Jarden's 'Rope a Dope' Investor Relations

by: Amit Chokshi January 28, 2008 | about stocks: JAH    

Amit Chokshi

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Jarden Corp. ("JAH" or the "Company") continues to demonstrate how desperate it is to mask its deteriorating operations and support its overvalued share price by issuing laughable press releases. About two weeks ago, JAH issued a press release covering its expectations for Q4 2007, indicating the company would be "in line with...expectations" and that JAH is "comfortable with Analysts' estimates for as adjusted EPS for fourth quarter and the full year 2007."

Given how the sellside is spoon-fed these "pro forma, as adjusted for constant charges, synergies that will never happen" figures, it should not come as a huge surprise that JAH is comfortable with its own internal estimates. JAH is an amazing company in that its management skillfully directs the bucketshop research analysts towards whatever JAH feels is important and then issues irrelevant press releases that goad support for its shares while management wheels and deals in the background. JAH's investor relations team might have done investors a better service by issuing press releases for other, far more relevant items.

Outside of its most recent press release, in July 2007 JAH made a point to inform investors that its CEO Martin Franklin and CFO Ian Ashken purchased about $2MM worth of shares in the open market. Considering the compensation these men have received in recent years as well as the stock awards in JAH and other entities they have invested in, the aggregate open market purchases by JAH's executives was a joke and hardly worthy of a press release. Following that, after poor Q3 2007 results, JAH decided to commence a $100MM share repurchase.

This is for a company with very aggressive leverage ratios, an abominable balance sheet, and a bunch of mediocre consumer products with declining operating margins. Given the terrible capital returns for JAH's previous acquisitions, it appears that management is staying consistent in allocating capital that destroys firm value through the announced buyback. I suspect the share repurchase was done solely to prop up Q4 EPS estimates and "surprise" the Street.

While these three press releases might have encouraged investors to hold or add to their shares in JAH, I feel that the Company's IR team should have also addressed a number of other items through its press releases.

For example, in late 2006 JAH could have alerted shareholders to the fact that Franklin and Ashken created Freedom Acquisition Holdings ("FAH") which went on to merge with UK-based hedge fund GLG Partners in spring 2007. Rather than devote 100% of their time to running JAH, the Company's CEO and CFO were busy prospecting for potential targets for FAH. Another interesting item would have been Franklin and Ashken's foray into yet another SPAC with their launching of Liberty Acquisition Holdings Corp ("LIA") in December 2007.

In both cases, I can't seem to find evidence through Company filings where JAH indicated that its CEO and CFO would be devoting less than 100% of their efforts to JAH and would be busy enriching themselves at the expense of JAH shareholders. The only way JAH shareholders would realize Franklin and Ashken were involved in other material events outside of JAH would be by sifting through arcane SPAC filings.

I suggest JAH's IR team should follow up with a new press release entitled "Jarden's management team enriches itself while Company investors lose 50%" and then commend the Company's CEO and CFO for their involvement in two SPACs. JAH investors should feel happy to know that while JAH's operating margins have declined, sales have stalled, and debt has risen, their CEO and CFO have been able to purchase a UK-based hedge fund and raise another SPAC.

Based on Franklin's share of these two entities it appears as though his value is roughly $300MM which appears to be significantly greater than his total stake in JAH (including stock awards). This chart compares GLG and JAH's one-year performance showing that Franklin's interest in GLG increased by about 33% while JAH shares have fallen about 50%.

JAH's IR team also neglected to issue a press release covering the recent board-approved acceleration of equity grants for the Company's management team. Perhaps JAH insiders are starting to realize the party is coming to an end and it's soon going to be time to blow out as many share grants and awards as possible before their left holding this toxic stock. Franklin and Ashken are paid by JAH shareholders yet have used that time and compensation to focus on lining their pockets in other ventures while Company shareholders have been gored through poor operating performance and capital allocation.

If JAH implodes, JAH shareholders will be left holding the pieces while Franklin and Ashken will be on to their next scheme.

DISCLOSURE: AUTHOR MANAGES A HEDGE FUND THAT IS SHORT JAH

From 12/18/07: Jarden Remains a Compelling Short

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This article has 4 comments:

  •  
    Jan 28 02:20 PM
    Great insight, thanks. And congrats on the short - looks like it's done well.
    Reply | Link to Comment
  •  
    Feb 14 11:28 AM
    I anxiously await your next garbage piece after JAH delivered a strong quarter and excellent cash flow. Cash is cash and no matter what you claim that is the ultimate measure of performance. Bucket shops?? Since when were Lehman and Goldman considered bucket shops?
    I find it amazing you are allowed to publish slanted pieces like this when you are short the stock as your only aim is to benefit yourself and your investment by being negative (more like tabloid journalism).
    We see right through you.
    Reply | Link to Comment
  •  
    Feb 17 04:57 PM
    I'll have a follow up in a few days but if you're that "anxious" post with your real name and email address and I'll send you my thoughts on JAH or do you prefer to post anonymously? LEH is one of my favorite research houses, if it wasn't for Bruce Harting, CFA and his views on DSL, it would have been much harder to make $ off shorting since his institutional clients would not have been holding the bag.

    What's so slanted about what I've written in regards to JAH over the past year I've followed the company? What is not factual in what I've presented?

    1) Did Franklin and Co issue a press release covering their paltry $2MM insider purchase? YES, and what the hell is the point of something like that, how many companies put out PRs highlighting a $2MM purchase? AP wires may pick up on the Form 4 filings but do companies release a statement about it?
    2) Where are the JAH filings that indicate Marlin Equities (Franklin) and Ian Ashken have gone on to create two SPACs on JAH time while JAH shareholders have lost 40-50% of their investment value? If you're happy to have your CEO and CFO spend their time investing in GLG and raising capital during the time they're supposed to be running your company while being paid by JAH shareholders, fine. But what have I said that was slanted with respect tothat?
    3) Any press release covering the acceleration of equity grants to Franklin and Co recently? NO, and I wonder why there would be a PR on Franklin spending a few bucks to buy shares but then no PR to cover the fact that they are getting equity grants accelerated.

    So what have I stated that is slanted or tabloid journalism, everything I've presented in FACT. Is your long position preventing you from reading anything that contradicts your position with an objective mind? Seems that way.

    You find it amazing that SA allows people to post contradictory but factual based work with real analysis? If I was long on JAH and published a rosy piece saying ignore the fact that Franklin and Ashken are making a fortune off other investments and investing their time in creating and directing these SPACs while they're supposed to be running your company, ignore the incredible debt load because those Margarita concoctions and bicycle playing cards are hot sellers, or ignore the difficult Q4 comparisons since they jammed that K2 acquisition in their to gum up any comparable analysis, then that would be fine with you?

    You see right through me? You're a pathetic anonymous poster upset about a contrary view to a position you hold. I do this for a living and put out any comments/analysis along with my real contact info. Do you think I'd publicly discuss any idea if I did not vet the idea and believe there was tangible analysis to back my viewpoint from the start, have you read the prior postings on JAH here? If I put out anything that resembles tabloid journalism, how does that benefit me from a professional standpoint? Seems you think people are that foolish to think that 1) writers here can move actually markets 2) that people can't distinguish between objective work and slanted short work (although slanted long views are fine).
    Reply | Link to Comment
  •  
    Sep 12 07:09 PM
    Amit, don't worry about people like that. Expect criticism as an author on SA. I do.
    Reply | Link to Comment
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