Callwave Management: Proposed Transaction Officially Makes Them Dirtbags

Good taste in things is a rarity. Good taste in management is even rarer still. Outright stealing, yet another. If a management team offers to take a shareholder's $1 in cash and give them $0.70 in return, is that a breach in fiduciary responsibility? Perhaps not, but it is poor form in my books.

If I took 30% of something that belonged to you that would be wrong. Here is a helpful child's primer.

In the the minds of CEO and CFO Mr. Jeff Cavins $358K/year and Mark Stubbs $318k/year it is acting prudently. The CEO and CFO of Callwave (CALL) have decided to offer approximately $24.3 million dollars for their firm which had a reported cash balance of $35.2m and no debt. That works out to a 44% return for the fellas.

The acquirers can shut down the company and take $10m between them, leaving the shareholders they are supposed to represent to twist in the wind.

The legal definition of grand larceny is theft of $500 or greater. It is important to remember when stealing to wear a business suit and not a track suit as one leads to jail and the other to bailout.

I am not accusing Mr. Jeff Cavins or Mark Stubbs of doing anything technically wrong, but they and their Board of directors Peter Sperling, Jerry Murdock, Jeffrey O Henley a director of Oracle no less, Raj Raithatha, Osmo A. Hautanen and Manny Rivelo currently with Cisco (CSCO), have a very curious way of protecting and maximizing all of the shareholders value. Just because one can, doesn't mean one should.

You may look up these fine gentlemen's names and other roles via the SEC here.
Or contact investor relations to learn about this magnificent plan to enhance shareholder value

One might wish to consider steering clear of firms these gentlemen are associated with due to the rather awkward nature of the current transaction they seem to be pursuing or endorsing.

As Buffett says, how would you feel if you were on the other side of this deal? After these esteemed gentlemen are done with you as an investor, that burning sensation in your behind may not just be your wallet.

This is yet another friendly group of individuals helping you make a small fortune, provided you put forward a larger one at the start of the deal. How "all too common", and banal that offer is these days. I thought Washington D.C. was monopolizing the shrink ray pointed at your fortune space. This of course after the banks were done monopolizing it.

Value investors look for management and board representatives to act as partners and stewards of their trust. Few investors would be interested in a partner who looks at your $1 and realizes he can buy it for $0.70 reaping an immediate gain at your expense.

Please note, I am not accusing the esteemed Mr. Cavins and Stubbs or their illustrious board of anything illegal, but rather being merely uncouth and lacking in class. From a strict dictionary definition this may make them dirtbags. Perhaps the SEC has another opinion?

Full Disclosure: I consult with a fund that holds a position in Callwave, but am writing here in a personal and not professional capacity. I have no direct financial interest in the outcome of the Callwave situation.

Comments

[Nom De Plum:]

If they try to run the business by making investments than I think there is nothing wrong with their offer if investors are willing to sell them their shares. However, if they shut the business down and receive any residual value after taking the company private, than in my opinion it's a crime. The board and management have that option currently which could be a better deal. The one caveat is that you can't always assume that liquidation value is = negative enterprise value. There are all kinds of termination, severance, and legal expenses that are not reflected on the balance sheet in a liquidation scenario.

May 06 09:03 AM

[deee:]

I dealt with callwave when it first came out. they said anyone over 65 could use the service for life. this was a ploy to get people to download the product and have those people advertise it for them. Then later after they got the business going they sent notice's all service's would be charged for. Including the free one's they had guarnteed to senior citizen's for life. The started asking for 4.95 a month for the service. I stopped all my service with them and told everyone I knew what a bunch of crooks they were. I would have used their service and paid for it but they lied to people. I don't condone that

May 06 11:29 AM

[C-Finance:]

This writer just does not get it--it figures he runs a hedge fund and doesn't understand the market or math. If the offer is as horrible as he says, anyone could make a better offer to the outstanding shareholders and make the "other 40%." Even the writer's incredible quant hedge fund--don't they want 40%? Guess what? No one wants CALL because they burn $14M a quarter. The other point genius here doesn't understand is that his enemy number one, Peter Sperling, actually owns the most shares so the person getting most screwed by this bad price is Sperling. Clearly, rightly or wrongly, he feels it is the best he can get. I'd love to see the audited return figures for his hedge fund--oh yeah, they don't have to report them.

May 07 07:40 PM

[Joey2shoes:]

As an investor in CALL I can't agree with C-Finance's posting. Callwave has simply been extremely poor at marketing their product and has for the last 3 years quite clearly mislead investors as to the true potential of the company. Sperling might be the major investor but at what price did he make his investment $1?? in which case he still gets something back. However if I remember the press release stated "The company has been informed by its directors and officers that they will not tender shares in the offer", That would probably account for some 50% of shares (according to Yahoo finance) that takes 10.5 million shares of the table. SO what they are offering the none related shareholder (to use a loose term) is actually about $13 million of the $35 million they are holding in cash. To me they're withholding $22 million for on going marketing of this company's product and not wishing to share with investors who have hung around with them for years the rewards when the company's value does improve. If they really had their shareholders interest at heart they would have wound up the company. I estimate wind up costs at less than $10 million that would have left them with $25 Million in cash and a product that I am sure that AT&T, Google, E-Bay, Microsoft, Verizon, Sprint, Apple or any of more than 10 other companies with a vested interest in telephony would have paid $50 -$100 million for without blinking an eye. That would have given shareholders at least a $3 - $5 price for their shares {all). I'm sorry but with Sperlings record and the offer on the table I can call these folks nothing but CALLous vagabonds!

May 21 05:42 PM