Category Archives: Wall Street

WWE Shares Smacked Down After Warning On TV Rights Deal

by Categorized: Entertainment/Tourism, Wall Street Date:

The recently-high-flying WWE lost nearly half its value in pre-market trading before Friday’s opening bell, after the company announced a new deal with NBCUniversal, and said it would need 1.3 million to 1.4 million subscribers at its new online network to make up for lost pay-per-view revenues.

In trading on the New York Stock Exchange Friday, shares World Wrestling Entertainment barely budged — opening at $10.94 and closing at $11.27, down 43 percent from Thursday’s close of $19.93.

Vince McMahon with WWE's Triple H in Las Vegas in 2009. Getty Images

Vince McMahon with WWE’s Triple H in Las Vegas in 2009.
Getty Images

The new TV deal, including flagship shows on USA Network and Syfy, brings WWE cable revenue to about $200 million a year. “With the favorable renegotiation of our largest television agreements, WWE transitions to a subscription-based business model for future growth,” said George Barrios, WWE’s chief financial and strategy officer, in one of the two releases.

The problem is that in the transition, WWE is giving up pay-per-view and video-on-demand revenues. In a detailed outline of what it needs to do to make up for that, WWE said it could sign up between 2.5 million and 3.8 million subscribers to its online network, at $9.99 a month.  In addition to the United States, the online network is rolling out this year in the United Kingdom, Canada, Australia, New Zealand, Singapore,Hong Kong and the Scandinavian nations, WWE said.

But with a break-even point of about 1.3 million subscribers, and well under 1 million now, investors remain skeptical — and so we have a standoff between Vince McMahon, the founder and majority shareholder, and Wall Street.

The $200 million TV deal is larger than previous contracts but was less than Wall Street anticipated. In a video, Jeff Macke of Yahoo Finance suggested that WWE chief Vince McMahon had wanted a deal more in line with the 10-year, $8.2 billion NASCAR TV package reached last summer, on Fox Sports and NBC.

WWE shares closed at an all-time high of $31.39 on March 20, as the TV deal was being negotiated.  From that peak to Friday’s trading value, WWE has lost about $1.5 billion in market value, leaving it with a market value of less than $850 million.

That means Vince McMahon could lose his newfound status as a billionaire on the Forbes list. He owns about 55 percent of the company and his wife, former WWE CEO and U.S. Senate candidate Linda McMahon, owns a smaller share.

Zygo Agrees To Be Acquired By AMETEK For $364M

by Categorized: Corporate finance, Technology, Wall Street Date:

Zygo Corp., the Middlefield maker of precision optics and optical measuring equipment, said Friday it agreed to be purchased by AMETEK Inc. in a cash deal worth $364 million.

The $19.25 per share deal represents a 31 percent premium over Zygo’s Thursday close of $14.68, and a 27 percent bump from the company’s 6-month average trading price.

If the deal goes through as planned with a targeted closing in June, it would mark the end of independence for a Connecticut homegrown technology stalwart that was founded in 1970 and showed growth but was rarely a home run for investors. Zygo had $162 million in sales in 2013, with net income of $11.4 million.

The deal was valued at $280 million by the companies in a joint written statement, a reduction from the total market value due to Zygo’s $90 million in cash and lack of debt.

AMETEK, based in Berwyn., Pa., is a $3.6 billion-a-year maker of electronic instruments and electro-mechanical devices. The company, traded on the New York Stock Exchange, is a component of the Standard & Poor’s 500.

The companies did not say how the acquisition would affect Zygo’s more than 600 employees, and whether Zygo CEO Gary K. Willis would remain as an employee. In recent years the company has employed nearly 300 people at its Middlefield head office and plant; an updated number was not immediately available Friday.

Willis, who was CEO in the ’90s,  returned to run the company last October after the board ousted a 3-year CEO amid a sales slump — but the deal with AMETEK is hardly a desperation measure, as Zygo sales recovered nicely and its balance sheet is very strong.

It’s so strong, in fact, that at least six law firms announced Friday that they were investigating the deal on behalf of stockholders, saying Zygo’s board might have fetched more in an open auction of the company. Such moves are not uncommon when strong companies that have not seen sharp run-ups in the markets agree to sell themselves.

A rejection by shareholders would seem unlikely considering that Michael A. Kaufman, the Zygo chairman, whose fund controls 24 percent of the company, has agreed to vote his shares for the deal. Willis owned 111,646 shares, or less than 1 percent, as of the end of 2013.

The deal would allow AMETEK to expand its line of contact-based measurement devices to include Zygo’s opitical, non-contact line, the AMETEK CEO said in the written release.

Willis said AMETEK “shares our focus on delivering exceptional metrology and high end optics solutions to our global customers.”

The deal is nearly twice as large as an offer Zygo rejected in 2010, from a different Pennsylvania company, for $10 a share. Since then, Zygo has made three acquisitions. It now has operations in Tucson, Arizona; two locations in Californiia; Montreal; and overseas in Shanghai, Taiwan and Germany.

Zygo shares opened near the offer price on the Nasdaq exchange and by late afternoon were trading as high as $19.65, closing at $19.43 — higher than the offer, as some investors believed a better deal could emerge.

AMETEK shares were up 1.25 percent on a sharply down day for Wall Street.

 

WWE’s McMahon Takes Big Pay Cut — But Powerslams An Extra $1 Billion

by Categorized: Entertainment/Tourism, Politics, Wall Street, Wealth Date:

Vince McMahon’s pay at World Wrestling Entertainment Inc. fell by 30 percent last year to $1.7 million, a $732,000 decline. But the Stamford company’s CEO is hardly taking a face plant on the mat.

Oh yes, he happens to own 52 percent of WWE and his wife, former company CEO and professional political candidate Linda McMahon, holds another 12 percent share. Together, they saw the value of their stock rise by $419 million in 2013 alone.

Vince McMahon, second from left, and Linda McMahon, pose with family members in 2012.  Cloe Poisson/The Hartford Courant

Vince McMahon, second from left, and Linda McMahon, pose with family members in 2012.
Cloe Poisson/The Hartford Courant

Take that!

And since January 1, WWE shares are up another 88 percent, closing at $31.14 Wednesday on the New york Stock Exchange.  So the McMahons’ headlock on Wall Street has yielded another $700 million — not bad for less than three months of work.

If you’re counting, that’s $1.1 billion in added value since the start of 2012. No wonder Forbes named McMahon a billionaire for the first time earlier this month.

The company’s dramatic stock run-up in 2014 could be the result of an upcoming TV deal or a live streaming site. But it’s also most likely related to speculation of a buyout — especially since the McMahons, well into their 60s, own more than two-thirds of the company along with a daughter.

Vince McMahon with WWE's Triple H in Las Vegas in 2009. Getty Images

Vince McMahon with WWE’s Triple H in Las Vegas in 2009.
Getty Images

Bloomberg this week reported on the speculation, saying likely buyers would be giant media firms especially Comcast, already a distribution partner, or Disney, or perhaps The Madison Square Garden Co., controlled by Cablevision’s Dolan family.

The Motley Fool speculated on a sale to AMC Networks, another Cablevision spinoff that could become the wrestling juggernaut’s new TV home. But no one has reported any talks, and no one can predict what the McMahons will do — in the ring, on the air or in the boardroom.

We might learn more at the company’s April 25 annual meeting at its headquarters in Stamford, announced Wednesday. But don’t count on it. Even though investors own a third of the company, the McMahons control virtually all of the voting rights — so their hold on the firm is tighter than John Cena’s iron grip.

Tracking CEO Pay for Connecticut — An Up-And-Down Year At Top

by Categorized: Corporate finance, Wall Street, Wealth Date:

You may be angry about CEO pay in the tens of millions, or you may be proud to live in a land of opportunity — but you’re likely to react if you’re following reports of compensation from publicly traded companies, which come out this time of year as part of shareholder proxy forms.  This blog post compiles the reports for central Connecticut companies in one place.

Nolan Archibald, the $123 Million Man.

Nolan Archibald, the $123 Million Man.

Whatever you believe, it’s hard not to see many of these paydays as a national disgrace.

Check back often as I update the listing throughout proxy season, with links to stories in The Courant and other news outlets.

We’re still leading off with this one: Nolan Archibald, the former Stanley Black & Decker chairman, hauled in $123 million in 2013, one of the biggest payoffs in U.S. corporate history, and perhaps the biggest ever for a takeover ransom. The money was part of his 2010 deal to sell Black & Decker to Stanley.

Travelers’ Jay Fishman hauls in a $40 million catch but there’s plenty left over for the guys in Hartford.

Much less take-home in 2013 for Mark Bertolini at Aetna, but his promise of future stock totaled $28 million.

Thomas May of Northeast Utilities. Courant Photo

Thomas May of Northeast Utilities.
Courant Photo

NU transmits and distributes $11.8 million to CEO Thomas May in 2013, less than he earned in 2012 as his options exercises and stock vesting declined.

Recovery brings an $11.7 million package to The Hartford’s Liam McGee, with deferred compensation from 2010 coming due and higher share values for vested stock.

 

UTC's Louis Chênevert John Woike/The Hartford Courant

UTC’s Louis Chênevert
John Woike/The Hartford Courant

UTC’s board powered up Louis Chênevert’s 2013 package by 26 percent to $24.7 million, and it’s a good thing — since his CFO, Greg Hayes, cracked $20 million.

René Lerer, retired CEO of Magellan Health Services, navigates his way to a $17.8 million treasure including a $6 million bonus even though he was chairman throughout 2013, not CEO.

A slight decline to $8 million for George Aylward at high-flying Virtus.

At MetLife, West Hartford native and Hall High graduate Steven Kandarian brings in less than he did in 2012, $7.3 millio

Stanley CEO John F. Lundgren collected $28.6 million, a typical year for this cost-conscious, aggressive acquirer. (Same story as above by my colleague Brian Dowling.)

Cigna reported that its CEO, David Cordani, saw his total package mushroom to $17.8 million in 2013, as he has $11 million in stock vest last year.

Kaman’s Neal J. Keating sees his pay drop to $2.5 million, but he’ll really get closer to $4.9 million for 2013, when all is said and done.

Webster Bank’s Jim Smith endures a pay decline to $2.4 million, with no exercise of options of vesting of shares. Former president Jerry Plush, who resigned abruptly last fall, earned $3.2 million including a severance.

At People’s United Bank, Jack Barnes gains a $3.6 million package, an increase driven by vesting shares.

General Electric’s Jeffrey Immelt received sharply less in 2013, for a package totaling $11.3 million.

Hospitals aren’t public companies but the state compiles salary data for them, later in the year. Since hospital finances and layoffs are so much in the news, here’s last year’s story showing 18 Connecticut hospital executives pulling in at least $1 million in the prior year. We’re eager for an update.

Here is a March 15 Post by former Labor Secretary Robert Reich, the most widely read critic of U.S. CEO pay.
Chart from Reich post

Chart from Reich post

Here’s my 2013 overview for the 2012 pay year, with links to AFL-CIO’s “Executive Paywatch” database. Please note, AFL-CIO and others calculate CEO pay differently from The Courant. They count the current value of stocks and options in the year granted; we count stocks and options in the year when they are vested or exercised.

UTC Forecast Hurts Shares On Down Day For Markets

by Categorized: Aerospace, Manufacturing, Wall Street Date:

United Technologies Corp. delivered a less-than-stellar profit forecast Thursday, sending its shares down $2.92, or 2.5 percent, to $112.89 on a day when every company in the Dow Jones Industrial Average lost ground.

UTC said it expects to earn a net $1.25 a share in the current quarter, down from $1.39 in the 2013 first quarter, as the Pratt & Whitney union settlement, one-time restructuring and “headwinds” in commercial aerospace sales dragged down organic gains.

For the full year, the Hartford-based conglomerate repeated an earlier estimate for per-share income of $6.55 to $6.85 a share, up from $6.21 in 2013, with sales up less than 1 percent to $64 billion.

The first-quarter numbers, coming from a company known for consistent, double-digit growth, fell short of estimates by analysts surveyed by Bloomberg.  Markets were already spooked by fears of a growth slowdown in China, as the Dow fell by 231 points, or 1.4 percent and UTC, with major exposure in China, was the second-biggest percentage loser in the bellwether index.

UTC’s own presentation to financial analysts showed a forecast for a smaller increase in commercial construction in China this year.

Investors Tell Morgan Stanley They’re Optimistic; More Fear In New York

by Categorized: Corporate finance, Wall Street, Wealth Date:

Investors across the nation with at least $100,000 in the markets told Morgan Stanley in a recent poll that they’re optimistic 2014 will bring gains, but those in the New York area, including Fairfield County, expressed more fear and caution.

Among about 3,000 respondents to the poll, by Morgan Stanley Wealth Management, “86 percent expect their investment portfolios to be ‘better’ or ‘the same’ at year-end, and 84 percent believe their financial well-being will be the same or better,” the company said.

The poll was taken during the fourth quarter of 2013, a bellwether year for stocks, before the declines of 2014.

Investors in the tri-state area were more concerned than those nationally about their families’ financial security, their ability to retire, having enough money for emergencies and market  volatility.  That makes sense, said Joseph Matthews, branch manager and first vice president at the Fairfield office of Morgan Stanley.

There is some familiarity bias associated with living in the tri-state area,” he said. “The people polled are more familiar with Wall Street.”

So, regardless of whether they actually anticipated the downturn that could become a full-on correction at the start of 2014, it’s less of a surprise to them, presumably.

As for types of stocks that might look good in 2014, technology firms led the way in the nation, at 79 percent, and in the tri-state area, at 72 percent, followed by energy, biotech and pharmaceuticals in slightly varying orders for the nation and the region. But other than pharmaceuticals, the sectors most prominent in the New York region, and especially in Connecticut, didn’t fare as well: finance, aerospace and insurance.

“The majority of investors nationwide said they were not knowledgeable alternative investments such as hedge funds, commodities and real estate although Tri-State region investors were more knowledgeable than other areas,” Morgan Stanley said in a written release.

The poll had a margin of error of plus or minus 3.9 percentage points in the nation and 6.7 percentage points in the region.

 

 

 

 

State Pension Fund Gains $2.9B In 2013, Even After Payouts

by Categorized: Public finance, Wall Street Date:

The political debate over Connecticut’s long-term health and pension liabilities just got more complicated, as the state’s pension and trust funds grew by $3 billion in 2013 to $28.2 billion, a record.

The gain was after paying out $636 million in benefits and expenses, state Treasurer Denise L. Nappier reported.

Stock market gains in the United States and overseas led to investment gains of 14 percent in both the Teachers Retirement Fund and the State Employees’ Retirement Fund, the largest of six pension plans and nine trust funds managed by Nappier.

That sounds great and it did match the benchmarks that Nappier uses to gauge the funds’ performance, but it was far less than the 29 percent return on the Standard & Poor’s index of 500 large U.S. stock companies. Of course, the whole idea is to balance the portfolio, to guard against big swings in stocks, real estate and various classes of debt securities.

Most important, the returns of 14 percent beat the state’s investment assumptions, which ranged from 8 percent to 8.5 percent.  In all, the funds have grown by $8 billion, or 40 percent, since the end of the recession in mid-2009.

If the gains lead to higher assumptions about returns, that could dramatically lower the state’s estimate of unfunded liabilities.  Gov. Dannel P. Malloy recently said the state’s long-term obligations were down by $11.6 billion to $64.6 billion — the source of much debate at the state Capitol.

Gov. Dannel P. Malloy and his GOP challengers, Sen. John McKinney and Tom Foley, have argued about “debt” and “long-term obligations,” not always clearly, making the debate needlessly more complicated.

Debt is money the state has borrowed and must pay back in a regular schedule, like a mortgage. The state’s debt costs are higher under Malloy, but not much higher in part because more borrowing has been offset by retirement of old debt and lower interest rates.

Long-term obligations are the estimated billions of dollars in future payouts the state will have to make for retirement.

Malloy has increased yearly payments into the funds as a way of chipping away at a projected shortfall, but the fund’s investment returns are far more important than any money the state can afford to kick in from year to year.

 

STR Holdings Fighting To Trade Higher Than Its Bank Account

by Categorized: Energy, Manufacturing, Wall Street Date:

Despite an agreement with a Chinese contract manufacturer to begin production, STR Holdings Inc., the East Windsor-based maker of solar encapsulation materials, is hovering around a rare distinction that all publicly traded companies want to avoid.

STR closed at $150 a share on the New York Stock Exchange Friday, for a total market value of $62.6 million. As of Sept. 30, the last date for which it reported, the company had $62.25 million in cash — with zero debt.

That puts STR perilously close to the Maginot line, where the total value of all its publicly traded shares is less than the cash it has on hand. Basically, it’s the market saying the company’s operations have no value.

Nine times in the 16  trading days of 2014, STR has closed at or below that level, which is $1.49 a share. On Jan. 14, STR closed at $1.33, a market value of $55.5 million, fully 6.7 million less than its Sept. 30 bank account.

This is all the more amazing considering the company listed $132 million in assets as of Sept. 30, including not only the cash, but $10.7 million in inventory and $28.7 million in property, plants and equipment, and just $16.9 million in liabilities, with no debt at all.

Situations like this, sometimes called “negative enterprise value,” are rare, with just a small handful of companies facing it at any given time.

Does this mean the troubled company and its stockholders’ investments are doomed? Not necessarily, and in fact some see it as a buying opportunity — but not for the meek.

STR in 2013 lost its largest customer, First Solar, and closed an East Windsor factory and research center that was just two years old. In November, the company fired four executives at the level of vice president or higher, to save money, after announcing a $6.2 million loss from operations in the third quarter.  It’s closing a plant in Malaysia that opened in 2009.

The company, based in Enfield since its founding in 1944 under a different name, now lists its headquarters as East Windsor.

But this week the company said demand for its latest products in China is picking up, and it reached a deal to hire ZheJiang FeiYu Photo-Electrical Science & Technology Co., Ltd. to make materials under its specifications. It’s also revamping a leased facility in China.

Analyst Houman Tamaddon wrote a report this month in the investor service Seeking Alpha, in which he called STR a “cigar butt,” a reference to Warren Buffett’s 1989 shareholder letter that compared some bargain companies to cigar butts on the street, cheap but perhaps with a few good puffs left.

Tamaddon’s Seeking Alpha report makes the point that STR management has been frank about the problems:

The bullish case for STR is that at the current stock price, the company is very attractive. The poor performance of the company has been mostly due to macroeconomic shifts out of the control of management. A “hiccup” in the environment would drive the stock price considerably higher. If no hiccup materializes, investors can be comforted that loss of their investment is limited due to the company’s strong balance sheet. At current prices, STR, like the house wallpapered with $100 bills, presents an opportunity for investors.

Of course, as he notes, shareholders can’t easily get at all those $100 bills. And it’s possible that STR has less cash on hand, as we’ll find out when the company reports fourth-quarter results.

One way to look at odd situations like STR is through book value — assets minus liabilities. While typical, healthy industrial companies trade at 2 to 3 times book value, STR is trading at barely more than half of its $2.75 a share net worth.

That means one of two things: Either the company is worth more dead than alive, as a liquidation, or it has nowhere to go but up.  The shares went public in 2009 at $10 and reached a high of $27.68 a year later.

For Connecticut, the game is largely lost, as STR, which had 300 local employees in 2011, has just a bare bones home-state staff. One bright note: Although STR did receive $829,000 in federal tax credits, it’s one of the rare firms that did not see any state assistance.

 

 

Economic Revolution At A Business Conference

by Categorized: Economic Development, Economy, Public finance, Wall Street, Wealth Date:

By now we all know that income and assets are so wildly unequal that U.S. economic progress is threatened, nowhere more than in the rich-state, poor-state of Connecticut. But we don’t expect the hue and cry about disparity to come from Wall Street.

It happened on Friday at the annual post-Labor Day economic conference of the Connecticut Business and Industry Association, where David M. Darst, managing director and chief market strategist at Morgan Stanley Wealth Management, delivered a view of the markets. Darst talked about what happened in the meltdown of 2008, what’s happening now and, of course, the hard part — what kinds of assets he predicts will perform well going forward.

Routine stuff, except that Darst, colorful with a loud, raspy voice, happens to trade in the realm of perception, the subtle art of measuring wealth and psychology not based on fundamental conditions, but how people feel. And he is very tapped into the anger of the typical household — and the decreasing buying power.

“The country is going nowhere unless the 80 percent are going somewhere,” Darst said. “The people who do a lot of the work get no respect.”

He added, “You need societal revulsion with the status quo, leading to…structural reform.”

For emphasis, Darst said in his next life, he wants to “come back as an employee of the Connecticut Department of Motor Vehicles,” presumably to rise up and demand the respect that he said clerical employees just don’t get.

“We will get structural reform,” he said. “Maybe things have to get worse for you to demand it.”

This was a CBIA conference? I checked my press packet and sure enough, Darst is one of the leading Wall Street denizens. His presentation listed 78 appearances on CNBC, by date, and 18 on Fox Business.

Darst didn’t say what, precisely, he meant by structural reforms and he bolted soon after the talk, but it was clear he was talking about the sort of fairer allocation of resources that comes from a more civilized economic system. As for political civility, which most of us agree is a crucial missing element to righting the U.S. economy, he said, “The day we get that is the day I see Nancy Pelosi and John Boehner in a hot tub together.”

Dave Chappelle needs to learn a thing or two from this guy about how to handle a Hartford audience.

I looked around and saw John Harrity, a longtime labor activist and Machinist Union official, among the bankers and economists. What, I asked Harrity, did he suppose Darst was talking about by way of structural reforms?

“It’s what we’ve been talking about all along,” Harrity said. “we really can’t afford to keep exporting job instead of products…the thing that scares me is, what’s the next generation going to do.”

Harrity allowed that the details matter, and exactly how reform happens will likely remain a matter of disagreement.

Darst wasn’t the only speaker at Friday’s conference talking about reform. David M. Walker, former U.S. Comptroller General — basically the national budget auditor — brought his message of tax and fiscal reform, part of his Comeback America Initiative.

Walker, who headed the Government Accountability Office under Presidents Bill Clinton and George W. Bush, uses his Bridgeport address — “In the nice part of the city” — to advance his call for a total rethinking of property taxes and government services. (I wrote about Walker’s efforts in an April column.)

Walker is pushing for reform of public employee health and retirement plans, saying, “They’re unaffordable, they’re unsustainable.”

Sure, he favors collective bargaining, but with tougher bargaining by public officials who aren’t beholden to unions. Darst, too, had called for more leadership by people like Clinton and Reagan, “who can bust heads, and do it in a nice way.”

And with that, we had a perfect illustration of why reform isn’t happening anytime soon. Reform requires taking wealth away from powerful interests, and right now we can barely adopt budgets without shutting down the state and federal governments.

It is all a sign of the decline of the American empire. The good news is we are Great Britain, not Rome.

Connecticut’s Tally From Huge Mortgage Bank Settlement: $448 Million For 6,260 Homeowners

by Categorized: Banking, Housing, Real Estate, Wall Street Date:

A preliminary tally is in for Connecticut’s take in the $25 billion foreclosure settlement with the nation’s five largest mortgage loan servicers: $448 million in loan restructuring for 6,260 borrowers, Attorney General George Jepsen said Thursday.

That’s an average of $71,618 that the homeowners won’t have to pay those banks, and they saw their mortgage interest rates fall by an average of 2 1/4 percentage points. On top of it, the state received $27 million for foreclosure prevention programs and 5,000 Connecticut residents who had already lost their homes to foreclosure received $7 million.

The February, 2012 settlement with Bank of America, Citigroup, Ally Financial, J.P. Morgan Chase Bank and Wells Fargo followed an investigation into abusive practices.

“The settlement has been a tremendous success in Connecticut, helping many distressed borrowers to keep their homes,” Jepsen said in a written statement.

“It was the goal we envisioned during long months of negotiations,” said Jepsen, who helped in the talks between the lenders, the federal government and 49 states.

Loan modifications and workouts continue but appear to be winding down as the banks reach their settlement targets. Nationally, nearly 644,000 borrowers have received $51 billion in mortgage relief, with an average benefit of $79,742.