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W. Walker Jr.'s  Instablog

W. Walker Jr.
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I tend to be more conservative and believe in free market capitalism. Buy when others are fearful, sell when others are greedy.
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  • Corning Inc. Starring Down The Barrel Of US Justice Department Antitrust Probe

    Corning Inc. Starring Down the Barrel of US Justice Department Antitrust Probe

    On Friday, March 30th, Reuters reported that Corning Inc. had disclosed to the SEC that they received a grand jury subpoena requesting information as part of an investigation into possible antitrust law violations. The information requested was regarding numerous parts installed in automobiles, including catalytic converter, diesel particulate filters for automobiles. Antitrust probes have cost companies millions of dollars, and a potential liability of a costly investigation may be a turn off to shareholders. While Beth Dann, Corning spokeswoman states they "will not speculate on the cause of the investigation," most shareholders are already calculating the impact.

    Corning is currently held primarily by institutions, at approximately 77%, and since the stock closed up .36% or $0.05 to $14.08 on Friday, it appears for now, that no institutions are jumping ship, just yet. Tim Plaehn wrote a very good article: Corning Shares May Drop 25% by Mid-Year, the same day as the release about the subpoena. I am assuming since this was published on March 30th he did not have knowledge regarding the subpoena, yet still makes a bearish case for the possibility of a 25% loss in share value. He does go on to say that for those long-term investors, there is a possibility of getting shares around $10 later in the year. I understand that the way he presents the facts, one could make a case for $10, but I do not personally feel this company will take this kind of hit. (subject to change)

    I have seen several people commenting on Yahoo message boards, regarding EPA via Obama wanting to go after Corning for some conspiracy theory nonsense. Others comment stating that since GLW has huge overseas profits due to its connection with APPL, they are squeezing them anyway they can to get that money back here in the US, even if by initiating an ambiguous long term antitrust "investigation." For factual purposes, their comment was "probably more like Obama wants GLW's overseas profits," and I assumed the rest.

    Is there a possibility of an antitrust violation? Who knows, most likely not, but in my opinion you should not be able to tie a company up in an investigation causing significant monetary strain, unless you have darn good reason. For example, we don't allow the police to arrest someone and then build a case against them… You must be arrested and charged, with sufficient evidence to take the case to court for the possibility of winning. These probes do significant damage to not only the reputation of the companies they go after, but can cost the company millions.

    What really grinds my gears is that Big Banks are "too big to fail", there are only 4 major mobile phone carriers, a couple of auto companies, the i-phone vs android, apple vs windows, yet Corning is cornering the market with respects to catalytic converters and auto parts? What, Huh?

    This must be a bad nightmare, I just don't understand, oh wait I goggled antitrust fines and here is what I found…(link to Gisbson Dunn Publication). The fines in 2011 were over $1B for the third year in a row.

    Look at some of the highest fees paid: (from article above)

    The monetary assessments resulting from the Antitrust Division's investigations in FY 2011 stemmed entirely from its ongoing investigation into bid rigging within the municipal bond industry.

    Monetary Assessments of More than $1 Million Stemming from Antitrust Division Investigations During FY 2011 (October 2010-September 2011)

    Company

    Country

    Investigation

    Total Monetary Assessments

    JPMorgan Chase

    United States

    Municipal Bonds

    $ 211,000,000[4]

    UBS AG

    Switzerland

    Municipal Bonds

    $ 160,300,000

    Bank of America

    United States

    Municipal Bonds

    $ 137,300,000

    We expect this new trend to continue in FY 2012 because the Antitrust Division has already announced monetary assessments totaling $218 million during the first three months of the fiscal year.

    Monetary Assessments of More than $1 Million Stemming from Antitrust Division Investigations During FY 2012 (October 2011-December 2011)

    Company

    Country

    Investigation

    Total Monetary Assessments

    Wells Fargo Bank

    United States

    Municipal Bonds

    $ 148,000,000

    GE Funding Capital Market Services Inc.

    United States

    Municipal Bonds

    $ 70,000,000

    Antitrust fines are at record highs! Are Antitrust Fines the new tax on corporations?

    Overall I am unsure what to think but the stats sure are climbing higher and higher, I plan to do some more research to find out how many of these cases resulted in "settlement?"

    Disclosure: I am long GLW.

    Apr 01 12:45 PM | Link | Comment!
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