Ever see the cop shows where the crazy guy sits there with a gun to his head and shouts “take one step closer and I’ll shoot”? We now know what Circuit City (CC) CEO Phil “The Shill” Schoonover watched as a kid.
Back in February when Mark Wattles disclosed a 5% stake in the company, rumors abounded he may make a play for it. Schoonver responded by expanding the company’s credit line by $800 million to $1.3 billion with an option to add another $300 million at their convenience. It does not seem like much until you consider prior to this they had $49.7 million outstanding against the current credit facility and have total sales of a paltry $2.9 billion. Quite an increase for no apparent reason.
Clearly Schoonover was trying to protect his job by making the company unattractive as a potential investment. It should be noted here that the now almost 80% drop in the stock price had done that for scores of current investors.
Wattles then called for the a new Board of Directors and nominated his own slate.
Schoonover responded by chopping off his own feet and fired Steven Pappas the Company’s “Small Store President,” and Peter Weedfald the Chief Marketing Officer. An important note here is the $6 million bonuses approved in December to retain 10 Vice Presidents and $3 million more to retain Executive Vice presidents, including the now unemployed Pappas and Weedfald. At the time Schoonover defended the bonuses saying it was important to retain “instrumental executives”. OK
Now word is that Schoonover is seeking to pacify irate investors with a $0.04 dividend. Is he thinking that makes up for the $16 collapse in the stock price?
Now the company is being removed from the S&P 500 and index funds are dumping the stock by the truck load. Schoonover’s moves have backfired as activist funds D.E. Shaw, Royal Capital Management & HBK Investments LP, have scooped up over 15% of the shares.
I cannot wait to see Schoonover’s next move… maybe random rolling store closings until Wattles “goes away”?
Disclosure (“none” means no position):None (Thank God)
