Hertz's Silly Suit
NEW YORK (
) -- By being so thin-skinned about a Wall Street research report,
wound up acting thick-headed.
The car rental giant filed a lawsuit Monday against accounting research firm Audit Integrity, alleging it was defamed in a report which named Hertz as one of 20 major companies that could potentially go bankrupt. According to Audit Integrity's calculations, which include metrics such as liquidity, leverage and profitability, Hertz has a 3.99% chance of going belly-up.
Hertz Silly Suit
"Not only are the conclusions about our financial health baseless, but questioning the integrity of our financial reporting is indefensible," Hertz Chairman and CEO Mark P. Frissora said in a statement. Hertz is seeking an undetermined amount in general and punitive damages, a retraction and apology from the company and attorneys' fees and costs.
Aw, come on Mark, look on the bright side. There's a 96.01% probability that you won't go bankrupt. That's gotta count for something, right?
Well, maybe not.
Audit Integrity CEO Jack Zwingli responded to the suit by accusing Hertz of trying to suppress his freedom of speech. Zwingli, who is directly named in the suit, said he stands "firmly behind our methodology and findings, and will vigorously defend ourselves against this unwarranted litigation."
Our feeling is that if Hertz simply ignored the negative report, then we probably never would have heard about it in the first place. The two firms topping the so-called bankruptcy list,
(10.54% chance of going under) and satellite radio provider
Sirius XM Radio
(9.04%), have not threatened legal action against Zwingli or his firm (at least not yet). And those guys are in far bigger trouble.
Instead of making a racket, Hertz should have left its pride at the checkout counter and taken the high road.
Dumb-o-meter score: 95 -- Alas, much like the odometer in a rented Buick, time can't be rolled back to correct a silly decision.
Terra Stands Firma
The fertilizer company said Thursday that its board of directors is rejecting
buyout offer, saying it is not in the best interests of the company or its shareholders. CF Industries' most recent overture is its fifth bid in the last nine months.
Terra Stands Its Ground
Five rejections in less than a year? Come on guys, we believe in the merits of persistence, but face facts: Terra is just not that into you.
CF Industries stepped up the pressure on its smaller competitor Terra earlier in the week, when it announced it had acquired 7% of the company's shares. CF said that over the past two weeks it has acquired a stake in Terra worth about $247 million and would happily purchase the remainder of the company for around $4 billion.
Terra, however, has consistently stiff-armed CF. The board's most recent rationalization for not getting together is that CF's stock price was inflated due to its own unsolicited takeover bid from fellow fertilizer purveyor
"Over the last nine months, our board has reviewed five proposals from CF -- and each time the board has unanimously determined that a combination of our companies lacks compelling industrial logic and runs counter to Terra's strategic objectives," Terra President and CEO Michael Bennett said in a statement.
Seems pretty clear to us. Now if only CF will take the hint.
Dumb-o-meter score: 90 -- Buck up, CF. There are plenty of fish in the sea.
It's been a long time since
has graced our Dumbest list. But zombies have a way of rising from the dead.
The bailed-out mortgage finance company announced late last week that its new chief financial officer will start his new job with annual pay of up to $3.5 million, including a nearly $2 million signing bonus. Freddie Mac, which has thus far accepted $51 billion in capital from its benevolent Uncle Sam, hired Ross Kari as the new CFO from
Fifth Third Bancorp
, where he was CFO for less than year. Kari is slated to start his new gig on Oct. 12, replacing David Kellermann, who died in April.
Freddie Mac said Kari would be paid a base salary no less than $675,000, plus an added annual $1.66 million in installments and an annual target incentive of $1.16 million. Kari gets a $1.95 million cash sign-on bonus, "in recognition of the forfeited annual incentive opportunity and unvested equity at his current employer," Freddie said in a regulatory filing.
So how much did Kari make at his old job? Kari signed a deal with Fifth Third last November worth $580,000 a year in salary, plus a $100,000 signing bonus and a bunch of restricted stock.
Amazing! For the first time in history, somebody is getting a raise to go to work for the government. And what makes it all the more impressive is that it comes after all that chest-thumping on Capitol Hill over executive pay.
Don't worry though. Kari's paperwork and pay package were approved by all the necessary pay "czars" down in Washington, says the Federal Housing Finance Agency, which oversees the government-sponsored home funding companies.
"FHFA approved the compensation after consultation with the Treasury Department, as Mr. Kari is well-qualified for the position and the amount is comparable to market pay," says FHFA spokeswoman Stefanie Mullin.
Save it for Rep. Barney Frank (D., Mass) the next time he drones on about overpaying Wall Street executives. Because, quite frankly, we think it's a ridiculous sum.
Dumb-o-meter score: 85 -- Wonder what the government's paying at the post office these days?
SpongeTech Gets Squeezed
New York Post
is tossing a whole lot of mud at
. And it sure looks to us like it's sticking.
The New York city-based cleaning products maker, which trades on the Bulletin Board, came under serious attack by the New York tabloid last Friday. The
is alleging that SpongeTech is falsifying revenue by booking sales to fictitious customers. SpongeTech dropped to 8 cents a share on Friday, down from 9 cents the day before.
SpongeTech Gets Squeezed
SpongeTech claimed in an SEC filing that six customers accounted for 99.4% of its sales, or nearly $31 million, for the first nine months of its fiscal year. The firms are SA Trading Company, US Asia Trading, Dubai Export Import Company, Fesco Sales Corp., New Century Media and
Unfortunately, after much searching, the reporters over at the
could not track down a single representative for any of those companies except Walgreen. For example, the
said it called the number SpongeTech provided for the Dubai Export Import Company only to see that number "disabled" a few hours later.
"Calls to the phone numbers SpongeTech provided for the other four companies also led to receptionists who took messages. They were all disabled shortly afterwards," reported the Post.
SpongeTech, famous for its "Smarter Sponge," responded on Friday with a press release calling the
accusations "inaccurate." The company maintained its operations were squeaky clean and that the customers cited in their financial statements are all current and active.
"We believe that a number of documents cited in press reports about the company are internet forgeries being used by short sellers and stock speculators to undermine the integrity of the company and profit from the adverse publicity," said the folks at SpongeTech.
They went on to say that statements in the press that SpongeTech must restate its financial statements are "wrong." What's actually happening says the company, is that it has hired a new accountant to "re-audit," its books, not restate them.
Hopefully the new auditor will have an easier time finding SpongeTech's so-called customers than the
did. But we doubt they will.
If there is one thing we know, it's that those guys at the
have put the squeeze on SpongeTech.
Dumb-o-meter score: 80 -- We think SpongeTech ought to just come clean.
Starbucks' Instant Success
CEO Howard Schultz that when Wall Street wanted an "instant" hit to rejuvenate flagging coffee sales, it was not meant literally.
In an attempt to tap into the $17 billion market for instant coffee, Starbucks launched its Via Ready Brew product nationally this week after test runs in its hometown of Seattle, as well as in various locations in Illinois. Via is made by adding water to a single-serve packet. The packets will be sold in books of three for $2.95 or boxes of 12 for $9.95.
Starbucks Instant Success
"We're so confident that you won't be able to tell the difference between Starbucks Via and our brewed coffee, we're inviting customers into our stores to see if they can tell the difference," Starbucks Chairman, President and CEO Howard Schultz said in a statement.
Wait a second there Howard! Are you saying that all we have to do is add hot water to your instant coffee mix and we can get the same Starbucks experience for a buck or less a cup?
That's simply fantastic. That way we won't have to spend all that extra money on cookies, muffins, sandwiches, CDs, coffee makers and all those other various and sundry items we pick up in your stores while waiting for our milk to be steamed.
Sarcasm aside, seems to us like Starbucks is -- quite literally -- diluting its high profile brand. And they are unabashed about it, even backing this new rollout with taste tests and even national television ads, something Starbucks rarely does. (Why should they advertise on TV when they have a store on every corner?)
"We think there's a big prize here," Schultz told the
, adding that first-day sales were exceeding expectations.
That's great Howard. But we are talking about instant coffee here. So let's wait and see how long the buzz lasts!
Written by Gregg Greenberg in New York
Before joining TheStreet.com, Gregg Greenberg was a writer and segment producer for CNBC's Closing Bell. He previously worked at FleetBoston and Lehman Brothers in their Private Client Services divisions, covering high net-worth individuals and midsize hedge funds. Greenberg attended New York University's School of Business and Economic Reporting. He also has an M.B.A. from Cornell University's Johnson School of Business, and a B.A. in history from Amherst College.