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Author: Littlechap Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 10845  
Subject: Re: Reading between the lines Date: 12/6/2005 1:00 AM
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"The saddest part of your response is that I will have to liquidate CPN completely and thus I will not have any need to come back to this CPN board.

I have understood your reponses earlier, although your last few posts really hit home. I have made a significant amount on CPN and will struggle on finding where else to put it.

The price might go up but history shows that July is it's yearly high and then down from there."


Well, Al...

I'm posting this publicly to the board but also sending an email copy to you, since I assume you probably wouldn't see it otherwise.

It took me a lot of time and a lot of words (plus enduring several inexcusable flames from various parties), but I'm glad I convinced you to take the action described above. If memory serves, you got out of your CPN position somewhere around three bucks. Well, its last trade on the NY Stock Exchange will end up being less than 1/10 of your selling price.

One does not know how long the discussion board will remain open for review, because generally the Fool does not keep boards open for over-the-counter stocks (or with prices so low). There are scads of articles about Calpine's being delisted from the NYSE, but here is just one link to give the gist of it:

http://biz.yahoo.com/rb/051205/utilities_calpine_delist.html?.v=3

Also in the past week or so, Standard & Poor FINALLY removed CPN from the S&P500 index (it was incredible to me that they waited so long). So, the stock was not going to do very well anyhow, but getting sucked out of all the many index-based mutual funds just added to the damage.

Over the years, people have accused Calpine of various kinds of stupidity, or deception, or carelessness; but I don't recall any accusations of illegality that ever got serious attention by the media, other than typical corporate/financial litigation about the wording of contracts and bond agreements. So I am wondering if anything like that might surface in coming months, i.e., financial manipulations or other malfeasance that has gone unreported so far.

A recent article -- I *think* it was at thestreet.com, which has been giving pretty good coverage to the company and this story lately -- quoted a source who said that the company's financial statements and balance books were like an intricate mesh of interwoven spider webs (or some similarly colorful analogy).

In other words, trying to trace a dollar through Calpine was like falling with Alice down the rabbit hole into Wonderland, and trying to find the exit. Sure, they published documents that purported to be earnings statements and SEC filings, but one wonders if anybody ever really tried to sort them out. Qazulight here on the board sounds like he understands some of the layering of bond obligations, which would be impressive, although I think he gives credit to his broker.

It was not very long ago that many Wall Street Analysts -- and the SEC! -- were complaining that they could not decipher Calpine's financials. Even the company itself had trouble, as evidenced by its having to restate its Q3 earnings a few days after the initial statement. (Something they've done more than once.)

Add to that all the unusual personnel moves in the past year or so, including the abrupt changes to the board, the failed relationships with banks, the rising tide of litigation by bondholders over who gets first crack at money raised by asset sales... somewhere, trouble is a-brewing.

Anyway, the company still exists, but just barely. The CEO and CFO are gone, with nothing but silence to mark their exits. The devastation of the stock value and the virtual destruction of the company were predictable to a lot of observers, not just me -- like the analyst from Morningstar who I quoted to you in those arguments six months ago. I know that you finally started to accept some of what I was saying, but now those opinions and expectations have become reflected in fact.

The failure of a company is not something to be happy about in and of itself. But the way that Cartwright and Kelly were discredited in the process, that IS worth a cheer. Because those guys did not respect their investors. The people who bought common stock and helped them get the company going, end up getting nothing.

And that is because these executives -- apparently with the acquiescence of an irresponsible board of directors -- consistently, repeatedly, arrogantly refused to admit when they had failed, and when bad news really was bad. They just issued more press releases and sold more crazy securities. The company soon epitomized the old expression of "putting lipstick on a pig."

Now, they have had their comeuppance. The board should also take some of the blame, but then again, Cartwright was the COB, not to mention the founder. Directors might defer to such a person more than usual, and perhaps they gave him too many benefits of too many doubts. In any case, their passivity is one of the more puzzling issues. Perhaps this will be explained eventually, as the press writes its post-mortems.

Ah well, enough. Happy holidays!
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