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Dave S. Goodboy's  Instablog

Dave S. Goodboy
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Dave Goodboy - contributing writer for BeaconEquity.com
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  • Groupon: Come on, Folks - Just Relax!
    In a world full of Howard Stern wannabes, Jackass 3Ds, and other crass examples of popular culture, I was surprised to witness the extreme negative reaction to Groupon's Super Bowl ad series.   If the amazingly successful local yet international marketing company wanted more attention, they got it in spades.  However, this attention is definitely of the reverse psychology sort. 

     

    If you don't know already, the company that refused Google's (Nasdaq: GOOG) $5 billion take-over offer ran a series of three ads depicting global issues such as deforestation, Tibet, and the plight of the whales.  These ads featured celebrity spokespeople using the global issues as lead-ins to Groupon's money saving coupons.  Were these ads crass and over the top?  Sure, but that was the idea, to get people talking and possibly go viral which they did. 

     

    The public, at least the vocal blogging community, is outraged at these ads, particularly the one featuring C Lister, Timothy Hutton on the plight of the Tibeten people.   What the complainers are conveniently forgetting is now millions more people are aware of the dire situation in Tibet.  Not to mention, that Groupon itself is a substantial donor to the cause.  In fact, if you go onto their Web site http://savethemoney.groupon.com  there are buttons where anyone can donate funds to the three causes parodied on the ads.  

     

    Groupon's CEO, Andrew Mason has even gone as far as to address  the controversy in simple language on his blog, "We would never have run these ads if we thought they trivialized the causes - even if we didn't take them as seriously as we do, what type of company would go out of their way to be so antagonistic?"

     

    However, the activists are refusing to listen to common sense and continue to trash the company.  What they are not realizing is these actions are simply bringing more attention to the ads, having a reverse effect than the one intended.   In addition, my bet would be that with the scores of new people aware of these causes, donations will be up across the board.  How can these well intentioned folks be so unaware of real world cause and effect?

     

    Marketing is marketing and controversy sells.  Like it or not, this is a primary tenant of advertising.  Come on everyone, just relax and remember the real result of these ads, not your perceived offense.  I am on the side of common sense in this matter.  Let's hope this side prevails!

    Tags: GOOG, groupon
    Feb 09 10:43 AM | Link | Comment!
  • Sanofi/Genzyme Deal: an Interesting Twist

    It's been more than nine months now since Sanofi Aventis (NYSE:SNY) has been dancing the big-money take-over dance with Genzyme (Nasdaq:GENZ).  Until recently, Genzyme has rebuffed Sanofi's offers, which led to an unsuccessful hostile takeover attempt by Sanofi for $69 per share back in October, 2010. 

     

    Why would is the world's sixth largest drug maker so hot and heavy for Massachusetts-based Genzyme?    The prime attraction seems to be Genzyme's stable rare disease drugs.  This would add a new area of growth to Sanofi offerings.

     

    After intense negotiations, it looks like a deal might be close, with closure rumored to be this week.  Both companies’ boards met yesterday to supposedly hash out the final deal.  IF they are able to pull this off, the transaction will be among the largest merger of the last several years. 

     

    The latest offer, the one said to be likely accepted by analysts, includes an interesting twist.  This unique situation will be particularly attractive to small-cap investors since it will provide a low-cost way to directly play drug release success or failure.  Let me explain.  Sanofi has offered $74 per share for Genzyme.  This deal includes a little known instrument called a Contingent Value Right or CVR.  This CVR will trade on a stock exchange with its value being directly tied to the success or failure of one of Genzyme's drugs known as either Campath or Lemtrada.  If this drug hits its sales goals, the CVR could be worth $5 or $6.  It is suppose to enter the market at around $2 per share.  This opens up a whole new angle for small-cap bio tech investors in these companies. 

     

    Sanofi is expected to release earnings on Wednesday.  Most analysts believe that the deal closure will be revealed prior to the earnings release.  However, given the unique factors inherent in this transaction, don't be disappointed if you have to wait a little longer …  Good trading!

     

     

    Feb 07 10:12 AM | Link | Comment!
  • Alpha's Most Toxic Deal: Buy, Sell or Hold?
    Alpha Natural Resources (NYSE:ANR) may have just entered one of the most toxic business deals of the year, agreeing to purchase Massey Energy (NYSE:MEE) for $7.1 billion in a cash and stock deal.  On the surface, by just looking at the numbers, the transaction appears to be a win/win situation for both companies.  Alpha will pay 1.025 of its own shares plus $10in cash which equals $69.33 for each Massey share, a 21% premium over Friday's closing price.  Alpha will be turned into a coal monster with more than 5 billion tons of   reserves.  This isn't mentioning the deal providing Alpha with key reserves of metallurgical coal used for steel production.  This coal is in high demand in rapidly growing economies around the world. 

     

    As stated, everything looks great on the surface of this deal, what's the toxic factor?  Everyone knows that Massey has a dismal safety record; in fact, the company has the worst record in the coal industry.  Despite the company's obvious success in the coal mining business, it has been plagued with a series troubling occurrences.  The most recent happened on April 5, 2010, in an explosion killing 29 miners in Massey's Upper Big Branch Mine. This appropriately named tragedy, The Upper Big Branch Mine Disaster, was the cumulating of an astounding 1,100 Federal safety violations over the previous three years.  Disturbingly, sections of the Upper Big Branch Mine were ordered closed 60 times in the year previous to the catastrophe.  Investigations are ongoing into the exact cause of the explosion.  In addition, as you may expect, a criminal negligence probe is also ongoing.  This worst coal mining calamity in more than 40 years is far from the only troubling situation occurring at Massey.  A far from perfect safety record resulting in multiple deaths over the years combined with an abysmal environmental history plague the company.   

     

    Alpha believes it will be able to clean up this disturbing record and make Massey's mines safe.  This is very likely, but I believe Alpha is discounting the legal concept of successor liability in the transaction.  This means that Alpha now becomes responsible for Massey's legal woes.  Of course, Alpha believes they have quantified these liabilities, but with all things court related, one never knows for sure what will happen until the gavel falls.  Successor liability creates a large overhang of unknown factors. Investors must consider these unknowns prior to investing in Alpha. 

     

    Jan 31 10:57 AM | Link | Comment!
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