• http://www.brickmarketing.com nickstamoulis

    Hi Chris, Thanks for the background regarding Idearc…it should be interesting to see what happens to them…

  • http://www.positracker.com PosiTracker

    The yellow page business has a bad rep. Many of them trick advertisers with fake bills and other ultra-aggressive sales tactics.

    Maybe this is a case of “what goes around comes around”.

  • http://silvery.com Chris Silver Smith

    PosiTracker, it really is not a case of the “deserving getting punished”.

    Predatory business practices or aggressive salesmanship are not caused by the literally thousands of elderly stockholders who merely invested in a business that historically had been extremely stable and conservative.

    It’s those stockholders who are losing out in this sequence.

  • nikiscevak

    Chris, it’s sad you lost your money in your investment. But why are citing these concerns now? Verizon didn’t sell the debt to others yesterday. You had ample chance to voice your opinion by selling your shares as soon as they did.

    “The sequence rather smacks of something similar to Enron or other unsavory deals where one knowingly sells off debt-laden assets at a hyper-inflated rate”

    That statement is quite simply preposterous. Investors bought an investment from another investor. Everyone is an adult. Take responsibility for implicitly saying everything was OK with the spinoff/debt sale by holding your shares each and every day after it happened. The investors who bought the debt certainly have. And you shouldn’t be surprised that they are acting in their own best interests.

    In the end when a company decides to take on debt and can’t pay that debt, then the decision making hands over to the debt holders. Finance 101: Debt has more recourse and higher priority than equity.

    You as an owner must take responsibility. If you couldn’t change the course of decision making because of the small shareholding then you should have sold every share you had!

  • http://silvery.com Chris Silver Smith

    Hi, nikiscevak – I can understand your perspective, but a basic premise with most stock purchasing is that we have to have some assumptions of trustworthiness when we invest in companies. We must trust that the books aren’t cooked, that other companies our company purchases are sound or business-worthy, that annual statements are accurate, that the company we invest in is reasonably business-worthy, etc.

    The reason to cite the concerns now are because the management have decided to reorganize under Chapt 11, stripping away our ownership this spring. That didn’t happen until this year. If you’d looked at the link I included to an article about an open letter from one of the biggest shareholders, you’d see that even he questions the management’s decision and challenges them to uphold their fiduciary duty — he stated that there appeared to be other options. I’m stating that there are other options.

    Verizon had a fiduciary duty as well – our expectation as stockholders in the market was that they would spin off the company with a reasonable valuation and debt load. Unfortunately, stockholders must frequently assume that reasonable, logical decisions are made on their behalf. When that’s not the case, the people involved are culpable. I don’t believe that all details of the debt repayment timeline and requirements were made available to us — so your suggestion that we \knew what we were getting into\ or somesuch isn’t accurate or even reasonable.

    There’s absolutely no way that all the stockholders in question knew all the terms of the debt repayment details. Quite a few stockholders were likely even invested in mutual funds which invested on their behalf for the same good reasoning — those holders of mutual funds will have lost some portion — and they’re not at all implicitly or otherwise stating that the spinoff was okay just because they held shares.

    I want you to really think about what you’re saying — think about your grandmother who may have inherited stock from a husband who had invested, or who had even invested herself, thinking that the company descriptions and stock prospectus all looked good. She doesn’t run the company herself — that’s why there’s a board of directors and she should have a reasonable expectation that they will manage her business interest in the company capably and well. She has to trust that they will operate honestly.

    This probably falls under what’s called fraudulent conveyance, where \…the debtor is insolvent at the time of the transfer or becomes insolvent or is left with unreasonably small capital to continue in business as a result of the transfer.\

    Wall Street Journal has paraphrased Idearc CEO, Scott Klein, as stating, \Everyone was aware that ‘$9 billion was really more debt than this business could bear…’\.

    Really? If the executives who handled the spinoff all knew with a wink and a nod that the price was unsustainable, then it was irresponsible of them — they have a responsibility to uphold their fiduciary duty towards anyone who might subsequently purchase the stock with the reasonable expectation that it was a viable company.

    \Fiduciary duty\ is also \Finance 101\.

  • http://www.facebook.com/people/Cheng-Jiang/222408468 Cheng Jiang