CD: From tonight's Motley Fool. This may shed some light on the "insider trading" claim. Enjoy.
By the way Gail: I really don't think JD would have recommended CD if he or anyone knew of the accounting irregularities at CUC. As of last night, 6 of the 12 analysts covering the company had BUY ratings - 3 of them STRONG BUYS. This is one-of-a-kind, "aw-shit" incident that happened at an otherwise outstanding company. No one, and I mean no one, knew of what was going on, and that includes CEO Silverman and CUC's accountants at both Andersen and Ernst & Young. - so we're told at least.
So please, please don't insult my intelligence by laying the blame at JD's feet. I too bought Cendant at below 19, though I flipped it for a quick 15% profit. I just have easily could have held it as a long-term, though, and I would have been where you are today. Except I wouldn't be blaming JD. Not on this one.
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Speaking of scumbags, who let the cat out of the bag yesterday with Cendant (NYSE:CD - news) ? Somebody yesterday fired off a sale of one million shares of Cendant at $19 1/2, down $2 1/2 from its prior close but only slightly below market by 1:00 p.m. Now, nobody inside Cendant has to have communicated information to anyone at any point for the market to sell it off. There is an information chain of people that has to deal with auditing Cendant's past accounting practices, and the leak could have come from any point in that chain. And no one had to profit directly from moving information from inside the organization to holders of the stock. Someone could have been trying to curry favor with a certain Cendant holder or someone might have been trying to get revenge on Cendant. Human motives are as varied as the pattern of snowflakes, but the bottom line is that somehow -- and not really mysteriously -- information got out yesterday that Cendant would be announcing worse-than-expected information on the audit into the accounting practices of the former CUC International. That's the company with which HFS Inc. merged to form Cendant.
Knowing that the market doesn't like to invest in scumbags, Cendant Chairman Walter Forbes, who built Compucard into CUC and now is the Chairman of the whole shebang, made it clear today that there was a "leak" of information but that he personally has had no part in "wrongdoing" at Cendant. Henry Silverman, who has been the driving force behind the growth of HFS and is currently CEO of Cendant, has been vehement about rooting out the perpetrators of wrongdoing inside the CUC units since the whole "accounting irregularities" thing came to light in mid-April of this year. At that time, the company said the hit to earnings would be in the range of $0.11 to $0.13 per share. Now, the company estimates that EPS could take up to another $0.15 in damage, bringing 1997 net income before charges as low as $0.72 to $0.78 per share.
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