5 Dumbest Things on Wall Street: March 26

ADVERTISEMENT

JetBlue Bites Big Apple

JetBlue (Stock Quote: JBLU) announced Monday that it loves New York too much to take off for Florida.

How much does JetBlue love New York?

Easy, $10 million of tax breaks and public assistance worth. Oh, and a joint branding deal for the iconic "I Love NY" logo to boot.

The airline said Monday it will keep its corporate headquarters in Queens, N.Y., instead of relocating to Orlando, Fla. JetBlue has been mulling a move for over a year, with the lead candidate being Orlando, the site of its training facility.

JetBlue is the only airline based in the Empire State and is now the biggest carrier at John F. Kennedy International Airport. The airline's first flight took off from JFK on Feb. 11, 2000.

Nostalgia, however, was not what kept JetBlue from taking up residence near Disney World. Nor was it an affinity for Woody Allen movies, Broadway shows, the New York Yankees or the world's best bagels.

No, it turns out what really kept JetBlue, which bills itself as "New York's Hometown Airline," in its hometown is a healthy schmear of taxpayer subsidies. New York City Mayor Michael Bloomberg, who just happens to be richer than Scrooge McDuck himself, said the city will invest up to $3 million in the airline's Kennedy Airport Terminal, on top of a $7 million tax exemption. In return, JetBlue said it will stay put and create up to 200 new jobs in the city over the next five years.

We say that's a lot of taxpayer dollars at risk for a Mickey Mouse number of jobs generated. And if corporations keep playing municipalities against each other like this, things are going to get downright Goofy.

Dumb-o-meter score: 75 -- JetBlue took a $10 million bite out of the Big Apple.

 

 

From Russia 'With Attention'

The Russians are coming! The Russians are coming!

Wait a second. It's just a false alarm. They aren't coming to bid on our military aircraft at all, so all you Cold War kids just chill out for a second.

 

Russia has not been asked to participate in a bid to supply aerial refueling tankers to the U.S. Air Force, said Deputy Prime Minister Sergei Ivanov on Monday. The news counters a report by the Seattle Times on Saturday saying that United Aircraft of Moscow, with an unnamed U.S. partner, was planning to challenge Boeing (Stock Quote: BA) for the $40 billion contract.

"If (UAC) received a request, it would study it with attention," said Ivanov, who is also board chairman of state-run United Aviation.

Glad to know somebody is taking this whole idea seriously. We can only imagine the hilarity of the hearings on Capitol Hill that would be necessary to approve our former mortal enemy as our newest military supplier.

Not that the bidding process for this project couldn't get much wackier. Boeing was expected to be the sole bidder after Northrop Grumman (Stock Quote: NOC) dropped out of the tanker contest earlier this month. Then, Northrop's former partner, European manufacturer EADS, asked the Pentagon last week for a 90-day extension so it can decide whether to go it alone. And now we get word that the Russians want to enter the contest with what some analysts call Prime Minister Putin's favorite plane.

Somebody pour us a vodka, this whole thing is getting to our heads.

Better make it a Stoli. Just in case the Russians do show up after all.

Dumbest score: 80 -- Goose to Maverick. Holy crap! Is that a Russian MiG you're flying?

 

 

Icahn Tames Lions Gate

There's a billionaire barbarian at Lions Gate (Stock Quote: LGF), and the movie studio has come up with some pretty lame excuses for not letting him in.

Activist investor Carl Icahn blasted the board of directors at Lions Gate Entertainment as "absurd" this Wednesday after the film studio rejected his latest bid for the entire company as too low. The company's board voted unanimously against Icahn's offer to buy all of its outstanding shares for $6 apiece, valuing the deal at about $575 million.

Lions Gate already snubbed Icahn's offer of $6 per share last month in a move that would have raised his stake in the company to 30% from 19%. The company's board also went the extra step and enacted a poison pill defense to fend off future takeover attempts, a ploy that Icahn plans to challenge in court.

"We believe that nothing has changed -- the offer remains financially inadequate and still does not reflect the full value of Lionsgate shares," said Lions Gate Co-Chairman and Chief Executive Officer Jon Feltheimer.

Um, excuse us Jon, but Icahn's bid was 15% above the stock's latest closing price at the time it was announced. That sure seems like more than full value to us, at least to where it was while you were running it without him.

Furthermore, we tend to side with Carl when you slam him for having no industry experience or vision. Icahn writes in his letter that he "cannot help but wonder why your 'vision' -- if so 'meaningful' -- never translated into shareholder value?" Sure makes sense to us.

Our opinion is that Lions Gate's keepers revisit what happened two years ago when Yahoo's! board rejected Icahn's demand to sell the company to Microsoft for more than $30 a share. Yahoo! now trades for barely half that amount.

Hindsight may be 20/20, but Icahn's vision sure was good on that one.

Dumb-o-meter score: 85 -- Lions Gate's latest movie Kick-Ass sure better live up to its title or Carl will pounce.

 

 

Palm Plummets

Kaboom! The bomb that is Palm (Stock Quote: PALM) has officially gone off.

Palm shares plummeted 29% March 19 to a 14-month low after the smartphone maker warned that its current-quarter revenue would be far below Wall Street's expectations. Analysts on the Street slashed their ratings on the news, one going so far as to lower his price target to zero.

 

That's right, zero, zip, nil, nothing, nada. To which we say: Ouch!

Worst hit by Palm's implosion was major stakeholder Elevation Partners, a private-equity firm that includes U2 lead singer Bono. Elevation owns about 30% of the company. Instead of singing the blues, however, Elevation says the company still has "enormous opportunity" and backed its management, led by Chief Executive and Chairman Jon Rubinstein, a former member of Elevation who is well known for developing Apple's iPod.

"Jon and his team have built the best mobile operating system available today and they are now working through short-term execution challenges with Elevation's complete support," Elevation said through a spokesman.

Now that Wall Street has abandoned the company, however, Rubinstein's short term has become ever shorter and those challenges even greater. Unless a savior in the likely form of Microsoft, Nokia or Dell steps up to buy Palm for its technology, then Elevation's investment will be totally sunk.

Dumb-o-meter score: 90 - "Somebody better land Palm a hand. And fast!"

 

 

FDA Jeers Genzyme

Here's a bright idea for the brass at biotech company Genzyme (Stock Quote: GENZ): Before spending big bucks to lobby the government or battle activist investor Carl Icahn for control, maybe you ought to dish out a few dollars to clean your manufacturing plant.

Genzyme said Wednesday that the Food and Drug Administration is taking enforcement action against it after a series of problems stalled the production of its key drugs. The FDA will oversee the inspection of the company's plant operations for an extended period of time. Genzyme will also likely be required to pay hundreds of thousands of dollars in penalties.

Sorry, Genzyme, looks like that $750,000 you shelled out to lobby the federal government in the fourth quarter, a number released last Friday, didn't pay off too well, now did it?

In June, the company shut down its manufacturing plant in the Boston neighborhood of Allston for nearly three months to clean up viral contamination that had been slowing down production of top-selling drugs Cerezyme, which treats Gaucher disease, and Fabrazyme, which fights Fabry disease. Then in November, the FDA said it found tiny particles of garbage in drugs made by Genzyme, including steel, rubber and fiber.

Speaking of trash, this latest stink involving Genzyme's management will only boost Carl Icahn's chances of gaining control of the company, according to a number of Wall Street analysts. Icahn, who owns 2% of the company, plans to nominate himself and three of his buddies to the board.

Just thinking about it, Icahn is probably the perfect person to take over this cleanliness-challenged company. Talk about a guy who loves to clean house.

Dumb-o-meter score: 95 -- Forget Floyd Mayweather Jr., Manny Pacquiao should square off against Carl Icahn next. That guy will fight anybody.

 

Show Comments

Back to Top