Financial Shenanigans: Stocks Looking for a Fall Message Board

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Microcap & Penny Stocks : Financial Shenanigans: Stocks Looking for a Fall

Public Reply Prvt Reply Mark as Last Read File

Previous 10 PreviousNext

To: Anaxagoras who wrote (107)	12/6/1998 3:42:00 PM
From: Anaxagoras	of 108

There's a little article over on talks.com that's relevant to this thread. It's a John Tompkins' Matador column entitled <<Smoke And Mirrors Corporate Acquisition Department>>. The article is basically the product of an interview with David Tice of Pru Bear Fund fame. Part of it discusses the issue of write-offs of IPR&D, a topic I've been interested in lately (could ya tell? Didn't mean to hi-jack the thread, Rainier <g>). Some highlights: <<Tice explains that one of the most common ways a company can turn mediocrity into excellence is by writing off "in-process research and development." This is where the acquiring company claims the research performed by the acquired entity is worthless and won't lead to any new products. The write-offs are taken even as management reports to shareholders the benefits of the merger. This kind of accounting treatment is not just cocktail chatter for CPAs. As an acquirer, 3Com got a 20%+ boost to earnings by immediately writing off 88% of the entire acquisition cost of four companies, rather than writing down this R&D expense over four years (a practice that was once the norm). When Novell used the same aggressive tactic in fiscal 1996, it boosted its income six-fold.>> On a different note, I found this statistic rather interesting. Result of a fantastic economy with good prospects for all? I think not.... <<...few Wall Street analysts are interested in panning a stock for creative accounting or any other reason. According to Business Week, only 1.4% of Wall Street recommendations are negative today, down from 30% in 1982. And today's analysts give a "thumbs up" almost 75% of the time, even with today's sky-high stock market valuations and uncertain economic prospects.>> And finally, I liked this example of a company trying to get away with listing a normal cost of business as some kind of one time non-recurring charge: <<...the SEC...told McDonald's its $190 million charge for kitchen refurbishment was bogus. Updating a kitchen, regulators argued, seems like the normal cost of doing business for a restaurant.>> Anaxagoras

Report TOU Violation

Share This Post

Public Reply Prvt Reply Mark as Last Read File

Previous 10 PreviousNext