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Author: brewer12345 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 558  
Subject: Re: HELLO!!! (28 Days Later) Date: 10/15/2003 2:52 PM
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Well, I finally sold my JAKK position last week at 13, but I will give you the benefit of my experience. Among management's many sins:

- Excessive compensation (check out their total comp as a percentage of net income and compare it to HAS or MAT)

- Loans to insiders which weren't repaid

- Re-pricing management's stock options after the share price fell (i.e. if their exercise price was 20, it was reduced to 10, for example)

- Multiple stock offerings and now a convertible bond offering even though there is no reasonable acquisition target in sight

- A refusal to break out sales or results in any kind of detail, making it impossible to tell if JAKK is a "leaky bucket" (i.e. existing product lines are declining, but total sales and profits are kept up by constantly buying new lines)

- (Probably) misleading the investors in the convertible by pretending everything was fine a few weeks away from the end of the quarter when the bonds were sold, then releasing an earnings report that was (excuse my French) a turd (one analyst on the earnings call actually called it a "train wreck").

These are the most egregious transgressions, although there are others. I am a pretty patient investor, so I was willing to see if they could turn things around, but it is clear that mgmt has little interest in doing anything but empire-building and robbing the shareholders blind. I am out with a tiny loss (about $250 on a 1000-share position), and I have learned two valuable lessons: 1) Be very wary of serial acquirers, and 2) pay close attention to mgmt's incentives and character.
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