5 Dumbest Things on Wall Street This Week: April 12

5. Valeant Bags Obagi

Pity all those fast money players that poured into Obagi Medical Products ( OMPI). They were betting on a bidding war, but got left holding the bag instead.

Shares of the skincare products purveyor plummeted nearly 6% Monday to $23.98, after Germany's Merz Pharma Group yanked its offer for the company. Merz offered $22 a share for Obagi last Tuesday, topping Canada's Valeant Pharmaceuticals ( VRX) mid-March bid of $19.75. Valeant came back swinging last Wednesday with a $24 proposal, which caused traders to drive the stock even higher in anticipation of a showdown. Obagi closed at $25.42 last Friday, well above Valeant's revised price, before Merz surrendered Monday and sent the stock lower.

"Merz is a disciplined buyer and at this level the economics of such a transaction do not meet our requirements," said Merz CEO Philip Burchard in a statement.

Wow! Now there's something you don't see too often on Wall Street. A CEO zipping up his fly rather than engage in a pissing match. Boy did he make all those chest-thumping traders angling for a price fight look foolish!

As for Valeant, well, it certainly needed the win, even if it was forced to sweeten the pot. The company's stock got shellacked last week over Mylan's ( MYL) introduction of a new generic version of its herpes cream Zovirax. Valeant CEO J. Michael Pearson said Mylan's maneuver would hit the company's 2013 earnings, although he would not reveal the extent until it reports quarterly results in May.

Pearson did hint that the Obagi purchase might "mitigate the impact" of its Zovirax zinging. Nevertheless, the fact that Valeant was forced to spend $417 million for Obagi instead of $344 million -- thanks to Merz's meddling -- must be making him feel as bruised as one of those asinine armchair arbitrageurs right now.


Au Revoir Ron

Alas Dumbest fans, we knew the time would come when our dear Ron would move on. We just didn't think he would come and go so quickly. He arrived on the scene so erect with energy that now our world seems flaccid without him.

So with a heavy heart, we bid farewell to our friend Ron. He came. He saw. He screwed everything in sight. And for this we say amen.

Wait a second...Come on! We're talking about J.C. Penney ( JCP) CEO Ron Johnson, not porn star Ron Jeremy. Get your minds out of the gutter people!

In case you missed it, Penney's board fired Johnson late Monday, only 17 months after it brought on the former Apple ( AAPL) and Target ( TGT) executive to sex up the staid retailer. Shares of Penney sank more than 58% in the past year as Johnson implemented a turnaround plan based on upscale products and every-day low prices as opposed to the company's traditional strategy of seasonal sales and coupon blasts. In his place, the board brought back Johnson's predecessor Mike Ullman, the man who Bill Ackman, a board member and Johnson's original sponsor, said "chronically mismanaged" the retailer prior to Ron's arrival.

Why bring back Ullman specifically to right Ron's wrongs? Other than to give Penney's longer-serving board members a chance to stick it to the categorically overconfident Ackman that is.

Well, perhaps it's because Penney's board is worried about the company's dwindling cash position and they believe Ullman, who ran the retailer from 2004 to 2011, still has some residual credit with increasingly nervous vendors. Penney ended the last fiscal year with less than $1 billion in cash, and Standard & Poor's reaffirmed its financial risk profile as 'highly leveraged' despite the CEO switch.

Or maybe the board simply needed a placeholder in the corner office while it scouts for a new CEO, and Ullman was kind enough to oblige for the bargain price of $1 million a year, a sum well below the $17 million Johnson reportedly pocketed for his Plano, Texas sojourn. As to who would sign up for what very well may be a suicide mission, well, that's another question we can't fully answer. Still, should J.C. Penney take a turn for the worse, better the undertaker be a sympathetic figure like Ullman than another mercenary in the Johnson mold.

One final theory is that the board is reinstalling Ullman in a last ditch effort to reconnect with Penney's customers. Not that Ullman had much success increasing sales during his previous tenure atop the once-iconic retailer. Not in the least. But at least Ullman, like Allen Questrom before him, knew his customers' wants and needs. He respected who they were and how they liked to shop, even if that meant coupons and markdowns.

Johnson, on the other hand, never appreciated his shoppers' loyalty, taste or opinions. (Or those of his employees for that matter.) His redesigned stores were monuments to his manhood, not functions of their needs. The upscale designers on his shelves were his fantasy partners, not theirs.

Put simply, in Ron's warped view, the customer's role in the affair was to submit to his will and squeal with choreographed delight at his every move. And once it became overwhelmingly clear he could no longer deliver the thrills he promised, he was forced to beat it.

Once again, we're talking about the former Penney's CEO. Not the porn star. Although in either case the whole sordid affair makes us want to wash our hands in disgust.

3. D.A. Davidson Dumbness

Even with all our vast resources here at the Dumbest Lab, it's getting hard for us to account for all the insanity surrounding Herbalife ( HLF). Maybe we better hire an analyst and an auditor before the situation spins out of control.

On second thought, perhaps not.

Big Four accounting firm KPMG resigned as auditor for the besieged supplement seller, as well as shoe purveyor Skechers ( SKX) Tuesday, amid an FBI investigation into insider trading allegations involving a former senior partner named Scott London. London, who was based in Los Angeles along with both companies, admitted to sharing inside information and has subsequently resigned. Shares of Herbalife fell 4% to $37 while Skechers stock ended up 2% at $22.00 on the news.

"The partner was immediately separated from the firm," KPMG said in its statement. "This individual violated the firm's rigorous policies and protections, betrayed the trust of clients as well as colleagues, and acted with deliberate disregard for KPMG's long-standing culture of professionalism and integrity."

Well, we don't know about that last part. If you remember, KPMG did have to pony up $456 million to regulators in 2005 for selling fraudulent tax shelters. Still, at least the firm was smart enough to feed London to the government's regulatory werewolves and disown three years of his work before he damaged the firm's reputation any further.

Herbalife also attempted to separate itself from the rogue accountant. The company issued a statement saying that KPMG's decision to withdraw had no relation to Herbalife's accounting practices or its management, both of which have been called into question by hedge fund manager Bill Ackman in his quest to drive the stock lower.

And while this KPMG silliness had no direct connection to Ackman's battle with fellow billionaire Carl Icahn over the very validity of the company, it did spill over into the stock through an amazingly asinine research report from analyst Timothy Ramey of D.A. Davidson.

Ramey, a longtime Herbalife bull, downgraded his view of the shares to neutral from buy based on the KPMG kerfuffle, and lowered his price target to $38 from $78.

"This is and will be disruptive to the stock, but hopefully not the company," wrote Ramey. "Herbalife will likely have an excellent cause-of-action against KPMG, and clearly they will have their audit fees refunded for the past three years. But for now it would be imprudent for us to continue recommending purchase of Herbalife's shares."

Excuse us, but "Hopefully not the company"? "Imprudent" to recommend the shares? What is it with this guy? Is he selling Herbalife on the side? Doesn't he know analysts are supposed to shill for investment bankers, not supplement sellers?

In case you forgot, Ramey is the same analyst that attacked Ackman for his bearish presentation about the company that sent the stock reeling in December. And while Ackman may have his own faults -- just read that Vanity Fair piece on him, oy! -- there is no question that he is far more meticulous than most analysts on Wall Street.

Back in December when the stock was getting shellacked, Ramey reiterated his buy on the stock with an ad hominem shot at Ackman, saying Herbalife's customers "may not look like the people Mr. Ackman knows in Chappaqua, but they are out there, and in growing numbers; weight loss is becoming a growing industry."

That's pretty personal Tim! And while you found a convenient way to slash your rating and price target via this ridiculous KPMG story, it does not belie the fact that Ackman, pompous ass he may be, has been proven right so far on Herbalife, while you remain way, way off base.

2. Haphazard Harvard

We may not be Ivy League material, but we're not so dumb that we don't recognize that something strange is going on at Harvard Bioscience ( HBIO).

Sorry. Was that a double negative?

You see! Even writing about Harvard is making us self-conscious!

And they -- not us -- are the folks who wackily went from accelerating the IPO of its Harvard Apparatus Regenerative Technology (HART) unit last Tuesday to postponing it over "market conditions" this past Wednesday. Shares of the life sciences company sank 14% on the announcement to $4.78.

HART develops medical devices that are intended to grow organs outside of a body for transplant. Harvard Bioscience filed for the HART public offering in December, and in late March it said it expected the offering of 1.7 million shares to price at $10 to $12 each.

"HART will continue to pursue certain clinical development milestones, including a trachea transplant clinical trial plan agreement with the FDA, completion of surgeries with synthetic scaffolds manufactured by HART and completion of trachea transplant surgeries in the U.S. Harvard Bioscience will continue to explore alternatives related to its regenerative medicine device business, including the optimal timing and methodology of separating that business," said the company in a statement.

Once again, we may not be the sharpest tool in the shed, yet we still don't understand what happened in the past week that made the timing less than "optimal." If anything, the market environment could not be any more welcoming for the new issue.

The S&P 500 hit its highest level ever this week, broaching the 1585 mark. Meanwhile, biotech stocks as measured by the iShares Nasdaq Biotechnology Index ETF ( IBB) are up over 2% in the past week and have risen almost 20% since the start of 2013.

Furthermore, the so-called "market conditions" seemed quite ripe for Taylor Morrison Home Corp. ( TMHC) to pull the cord and sell 28.6 million shares to the public Wednesday, a full 20% more than previously planned. Taylor's underwriters priced it at $22 Tuesday night, the top of the range, and it finished 5% higher on Wednesday.

Seriously, if a homebuilder feels confident enough to take the plunge after the storm that hit that sector, then why would Harvard get cold feet when it's been nothing but blue skies for biotechs over the past decade?

You don't need a weatherman to know which way the wind blows.

You also don't need a Harvard degree to know when something funny is going on.

1. The Fed's Fat Finger

There's no disputing that Ben Bernanke has the global economy in the palm of his hand. His massive bond-buying program has forced stock and bond bears alike to lay down their arms in deference to his power.

We just hope the Fed doesn't suffer another fat finger episode like it did this past week. Though its premature data dump may not have sparked a flash crash, it is a good reminder of the Fed's fallibility.

Somebody at the Fed fouled up and mistakenly sent the minutes from its March meeting ahead of schedule to a select group of congressional staffers and lobbyists on Tuesday afternoon. Once it recognized the problem, the Fed was forced to release the information to the greater public on Wednesday morning at 9 a.m. instead of its usual 2 p.m.

"The reason is they were inadvertently sent early to a list of individuals who normally receive the minutes by email shortly after their usual release time," said a Fed spokesperson about the mishap. "The individuals on the distribution list -- primarily congressional employees and employees of trade organizations -- received the minutes shortly after 2 p.m. Tuesday."

Hey, that's no big deal. Congressional staffers and lobbyists are great at keeping secrets! There's no need to worry at all if they mistakenly get inside information in the future. It's not like these Washington folks know anybody on Wall Street or anything like that.

Sure. And if you believe that then we have a mortgage bond to sell you.

Wait. Ben Bernanke would probably buy that bond, toxic or not.

So we'll sell you a bridge instead.

-- Written by Gregg Greenberg in New York City.

Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.

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