The 5 Dumbest Things on Wall Street This Week: May 3

5. CME Czechs Out

Central European Media Enterprises ( CETV) apparently has a new motto: If at first you don't succeed in selling advertising, try, try to raise prices again.

Yeah, we don't get it either. Then again, we don't speak Czech very well.

The loss-making broadcaster, most often referred to as CME, kicked-off its debt-reduction plan by selling around $174 million worth of stock Monday. CME's partner Time Warner ( TWX) was the biggest buyer, sucking up 49.9% of the class A stock to maintain its stake at that level. Time Warner's purchase comes on top of an additional $200 million of CME class B preferred shares it will buy in a private placement. CME said it would use $300 million of the net proceeds from the sale to retire a slice of pricey 11.63% senior notes due in 2016.

Although the fundraising maneuver was widely expected, shares of the company still sank over 10% to $3.90 on the extra shares being puked onto the market. Also not helping the stock was CME's dismal first quarter results. CME reported a $109 million Q1 loss Monday, compared with $13.8 million a year earlier. Net revenues sank a sickly 18.2% to $137 million, mostly due to Czech advertisers protesting higher rates.

"Our pricing actions in the Czech Republic and across our region will continue as we are determined to reverse the trend of declining TV advertising spending," said CME CEO Adrian Sarbu.

Yo, Adrian, what are you punch-drunk? If the customers in your largest market weren't buying from you before, do you really think jacking up your rates will help your cause? Do the words "price elasticity of demand" translate into Czech, or did they get lost with Slovakia?

At least Time Warner is lowering its cost basis as it vacuums up another round of CME's sloppy stock. A year ago the media giant bought 9.5 million shares of CME for $7.51 apiece in the company's last deleveraging exercise. Time Warner is down nearly 70% on its original 31% stake purchased in March 2009.

Yeah, we don't get why Time Warner would throw good money after bad either.

Then again, we don't want to speak too soon.

Jeff Bewkes' investment in CME has been one of his rare missteps since taking the CEO job at the media giant in 2008, so maybe we better Czech back later.

4. So Long Sheldon

We here at the Dumbest Lab perfectly grasped why KPMG relinquished its lucrative Herbalife ( HLF) audit business. It had no choice but to step aside once that schmuck Scott London admitted to feeding inside information to an equally asinine acquaintance.

That conclusion we understood.

On the other hand, PricewaterhouseCoopers' (PWC) decision to cut loose Las Vegas Sands ( LVS) from its client roster late last Friday, well, that one has us flummoxed. And we're not alone judging from the casino stock's 1% selloff on an otherwise bullish Monday in the market.

"It's been 25 years, and in business vendor relationships change and evolve over time," said Sands spokesman Ron Reese about PWC's choice to end its 25-year relationship with Sands founder and chairman Sheldon Adelson. Reese added that it also was "not the result of any non-public information" concerning the company's recent admission that it violated the U.S. Foreign Corrupt Practices Act when it was bribing Asian bureaucrats to get its casinos up and rolling.

OK. So it wasn't a big falling out with Adelson that led the Big Four accountant to drop out. It also didn't have anything to do with the company's Macau mishegas.

Hmmm. This truly is a puzzler. Is it bigger than a breadbox? What about a breadbox filled with dollar bills under the arm of a Chinese official? Is it bigger than that?

Unfortunately, PWC offered even less information as to why it was bidding Adelson adieu. All it said in its letter to the SEC was that it agreed with the Las Vegas Sands' public filings regarding the end of their affair.

Thanks a lot guys. You've been very helpful. Not.

One serious possibility is that Adelson's crew are seeking a Chinese or Hong Kong-based accounting firm to sign off on its books now that Asia's high rollers are puddle jumping to Macau instead of jetting all the way to Vegas to place their bets. Of course, a drastic move like that would undoubtedly unnerve Sands' shareholder base considering the widespread distrust of Chinese auditors in the wake of all those reverse merger blowups.

As to whether Adelson personally gives a GAAP which pencil pusher signs off on his company's financials, we highly doubt it. Sheldon plays by his own rules and he has no qualms paying big bucks to do so. In the last election cycle the 79-year old billionaire spent $98 million on at least 34 different candidates and groups.

In other words, Sheldon is accountable to nobody but Sheldon because in his mind he's the biggest breadbox around.

3. (Yet More) Herbalife Hilarity

Audits? Herbalife ( HLF) don't need no stinking audits!

The embattled supplement seller celebrated its Street-beating results Monday by sticking it to its nemesis, hedge fund manager Bill Ackman. Herbalife reported revenue of $1.1 billion, a 17% increase over the prior year's quarter, topping analysts' estimate of $1.07 billion. Excluding items, Herbalife earned $1.27 a share, up from 88 cents a share in the prior year's quarter. Analysts surveyed by Yahoo! Finance were looking for earnings of $1.07 a share.

The Los Angeles-based firm, which Ackman referred to as a "pyramid scheme" when he announced his billion dollar bet against the company in December, also raised its 2013 guidance to between $4.60 and $4.80 a share. Previously, the company had forecast earnings between $4.45 and $4.65 a share. Shares of the heavily shorted stock -- almost 50% of the shares -- popped 2% Tuesday on the news.

"The proof is in the results. Ultimately people will realize that Bill Ackman's reckless bet is based on an unfounded hypothesis," Herbalife President Des Walsh told Reuters.

Easy there Des-y. We wouldn't be so quick to gloat with all that splainin' you need to do. You may believe Ackman's bet is "unfounded", but as you repeatedly remind investors in your earnings release, your financials are "unaudited" as a result of the KPMG insider trading scandal.

"As a result of the resignation of KPMG, the unaudited interim financial information presented has not been reviewed by an outside independent accounting firm," Herbalife warns three times in its earnings press release.

And while it is true that Herbalife had no role in Scott London's silly scheme to help his golfing buddy get rich (Jeez what an idiot!), it's still not the type of earnings report to crow over considering all those caveats. As much as Herbalife is using this report to go on the offensive against Ackman, we've never seen a more defensive press release.

Aside from the multiple references to its lack of accounting certification, Herbalife listed over 20 bullet-pointed warnings about its guidance in its "Forward Looking Statements" section. From the boilerplate admonition about "the competitive nature of our business" to "adverse changes in the Chinese legal system" to "pricing and currency devaluation risks, especially in countries such as Venezuela", we've never seen so many disclaimers in a single release! There's enough scary stuff there to even send Carl Icahn running away from the stock if only he didn't hate Bill Ackman so much to stay in it.

And speaking of Venezuelan currency risks (now that's something we don't say often), it's worth noting that Herbalife only earned $1.10 per share when including a hit from the devaluation of Venezuela's currency (a hefty 10 cent bottom line hit) and legal expenses related to its defense against Ackman's onslaught (an equally stiff 7 cents).

True, that still leaves Herbalife's earnings 3 cents ahead of Wall Street estimates for the quarter, yet it's equally true that Bill is not going anywhere soon, so investors can expect an Ackman adjustment in its GAAP accounting statement -- audited or unaudited -- for many quarters to come.

And as for Venezuela's hefty impact on the company's profits, well, that's just one of the twenty plus risks associated with doing business with Herbalife. Just check the bullet points.

2. Apple's CEO Committee

Tim Cook is not running Apple ( AAPL). That much we learned from the tech giant's record-breaking $17 billion bond sale this week. Neither is the ghost of Steve Jobs for that matter.

So if not Tim or Steve's everlasting spirit, then who is calling the shots at the iPad maker?

Not in any particular order: the Internal Revenue Service, Fed Chief Ben Bernanke, Goldman Sachs ( GS) and hedge fund manager David Einhorn.

Let's start with the IRS.

Apple has $145 billion in cash. One would think that with that type of moolah, the company could easily tap its reserves if it wanted to achieve its goal of returning $100 billion to shareholders by 2015 via dividends and buybacks. Apple could simply write one big withdrawal slip at the bank, distribute the cash and still have a mountain left over while it churns out more.

Unfortunately, only $45 billion of that cash hoard is readily available in the United States, leaving it around $55 billion short for its distribution plan. The rest is stashed overseas, which means Apple would be forced to pay up to 35% in taxes should it choose to repatriate it.

Put it all together and you can clearly see how the IRS, not Tim Cook, made the decision to go into debt and sully its once pristine, debt-free balance sheet. Seriously, if you could borrow $5.5 billion for 10 years at an annual yield of 2.4% instead of paying Uncle Sam 35% of your hard-earned money, wouldn't you? Sure you would.

Of course, those low rates are a function of Apple's other CEO in its CEO by Committee, Ben Bernanke of course. Ben has been buying bonds by the billions in his quantitative easing program in order to push investors out of bonds and into the stock market. Not that Ben's binge-buying has helped Apple's stock of late, even as it pumps up the housing market. The shares have sunk from over $700 in September to barely $440 today with a 2.9% dividend.

Congratulations Ben! All those investors you want buying Apple stock so they can feel rich jumped into the bonds for an even smaller yield instead. What a brilliant plan to screw up corporate balance sheets in the same exact way the Fed's low rates caused American citizens to leverage themselves out of their homes.

Not that Ben didn't have any help in selling that deal of course. Just like Wall Street used the Fed's yield curve manipulation to profit from the mortgage bond bubble, those very same folks are now using those very same skills to inflate a nascent corporate bond bubble.

Think about it. Two of the most cash-rich companies in the world - Microsoft ( MSFT) and Apple - raised money they don't really need by selling billions worth of bonds in the past two weeks. Neither of them is using the money raised to build plants, make products or create jobs. It's simply money being moved from one pocket to another with an investment bank taking its cut in the middle.

Yep, you guessed it. Goldman Sachs led the Apple bond sale along with Deutsche Bank. Not to be a conspiracy theorist, but it's hard not to envision the Goldman guys whispering in Cook's ear: "Come on Tim. Don't you see how good a bond sale would be for Goldman...we mean Apple?!"

Which brings us to Greenlight Capital's David Einhorn (ok, so we did have a particular order for the puppet-masters pulling Tim Cook's strings). For those who don't remember him, Einhorn is the man who knows better than anybody how debt and an economic downturn can destroy an overleveraged company because he's the hedge fund manager who called the demise of Lehman Brothers.

Einhorn, you see, started Tim Cook down this Rube Goldberg-designed road when his frustration with Apple's "cash problem" led him to sue the company to get some of that problematic cash back to shareholders like himself. Aside from using the courts, he also offered his own brilliant, iPie-in-the-sky idea called "iPrefs" as an alternate solution to a crisis that nobody really knew was a crisis until Einhorn made it a Wall Street cause celebre.

At first Tim Cook ignored Einhorn, calling his crusade "a silly sideshow". Nevertheless, we can now safely say that Einhorn's lip-flapping created the butterfly effect that led to this week's bond sale.

And for the record, we here at the Dumbest Lab don't necessarily see debt as an evil thing on a balance sheet. We are well aware that debt makes things grow in a capitalist economy and it could turn out to be a grand slam of a move for Apple.

Still, the whole way that this particular debt deal unfolded puts us on edge, especially with the ashes of last credit bubble fresh still smoldering. Apple's CEO called not a single shot during the process. Rather than make decisions for himself, Tim Cook let the quartet of the IRS, Ben Bernanke, Goldman Sachs and David Einhorn wittingly or unwittingly make his choices for him.

In our opinion, that does not bode well for Apple's future. How can it?

You know what they say about too many Cooks in the kitchen.

1. Less Than Hysteric Hemispherix

If Hemispherx Biopharma's ( HEB) board of directors is playing some kind of joke on its shareholders with its recent executive payouts then let us be the first to tell them it's not funny.

Extremely dumb, yes. Hysterically funny, no.

As TheStreet's biotech ax Adam Feuerstein brought to light Wednesday, Hemispherx CEO Bill Carter was awarded a 5% bonus totaling $1.1 million based on the net proceeds resulting from the sale of 30 million shares of company stock through an At-The-Market (ATM) financing arrangement last fall.

Hemispherx's board concluded the sale of company stock on the open market actually represented a sale of "company assets not in the ordinary course of its business." Under this definition, Carter was contractually eligible to receive 5% of the proceeds from a sale of 30 million shares of Hemispherx stock during the fourth quarter 2012 that netted $23 million for the company. Thomas Equels, Hemispherx's vice chairman and lawyer, also received the same $1.1 million "ATM bonus" under his employment contract.

Forget ATM as in At-The-Market, these clowns are using the company like an ATM as in Automatic Teller Machine! Carter and Equels are ostensibly supposed to be getting paid for selling drugs, not stocks. Furthermore, even boiler room brokers wouldn't charge 10% for a crappy penny stock like this.

"Hemispherx was selling those 30 million shares under the subterfuge of its ATM agreement which allows the company to disclose sales only when it files quarterly reports to the SEC. And of course, at that same time, Hemispherx shares were losing 80% of their value after the FDA and an independent advisory panel sharply criticized the company for the way it conducted clinical trials of the experimental chronic fatigue syndrome drug Ampligen," writes TheStreet's Feuerstein.

The panel voted not to recommend Ampligen for approval and the FDA rejected the drug, making it the second time Hemispherx has been turned away by U.S. regulators. Despite these miserable results, however, the company's sycophantic board deemed it kosher to pay millions to Carter and Equels.

Wait. We forgot one.

Obnoxiously greedy, yes. Definitely yes.

-- 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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