Monthly Archives: October 2007

The Business Day of Global Warming (SPWR, LDK, PSD, ACM, ICPR, CAB, CSUN, FTEK, EFOI, HOT, CVX)

Wall Street analysts covered a few of the alternative energy names today: SunPower (NASDAQ:SPWR was started as an Outperform rating at RBC Capital Markets; LDK Solar (NYSE:LDK) was downgraded to "Market Perform" at Piper Jaffray.

Puget Sound Energy, a subsidiary of Puget Energy (NYSE:PSD), is deepening its mark in renewable energy, with the utility and its customers now boasting more than 1,200 kilowatts (kW) of combined solar-power generating capacity or enough to serve the total power needs of 125 homes.  As Puget Energy serves 1 million electric customers and 721,000 natural gas customers, there is still quite ways to go.

ENSR is providing environmental permitting and licensing support for four major solar energy projects in southern California. ENSR, part of AECOM (NYSE: ACM), is a leading global environmental services firm.

Read More »

Posted on: October 31, 2007 – 6:10 pm in Alternative Energy, , , , , , , , , , ,

Can Google (GOOG) OpenSocial Platform Compete With Facebook?

The new Google (GOOG) OpenSocial Platform list of sites includes Orkut, Salesforce, LinkedIn, Ning, Hi5, Plaxo, Friendster, and Viadeo. Below is a chart from Hitwise comparing the audience to Facebook.

Facebook is nines times larger. Seem tough for the forces from Google.

opensocial2.png

Posted on: October 31, 2007 – 6:00 pm in Internet,

Cramer Defends Nastech After Weakness (NSTK)

On tonight’s MAD MONEY on CNBC, Jim Cramer said he has a small speculative stock that got crushed.  Nastech Pharmaceutical Inc. (NASDAQ:NSTK) is supposed to win from an intranasal delivery system, and it is controversial.  Cramer said the loss was much wider than expected and it got hit hard on Tuesday.  He’d usually say you bail out, but this one is speculative and it shouldn’t really trade off of earnings yet.  It was supposed to win a $5 million milestone by P&G (NYSE:PG), but it missed the date for that milestone to go in.  It has trials going for diabetes and obesity, and the bad quarter doesn’t kill its pipeline story.  Cramer even noted its autism drug study, RNA studies, and a bone density target for osteoporosis.

So Cramer interviewed Dr. Steven Quay, Nastech’s Chairman, and shares traded up over 6% in after hours trading.  That is after a 5.8% gain today in regular trading.  One key note is that the company is looking at unlocking the value of its RNAi unit, and Cramer said that if the company unlocks this it will release a lot of value in the stock.

Jon C. Ogg
October 31, 2007

Posted on: October 31, 2007 – 5:29 pm in Biotech, Cramer,

Last Look At ExxonMobil Earnings (XOM, VLO, SLB, XLE)

Integrated oil giant ExxonMobil (NYSE:XOM) is set to report earnings on Thursday morning, and it is still a wonder as to why shares are lagging behind the market when oil traded up over $4.00 per barrel today to a new $94.53.

A chartist would say this doesn’t bode well at all for earnings.  Energy has definitely seen a bit of a sector rotation out into tech, which was partly noted on the Goldman Sachs downgrade on oil as a commodity yesterday.  Without owning a crystal ball, we can’t say which is right or if both combined make the explanation right.

First Call has estimates pegged at $1.75 EPS tomorrow.  The company’s buyback continues, but with shares up around $90 it’s a wonder just how many shares the largest oil company in the world actually bought.  Options are a bit hard to use as a comparison to others, but it looks like options traders have an expected price change in a range of $2.50 to $3.40 in either direction.  Analysts that follow Exxon have an average price target of about $97.00.

What is hard to imagine is that Exxon’s numbers would be bad with oil prices this high.  But Valero (NYSE:VLO) posted lackluster earnings because of refinery costs.  Schlumberger (NYSE:SLB) has also performed dismally since its earnings report.

Shares closed up 0.9% today at $91.99, and the 52-week trading range is $69.02 to $95.27.  Regardless of the actual number on EPS tomorrow, you can imagine the media headlines are going to be focused on the monstrous revenue number for its shock effect.  It will be interesting to see the reaction in the Energy Select Sector SPDR (AMEX:XLE) since ExxonMobil makes up some 21.38% of the ETF on last look.

Jon C. Ogg
October 31, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he produces the Special Situation Investing Newsletter and does not own securities in the companies he covers.

Posted on: October 31, 2007 – 4:44 pm in Earnings, Oil & Gas, , , ,

Deciphering Medarex Earnings (MEDX)

Some traders might bother peering at the losses on Medarex (NASDAQ:MEDX), but all we are looking at for the time being is the forward study data and the company’s use of cash and burn rates.  When you see the explanation and the stock options activity you’ll understand why. Here is all that matters, to 24/7 Wall St. anyway:

  • Medarex ended the quarter with approximately $396.1 million in cash and equivalents, with roughly $8.9 million related to Celldex. In addition, the fair market value of Medarex’s equity interest in Genmab A/S as of September 30, 2007 was approximately $297.0 million.
  • It continues to expect total cash burn to be approximately $13.0 million per month for 2007, which includes approximately $3.0 million a month to support its net contribution to the ipilimumab program. The company noted that the cash burn guidance is consistent with the guidance previously provided on February 28, 2007.
  • "We and our partners continue to make consistent progress in developing and advancing the clinical pipeline, building momentum for continual long-term growth for Medarex, and we anticipate seeing top-line data from the ipilimumab monotherapy studies in second-line metastatic melanoma patients before the end of this year," said Howard H. Pien, President and CEO of Medarex.

This "ipilimumab monotherapy studies in second-line metastatic melanoma patients" is the program with Bristol-Myers Squibb (NYSE:BMY) that has options traders making huge bets since this is still a relatively untreated killer with blockbuster potential.  This "before the end of this year" statement leaves the NOV and DEC options expiration dates as still having a chance of seeing the news, but the true tally is loaded up in the JANUARY-2008 options contracts:

  • Of the 3 most active call option contracts for JAN-08 in Medarex there are more than 450,000 options contracts in the open interest, or 45 million shares on a fully leveraged basis.
  • Of the 3 most active contracts in Bristol-Myers Squibb the contracts in the open interest total just under 1 million contracts, or 100 million shares on a fully diluted basis.

Recent key stories on Medarex:

Jon C. Ogg
October 31, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he produces the Special Situation Investing Newsletter and does not own securities in the companies he covers.

Posted on: October 31, 2007 – 3:50 pm in Biotech, Earnings,

CROCS Traders Send Shares To Everglades (CROX)

Shares of CROCS Inc. (NASDAQ:CROX) are getting hammered in after-hours trading.  The highly successful maker of ugly shoes that everyone still loves posted earnings:

  • Revenues up 130% to $256.3 million (consensus $258.4 M);
  • EPS rose more than 100% from $0.27 in Q3-06 to $0.66 (consensus $0.63);
  • CROCS is also raising guidance for 2007 to $820 million to $830 million revenues ($835 million is consensus) and diluted earnings per share at $1.94 to $1.98 ($1.97 is consensus).

CROCS is introducing guidance for fiscal 2008 revenues and EPS growth of 35% to40%.  If we took a 37.5% mid-point and used the mid-pont for 2007estimates as the benchmark:

  • 2008 EPS $2.71 EPS (consensus is $2.56)
  • 2008 revenues of $1.134.375 Billion (consensus is $1.13 Billion).

Investors have been used to consistent "handily beating estimates and drastically raised guidance" on the shoe (and now apparel) maker.  There is nothing wrong with the numbers here per se, but after a 300% stock run it was only a matter of time before investors would start to sell even the good news or when the good news would be deemed not good enough.

CROX is trading down 16% in after-hours around $62.50, and the 52-week trading range is $17.63 to $73.75.  This was one of the stocks that closed on a new all-time high close today, and we noted that it was likely one of the mutual fund window dressing stocks as today market the year-end for most mutual funds. 

Based upon the cult following and the core audience, it would not be crazy to think that by tomorrow morning some of the analyst notes may be deeming the guidance as overly conservative despite a revenue number that some will deem as light.  We’ll know soon enough.

Jon C. Ogg
October 31, 2007

Posted on: October 31, 2007 – 3:22 pm in Apparel, Earnings,

The 52-Week Low Club

Fremont General (FMT) Mortgage company talks with investor fall apart. Stock drops to $2.74 from 52-week high of $17.30.

Watts Industries (WTS) Downgraded after poor earnings. Falls to $27.91 from 52-week high of $46.71.

Time Warner Cable (TWC) Cable loses exclusive franchise in apartment complexes. Drops to $27.55 from 52-week high of $44.

Merge Technologies (MRGE) Company says it will restate some earlier financial results. Shares drop to $1.84 from 52-week high of $8.16.

Lca-Vision (LCAV) Two downgrades on poor earnings outlook. Falls to $16.90 from 52-week high of $50.69.

Douglas A. McIntyre

Posted on: October 31, 2007 – 3:03 pm in HI/LOW, , , , ,

Why Goldman Sachs’ Sell Rating on Sirius Didn’t Matter (SIRI, XMSR)

Most days investors might get thrown into a stir when one of the most active stocks like Sirius Satellite Radio (NASDAQ:SIRI) has a "SELL" rating next to it, particularly if it comes from a bulge bracket firm like Goldman Sachs.  But this really didn’t matter, and for a few obvious reasons.  Analyst Mark Wienkes of Goldman Sachs is rated a 4 of 5 stars by StarMine, although that leaves 5 other analysts ahead.

Goldman Sachs has the lowest or one of the lowest price targets out there on Sirius at $2.25 per share.  To top it off, the entire call was a whopping change to 2007 estimates of a mere penny per share after its mostly in-line earnings yesterday.  Goldman also noted that the net subscriber additions were 525,000 compared to its own 450,000 estimate and a consensus net subscriber add of roughly 425,000. 

The part that Goldman Sachs used to cut estimates really looks more like it is splitting hairs than it is making any major statements:

  • Revenues of $242 million (actually $241.8M) were 1% under Goldman’s target;
  • Adjusted EBITDA was -$57 million compared to Goldman’s -$70 million estimate;
  • The $103 average sale of $103 was in-line with Goldman’s target;
  • Average revenue per user was $10.71 versus the Goldman target of $10.77;
  • Churn was 2.16% instead of Goldmans 2.2% target, but above the 2.0% last year;
  • Goldman’s loss per share for 2007 was adjusted by a whole penny to -$0.41;
  • Goldman’s 2008 target is -$0.34.

Another interesting note is that Goldman Sachs has put roughly a 30% chance of the XM Satellite Radio (NASDAQ:XMSR) going through.  Over the last few weeks there are some indications that there is a better chance, although any specific percentage chances of this being approved would be hear-say.  24/7 Wall St. still believes that the regulatory powers that be "should" allow this merger to go through, but the government is the government and we aren’t going to predict what a few people’s decision will be. Particularly when they are heavily under the influence of opposition forces to this deal and make closed decisions in a star chamber.  XM shares have actually been outperforming Sirius as of earlier this week, even though the interim CEO of XM is acting like a normal CEO.

Shares had been up all day on Sirius and the only time it went flat or down marginally was after the FOMC cut initial trader interpretation.  With just under 20 minutes to the close, Sirius shares are up 1.8% at $3.35 and shares briefly touched as high as $3.45 early this morning.

Jon C. Ogg
October 31, 2007

Jon Ogg can be reached at jonogg@247wallst.com; Sirius Satellite radio and XM Satellite Radio have both been reviewed for 24/7 Wall St.’s subscriber newsletters under the  Special Situation Investing Newsletter and the Old Media/New Media newsletters.

Posted on: October 31, 2007 – 3:00 pm in Analyst Calls, Satellite, ,

FOMC Delivers 25/25 Cuts

The FOMC did trim both the Fed Funds Rate and the Discount Rate by 25 basis points each today.   There was some dissention among the Fed Governors if you read through the statement.  You can see the full commentary here.  Because of the rate cut theorists out there making their opposite calls on the same data, you can imagine there is ammo here for the bulls and bears alike.   Some wanted a 50 basis point cut, while others are arguing that rates aren’t able to fix the current credit problems.

We had already noted how a rate cut borders alongside a potential dollar crisis.

Here was the 50/50 cut from September for comparison.

Posted on: October 31, 2007 – 1:23 pm in Economy

Analysts Likely To Revisit Google Price Targets (GOOG)

Now that Google (NASDAQ:GOOG) has crossed that $700 threshold, there are some analysts that are going to have to either raise thair targets or make other calls on the stock.  We noted before what a $700 GOOG stock is valued as.

Here was a full list of the Google price targets from analysts after they all raised estimates and targets, and we still want to know when the first $1,000 target will be issued from Wall Street.

The highest target at the time was $800, but it is growing quite obvious that some updated calls may already be in order.  Google has also been a beneficary of window dressing as today marks the year-end for most mutual funds.

The volatility is still fairly high with a $700 straddle for a November expiration still priced north of $36.00.

Jon C. Ogg
October 31, 2007

Posted on: October 31, 2007 – 12:57 pm in Analyst Calls, Internet,

Earnings Preview: JDS Uniphase (JDSU)

JDS Uniphase (NASDAQ:JDSU) is set to post earnings after today’s close and First Call had the last estimates seen at $0.06 EPS on revenues of $355.8 million.  The company usually offers some guidance, and next quarter estimates are $0.12 EPS on revenues of $392 million.

Stock options appear to be pricing in a move of up to almost $1.00 in either direction.  Analysts are far fewer than in the dot.com and fiber optic craze days, but the ratings are mixed with an average target apparently just north of $18 per share.  Shares have traded within a band of $13 to $16 for most of the  last six months, although shares are at the higher-end of that band now.  Its average daily volume is now about 4.3 million shares.

Since its reverse split, the split-adjusted trading range over the last year is $12.41 to $19.66 and shares traded north of $30 on a split-adjusted basis in the first half of 2006.

JSDU has mostly decoupled from its sector and no longer has any real impact on other stocks in the fiber optics and optical communications sector, or at least that is the prevailing opinion since it is no longer thought of as a leader in the sector.

Jon C. Ogg
October 31, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he produces the Special Situation Investing Newsletter and does not own securities in the companies he covers.

Posted on: October 31, 2007 – 12:34 pm in Earnings, Internet, Technology Companies, Telecom,

Rick’s… Now a $100+ Million Empire (RICK)

It isn’t every day that stock analysts and reporters get to cover a publicly traded topless bar chain.  But all issues aside and assuming today’s rally holds this stock will start showing up on many popular stock screenings that traders use to identify new stocks.  Shares of Rick’s Cabaret International, Inc. (NASDAQ:RICK) are trading up over 5% today on the company’s forward guidance for fiscal 2008 and 2009, and its fiscal years end on September 30 of each year. 

The company has now crossed the $100 million market cap stock as well to a level of roughly $108 million.  The assumptions (below) seem reasonable if you aren’t using an exacttarget on a month to month basis, and the valuations here with a 35% ormore earnings growth and low forward P/E ratios actually make Rick’sseem appropriate for growth investors and value investors alike.  The only issueat hand besides the near-micro-cap market capitalization is that theunderlying industry will keep some investors away or reserved becauseit falls under the "sin stock" status.  Here is forward guidance offered:

  • For fiscal 2008, the company sees sales of $52 million, and after tax net income of about $7 million or about $0.95 EPS.  For calendar 2008 it is aiming for $58 million in revenues and net income of about $9 million or $1.25 per share.
  • For fiscal 2009, the company sees sales of approximately $75 million, with net income of about $13 million or about $1.70 EPS.

Valuations assumptions are using today’s values even after the gain to $17.60.

  • For Fiscal 2008 (Sept.), Rick’s has a forward P/E ratio of 18.5 and trades at roughly 2.07 times revenues. 
  • For Calendar 2008, Rick’s has a forward P/E ratio of 13.3 and trades at roughly 1.86 times revenues. 
  • For Fiscal 2009 (Sept.), Rick’s has a forward P/E ratio of 10.35 and trades at roughly 1.44 times revenues.

The assumptions don’t seem unrealistic if you look back over the acquisition and growth history of the company:

  • These figures include two recent acquisitions and assume a target of 6% on same-store-sales growth. 
  • The projections anticipate issuance of 225,000 new shares of common stock for the Philadelphia transaction and up to 1.2 million shares, plus the assumption of $10 million in debt in connection with financing other acquisitions.
  • These projections assume the acquisition of one additional club in 2008; and further assume completing two acquisitions in early 2009.
  • The 2009 outlook assumes issuing an additional 400,000 shares of common stock in connection with acquisitions.

While shares are not on an intraday high, these levels above $17.60 would mark a high close for the stock.  Its 52-week trading range before today is $5.02 to $16.76 and the company had 180,441 shares listed as its last short interest count, or about a days to cover ratio of 1.4.

Jon C. Ogg
October 31, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he produces the Special Situation Investing Newsletter and does not own securities in the companies he covers. 

Posted on: October 31, 2007 – 12:20 pm in Cult Stock, Earnings, Entertainment, ,

Selected Stocks Under $10: Level 3 (LVLT)

Level 3 (LVLT) has fallen almost 35% in the last month. Recent earnings numbers hurt the stock. For the last quarter consolidated revenue was $1.061 billion compared to consolidated revenue of $875 milion for the third quarter last year. . The net loss for the third quarter 2007 was $174 million, or $0.11 per share, compared to a net loss of $163 million, or $0.12 per share, for Q3 06. 

Debt service was still an anchor. Interest payments hit $138 million.

Long-term debt is still an astonishing $6.833 billion.

And, the company lowered forecasts. “Primarily due to the provisioning issues we have been experiencing, we have lowered our Consolidated Adjusted EBITDA guidance for both the full year 2007 and 2008,” said Sunit Patel, CFO of Level 3. “Specifically, we have lowered Consolidated Adjusted EBITDA guidance for the full year 2007 from a range of $860 million to $920 million to a range of $813 million to $833 million and for the full year 2008 from $1.15 billion to $1.3 billion to $950 million to $1.1 billion.

Level 3 has made six significant acquistions since the beginning of 2006, and the market is beginning to believe that this was way too much.

Level 3 is broken at this point. Its businesses include Internet Protocol services, broadband transport and infrastructure services, voice and voice over IP services, and content delivery and media distribution services. A lot of moving pieces.

It is not clear that broadband bandwidth margins are improving at all or whether there is still more bandwidth capacity in the US than there is demand. The content delivery business has begun to be hurt by excess competition with companies like Akamai (AKAM) seeing their shares slide.

Until Level 3 can demonstrate that all of its new businesses work together or there is a sharp spike up in pricing for bandwidth and related services, a company with this much debt is going to be very unattractive to Wall St.

Douglas A. McIntyre

Get a Free Trial Subscription to the weekly "Ten Stocks Under $10" from 24/7 Wall St. and follow our opinions on companies with inexpensive shares, both big firms and small ones.

Posted on: October 31, 2007 – 9:59 am in Telecom,

Hey, Look Who’s Now The 5th Biggest Company in the US

From Silicon Alley Insider

That’s right: Google (GOOG).  And trading at a not-preposterous 55-times trailing 12-month earnings, too.

Continued….

Posted on: October 31, 2007 – 8:13 am in Uncategorized

Will IAC/Interactive Earnings Get Its Stock Back On Track? (IACI)

IAC/Interactive (NASDAQ:IACI) reported earnings that the wires are looking at as lower, although the actual numbers were above what Wall Street was looking for on the earnings front.  The company posted $1.515 Billion in revenues and adjusted EPS of $0.37. First Call had estimates at $0.35 EPS and revenues at $1.52 Billion.

The company also repurchased some 8 million shares during the quarter at an average of $27.54 and its OIBDA was $173 million.  The truth is that revenues were up even though net income on an EPS basis was lower when compared to Q3 2006.  The Associated Press unfortunately is reporting the $0.24 "GAAP" EPS as the drop instead of the adjusted EPS and this may be creating some confusion to some who only use the web for information on earnings and news instead of private systems.

Barry Diller, Chairman/CEO (and one of our "most entrenched corporate leaders")said, "With the exception of LendingTree, this was a satisfactory quarter for IAC. Trends at our businesses are good, and particularly so at HSN, where I believe that Mindy Grossman and her team have now become acclimated and are beginning to demonstrate the great retailing smarts that we knew they were capable of."

So far Wall Street is accepting these numbers because shares are up almost 2% on fairly thin pre-market trading volume at $28.90.  Its 52-week trading range is $25.08 to $40.99.

Here was a brief explanation by the company: Third quarter revenue wasdriven by increased year-over-year contributions from the Retailing,Media & Advertising, and Membership & Subscriptions sectors.Retailing revenue grew slightly; however, HSN revenue grew 5%,excluding America’s Store. Transactions sector revenue reflects stronggrowth at Ticketmaster, offset by a decline at LendingTree, whichcontinues to operate in a difficult home loan market. Syndicated searchand Fun Web Products drove strong revenue growth in Media &Advertising. Increased transaction volume and membership at Intervaland higher revenue per subscriber at Match benefited Membership &Subscriptions revenue.

Jon C. Ogg
October 31, 2007

Posted on: October 31, 2007 – 7:57 am in Earnings, Entertainment, Internet,

Failed Cancer Drug Trial Drives GPC Biotech (GPCB) Down 62%

Shares of GPC Biotech (GPCB) are off 62% before the open.

GPCB announced that the Phase 3 SPARC trial evaluating satraplatin for the treatment of hormone-refractory prostate cancer did not meet its primary efficacy endpoint.

The shares should open around $4.38. The company has a 52-week high of $37.79.

Douglas A. McIntyre

Posted on: October 31, 2007 – 7:42 am in Uncategorized,

Pre-Market Analyst Calls (October 31, 2007)

AKAM cut to Hold at Deutsche Bank.
BEC cut to Sector Perform at RBC.
BMS cut to Hold at Deutsche bank.
CF cut to Neutral at B of A.
EL cut to SELL at UBS.
ENR raised to Peer Perform at Bear Stearns.
GFIG started as Outperform at Bear Stearns.
GPCB cut to Sell at Deutsche Bank.
LCAV cut to Neutral at Oppenheimer.
LDK cut to Mkt perform at Piper Jaffray.
LNET cut to Peer Perform at Bear Stearns.
LNG started as Outperform at RBC.
LVS cut to Equal Weight at Lehman.
MCK raised to Buy at Citigroup.
NVAS raised to Buy at Oppenheimer.
PACR cut to Neutral at JPMorgan.
Q downgraded at both JPMorgan and CIBC.
RBA raised to Outperform at RBC.
SFLY cut to Hold at Jefferies.
SPWR raised to Outperform at RBC.
TAM raised to Buy at Citigroup.
TEVA raised to Outperform at FBR.
VTAL cut to Sector Perform at CIBC.

Jon C. Ogg
October 31, 2007

Posted on: October 31, 2007 – 6:46 am in Analyst Calls

WellCare Class Action Suits & More State Actions Leading Company To The Grave (WCG)

WellCare Health Plans (NYSE:WCG) is falling under class action pressure and more investigations.  Unfortunately the company has yet to admit to or to convince Wall Street that it has a full grasp of the situation and the verdict is still out on whether the company has the wherewithal to get out of the grave.  In its most recent filing it said it will defend itself against class action suits, although based on how this has gone and based on the shareholder implosions it is a safe assumption that any investor trying to use the company’s balance sheet for guidance is relying on fictional analysis.

On October 26, 2007, a putative class action complaint was filed in the United States District Court for the Middle District of Florida against the Company, Todd Farha, the Company’s chairman and chief executive officer ,and Paul Behrens, the Company’s senior vice president and chief financial officer, entitled Eastwood Enterprises, L.LC. v. Farha, et al. The complaint alleges that the defendants materially misstated the Company’s reported financial condition by, among other things, purportedly overstating revenue and understating expenses in amounts unspecified in the pleading in violation of the Securities Exchange Act of 1934, as amended. The complaint seeks, among other things, certification as a class action and damages. The Company intends to vigorously defend itself against this claim.

On October 29, 2007, a putative shareholder derivative action supposedly brought on behalf of the Company was filed in the United States District Court for the Middle District of Florida entitled Rosky v. Farha, et al. The action is asserted against all Company directors except for D. Robert Graham and also names the Company as a nominal defendant. The action primarily contends that the defendants allegedly allowed or caused the Company to misrepresent, in a manner unspecified in the pleading, its reported financial condition and asserts claims seeking damages and equitable relief for, among other things, the defendants’ supposed breach of fiduciary duty, waste and unjust enrichment. The Company intends to contest, among other things, the standing of the plaintiff to prosecute the purported claims in the Company’s name.

OCT. 30: Dreier LLP announced that a class action lawsuit was commenced in the U.S. District Court for the Middle District of Florida on behalf of investors who purchased the common stock of WellCare Health Plans, Inc. during the period from May 8, 2006 through October 24, 2007.

OCT. 29: Law Offices of Brian M. Felgoise, P.C. announced that a securities class action has been commenced on behalf of shareholders who acquired WellCare Health Plans, Inc. securities between May 8, 2006 and October 24, 2007, inclusive.

Yesterday, Reuters was reporting that New York state regulators were also probing the company.  It’s a safe bet that every state WellCare operates in is already looking into the company.  That’s how this works because if there is money "to be taken back" then they all have to act fast.

WellCare shares closed down huge at $22.04 yesterday.  Earlier this week 24/7 Wall St. noted that an analyst call from Jefferies was either genius or just crazy, and it appears that the analyst there was crazy.

The manner that this company has handled the raids by confirming problems but not fully disclosing what the problems are will be a classic "F" grade for any business school case studies.  These guys really dropped the ball, and personal liability (civil and perhaps criminal) is a serious notion at this point.  Shares have lost roughly 80% of their value since the raids.

Jon C. Ogg
October 31, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he produces the Special Situation Investing Newsletter and does not own securities in the companies he covers.

Posted on: October 31, 2007 – 6:32 am in HI/LOW, Healthcare, Law,

Affiliated Computer Services: Another Private Equity Deal Bites The Dust (ACS)

Private equity firm Cerberus has terminated its acquisition offer to acquire Affiliated Computer Services Inc. (NYSE:ACS).  This was a $6.2 Billion deal that valued Affiliated at $62 per share.

Cerberus did not blame the company for "material business changes" here like the weasel efforts of some competitor deals that have been called off.  According to the WSJ, the reason here is because of continuing poor conditions in the credit markets.  In other words, "we can’t finance the debt portion of the buyout."  Cerberus’ offer was made in March as a partial management-led buyout with founder Darwin Deason whom already owned some 42% of the company.

But the group does blame the special committee for taking to long in its search for a potential higher offer, because the group is reported to have said that it is confident the deal would have closed had the schedule proposed been adhered to.

The truth is that shares were trading under $51 yesterday, so this was already on the ropes.  The WSJ is also reporting that the two largest shareholders are unhappy about the board’s actions (or inaction), and the word from Pzena Investment Management according to the WSJ was "I don’t know why the board didn’t respond to us. They were radio silent."

Affiliated Computer is indicated lower, although it is still too early to tell the exact indications.  If you are a board member at Affiliated Computer that was in that special committee, it’s probably a good time to start finding out how much personal insurance you have protecting you from shareholder lawsuits.

Acxiom faced a similar drop.

Carl Icahn is going after BEA Systems over the board being childish.

Cablevision’s deal from the Dolan’s being called off was more the fault of holders.

Jon C. Ogg
October 31, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he produces the Special Situation Investing Newsletter and does not own securities in the companies he covers.

Posted on: October 31, 2007 – 5:58 am in Mergers and Buy Outs, Private Equity,

The World Wakes Up To $100 Oil

No one wants to talk about $100 oil when oil is at $70 or $80 a barrel. Most experts want to say it is too high on speculation and will be back at $60 before anyone knows what happened.

But, with oil above $90, a survey of oil experts and potentates yielded nothing other than comments about how high oil would go now. As a matter of fact, much of the discussion is now about oil being above $100 for good.

According to The Wall Street Journal "Sadad I. Al-Husseini, an oil consultant and former executive at Aramco, Saudi Arabia’s national oil company, gave a particularly chilling assessment of the world’s oil outlook. The major oil-producing nations, he said, are inflating their oil reserves by as much as 300 billion barrels" The oil may be there, but it is too hard to get to.

The head of Schlumberger (SLB) put a point on it by saying that 70% of the world’s major oil fields are now over 30 years old. Other sources expressed concern that "investment, skilled workers and technology" may not be available to help avert an oil price crisis.

The media is awash with economists saying the the US and other major nations have adjusted to high oil prices and that increasing costs for crude are not likely to drive down GDP growth in this country or other major economies like China. The comments are naive. If the cost of a commodity as widely used as oil makes a 100% price move over less than two years, global growth will pay a price, and a dear one.

If there is a global recession, oil will almost certainly be the cause.

Douglas A. McIntyre

Posted on: October 31, 2007 – 5:54 am in Oil & Gas,