Monday, October 20, 2014

FASB And IFRS Diverge

For several years, FASB and IFRS have been working toward the convergence of U.S. and international accounting polices. Now, it appears that a split has occurred. Several cultural differences appear to have led to divergence, including the informal relationship between stakeholders and FASB, which contrasts to the more rigid international relationship. Additionally, the lack of support for internationalization of accounting standards from U.S. corporations and investors appears to have been a major influence. IASB chairman, Hans Hoogervorst, believes that convergence was successful as convergence has been reached on several topics. In either case, it appears the push to homogenize U.S. and international accounting standards is at a standstill for now.

$100 Million Spreadsheet Error

Tibco Software recently agreed to be acquired for $4.2 billion by Vista Equity Partners. Usually, an announcement such as this ends the negotiations regarding price. However, in this case, an error in a spreadsheet overvalued Tibco by $100 million. As a result, Vista will only have to pay $4.1 billion for Tibco. The reduction in value will lower the payment to Tibco shareholders by $.61 per share.

Saturday, October 11, 2014

Spinoffs And Bondholders

In 2014, there have been 57 spinoffs by nonfinancial companies, an increase from 44 and 33 in 2013 and 2012, respectively. Many spinoffs are done for the benefit of stockholders. On average, a company that undertakes a spinoff sees its EBITDA increase by one percent between the announcement and the end of the next fiscal year. But the news for bondholders isn't as good. For one-third of the spinoffs since August 1, 2013, S&P has lowered the credit rating or put the company on a negative creditwatch. S&P notes that in spinoffs, there is often a decrease in cash flow without a corresponding reduction in debt. And, in the case of Symantec, S&P has the company on a negative creditwatch due to diminished business diversity (read diversification, or the coinsurance effect.) 

Friday, October 10, 2014

A Private Bankruptcy

In a unique bankruptcy filing, GT Advanced Technologies argued that it could not reveal why it had filed for bankruptcy, nor could the company reveal its turnaround plan. GT, which is expected to be a supplier of sapphire glass for Apple, argued that confidentiality agreements prohibited the company from revealing more about the reasons for the bankruptcy. A lawyer from the Office of the U.S. Trustee, which acts as a government watchdog on bankruptcy cases, criticized GT's lack of disclosure in the case. The judge granted the request by GT on a temporary basis. Another hearing to make the ruling permanent is scheduled for October 21st.  

Darden Board Fired

In most proxy fights, only a few board members are replaced at any time. New York hedge fund Starboard Value has been in a protracted battle with the Darden Restaurant, Inc., Board of Directors and management regarding the direction of the company. Today, it was announced that Starboard had convinced enough investors to replace all 12 Darden directors. Although replacing an entire board of directors does happen, it usually occurs with smaller companies. This vote was unique as Darden is the largest full-service restaurant company in the U.S., with 2013 sales of $8.55 billion.

Thursday, October 2, 2014

GoPro Unlocked Early

Video camera company GoPro went public on June 26, 2014. Since the IPO, the company's stock has almost tripled. Like most companies, GoPro had a lockup provision that prevented insiders from selling shares until 180 days after the IPO. However, founders Nicholas and Jill Woodman broke the lockup on 5.8 million shares today. The unlocked shares will be used to provide initial funding for a new charity. On news of the unlocking, shares in GoPro have dropped more than 12 percent on the day.