apparently, a REIT takeover or old events in the mining sector can be proof of something currently afoot there.
Look, The Business Press Maven has no idea whether Alcoa will be taken over. It does not seem to be well managed, which always makes a company vulnerable. But while aluminum hasn't kept pace with other commodities, it has still flown ever higher, so I just don't know if it's worth the risk.
But, hey, worse deals have been done. Though if I am going to trade one of these rumors, it needs to be with the assurance that there are living, breathing, prominent sources for the rumor talk. And that the talk is based on more than a French newsletter or a
Not to draw too trite a parallel, but if The Business Press Maven told you that he was spending Valentine's Day doing a feasibility study on making Paris Hilton my second wife, you would still know that several variables -- the results of the feasibility study, her willingness, my current wife's objections -- just might come into play.
Does that mean that Alcoa will never be taken over or that The Business Press Maven will never run off to Paris with Paris? Well, no. I guess. But you'd have to be nuts to chase these rumors. Remember above all else: The key to good stock market performance over time is to avoid glaring and avoidable mistakes. Too much of this takeover talk has the look of mistakes in the making. To consider this reported talk valid, you need sources -- hopefully named, but if not, you need a good general hint of who they might be. You also need better than a feasibility study.
Let's have no mistake about one thing, though. And there is a source: The Business Press Maven. Readers, you are all my valentine today. Big kiss.
At the time of publication, Fuchs had no positions in any of the stocks mentioned in this column.
A journalist with a background on Wall Street, Marek Fuchs has written the County Lines column for The New York Times for the past five years. He also contributes regular breaking news and feature stories to many of the paper's other sections, including Metro, National and Sports. Fuchs was the editor-in-chief of Fertilemind.net, a financial Web site twice named "Best of the Web" by Forbes Magazine. He was also a stockbroker with Shearson Lehman Brothers in Manhattan and a money manager. He is currently writing a chapter for a book coming out in early 2007 on a really embarrassing subject. He lives in a loud house with three children. Fuchs appreciates your feedback;
to send him an email.