This Week's 5 Dumbest Stock Moves
Stupidity is contagious. It gets us all from time to time. Even respectable companies can catch it. As I do every week, let's take a look at five dumb financial events this week that may make your head spin.
1. Playing hardball with a soft hand
It may finally be time to put Best Buy out of its misery.
The Minneapolis Star Tribune is reporting that dismissed founder Richard Schulze is coming back with a fully financed offer to take Best Buy private. The deal is reportedly worth at least $5 billion to $6 billion.
This would normally be good news, but there are two reasons for Best Buy making the "dumb" list on this development.
First of all, the original proposal that Schulze was considering was worth as much as $10.9 billion including assumed debt. Best Buy's board asked him to wait, and the waiting cost its stakeholders.
The other reason this makes the "dumb" list is because it's easy to see Best Buy rebuffing this second offer. It would be embarrassing to sell itself at a discount to the original summertime proposal, even though the board's own ineptitude got it here. Best Buy will argue that shareholders should give its new CEO a chance.
Everyone but Best Buy seems to know how this will end, and it won't be pretty for the sinking consumer electronics retailer.
2. Dell hangs up
Dell is bowing out of the smartphone business.
The PC giant had already pulled out of the domestic wireless market earlier this year, but it was still cranking out smartphones for China and other overseas markets.
Retreating from wireless devices will mean that Dell is relying more on its desktops, laptops, and servers, and that's generally a bad idea. Smarpthone sales are booming, and that success has led to stagnancy in the PC market.
Dell should be ramping up its tablets and smartphones -- and making sure that they're flavored with the Android operating system that everyone's craving these days -- instead of taking a step back.
3. Solar eclipse
Yesterday was a strange day for SolarCity .
The Elon Musk-chaired installer of solar panels had to settle for going public at $8 a share after initially targeting a $13 to $15 price range. The $8 price was too low. The stock popped higher at the open, ultimately closing 47% higher.
That's still not enough to take SolarCity up to its initial range, but SolarCity left a lot of money on the table by letting underwriters price the deal so low. Institutional investors may have felt that the growing yet profitless speedster was only worth $8, but retail investors have always had a better perception of Musk. They've seen Musk's Tesla Motors double since going public two years ago.
SolarCity's dumb move was to go public the traditional way. Reaching out to the public through a direct public offering or an OpenIPO-style Dutch auction would've probably fetched a more accurate price.
The pop may be good publicity for SolarCity, but in terms of the money being raised, the company got hosed by the underwriters.
4. Surfacing for err
Microsoft began offering its Surface tablet through traditional retailers on Wednesday.
This would naturally seem to be good news, but it also strikes a tone of desperation. Third-party reports were already projecting weak Surface sales, despite the company's costly marketing campaign. Being available exclusively through its website and dozens of Microsoft Store locations may have seemed limiting, but it also helped disguise the weakness. Now that consumer electronics superstores and office supply chains are stocking the Surface -- trying to sell it alongside much cheaper Android tablets and more popular iPads -- will expose the tablet's lack of popularity.
In short, Surface is the homeschooled kid who's about to get bullied at the public school.
At least one analyst is starting to see it that way. Despite Microsoft announcing that it would be ramping up production as it expands its retail distribution, Barclays Capital analyst Raimo Lenschow went ahead and slashed his target of Surface sales during the current quarter from 2 million to just 700,000.
5. Amazon's taxing dilemma
Amazon.com is caving in to another state's request for the leading e-tailer to start collecting state sales tax.
Come November of next year, Amazon will begin requiring the 6.6 million residents of Massachusetts to begin paying the state sales tax on their order. This isn't the first time that Amazon will bow to a state's revenue-hungry ways.
Yes, folks are supposed to pay state sales tax on their own online purchases, but the vast majority of the country doesn't do it. Ignorance is probably a big reason for that. However, the result here is that Amazon -- while doing the right thing by Massachusetts -- will be perceived as being that much more expensive than other online retailers that aren't playing along.
Oh, and what's the deal with the date for this to kick in? Did Amazon really have to agree to this move just as next year's holiday shopping season kicks in? Is Halloween going to be the new Cyber Monday in Boston next year?
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The article This Week's 5 Dumbest Stock Moves originally appeared on Fool.com.Longtime Fool contributor Rick Aristotle Munarriz has no positions in the stocks mentioned above. The Motley Fool owns shares of Amazon.com, Best Buy, Microsoft, and Tesla Motors. Motley Fool newsletter services recommend Amazon.com, Microsoft, and Tesla Motors . Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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