Tuesday, June 19, 2012

Looking Under The Hood

I just saw this article on yahoo.finance.  Autotrader.com has filed to go public, but six weeks ago it borrowed $400 million to pay insiders a one-time dividend.  From the article:
New federal filings show that Autotrader.com is looking to become the first internet company to retest the waters of the IPO market since Facebook's May 18th debut. There's only one problem; six weeks ago AutoTrader insiders borrowed $400 million in order to turn around and pay themselves a one-time dividend in the same amount. I call it, cashing in before you cash out, while my co-host Jeff Macke is more blunt.

"There's nothing illegal about this, it's just kind of scummy," he says in the attached video. "They've made it a lesser company and immediately after doing so, they're pitching on to the public."

It was Dan Primack's article, Dividends For Us, Not For You in Fortune Magazine that first pointed this out and highlighted the nearly 50% increase in AutoTrader's long-term debt as well as the payout to pre-IPO shareholders including Cox Enterprises and two private equity investors, Providence Equity Partners and Kleiner, Perkins.
Nice.  Two words popped in my head after reading this article - douchebags and clawback.

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