GOAL IS SMOOTH
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When Facebook Inc. (NASDAQ: FB) holds its annual shareholders’ meeting Thursday, June 1, one item some stockholders will be pushing is stripping Mark Zuckerberg of his role as Chairman of the Board of Directors. As the saying goes, good luck with that.
Zuckerberg holds a majority of Facebook’s voting stock and unless he votes to fire himself, there’s no way that he can be replaced. The company’s plan is to create a new class of shares that would allow Zuckerberg to extend his control of Facebook even though he plans to give away 99% of his financial stake in the company.
The actual proposition that Facebook shareholders will be voting on calls for the board to adopt a policy to require that its chairman be an independent member of the board. The proposition is designated as Proposal Seven in Facebook’s proxy statement and has been endorsed by Institutional Shareholder Services (ISS), a well-respected firm that consults with institutional investors on governance-related risks in publicly traded companies.The proposal was put forward by SumOfUs, a self-described international consumer watchdog, that has supported petitions demanding that Amazon stopping advertising at alt-right website Breitbart.com.
ISS has assigned a corporate governance score of 10 to Facebook, indicating the highest level of risk according to SumOfUs. In a letter to shareholders, SumOfUs cites the ISS reportISS has identified a number of governance issues which suggest that shareholders would benefit from more independent board oversight in the form of an independent chair. The company has a multi-class capital structure which is not in the best interests of all shareholders. The board is not substantially independent, and there is no formal nominating committee. An independent chairman would serve as a more effective counterbalance to the current leadership structure and provide unaffiliated shareholders with a stronger form of independent board oversight and leadership. As such, a vote for this proposal is warranted.
Under the company’s plan to create new Class C shares, holders of Facebook’s Class A and Class B shares would receive two Class C shares for each of the other shares they hold. Class C shares would trade publicly under a new ticker symbol. The economic effect is a three-for-one stock split, but the change would solidify Zuckerberg’s hold on more than 50% of shareholder voting power. The plan to create new Class C shares is being challenged in court and is set for trial in September.
Most of the large luxury car companies have high-performance divisions. They make $100,000-plus cars, which are as fast as any available in showrooms, including America’s fast muscle cars. The grandfather of these, the Mercedes AMG program, has reached its 50th anniversary.
The AMG division primarily makes very fast editions of existing Mercedes models. And they tack on tens of thousands of dollars for the AMG performance engines, suspensions and bodies. For example, Mercedes mid-priced E-Class cars have a base price of $52,150 for the E300. The AMG E43 model has a base price of $72,400. Fully loaded with the available features and equipment, the price rises to $95,000.
The Mercedes S-Class flagship has a base price of $96,600. The AMG S65 version has a base price of $226,900. Fully loaded with features, that figure rises to over $250,000.
To celebrate the anniversary, Mercedes made the following announcement:
AMG – these three letters stand worldwide for supreme automotive performance, exclusivity, efficiency and high driving dynamics. The company founded by Hans-Werner Aufrecht and Erhard Melcher in 1967 is celebrating its 50th anniversary in 2017. In the course of this half century, Mercedes-AMG has further consolidated its position as an extremely successful sports car and performance brand with numerous successes in motorsport and the development of unique road-going vehicles. Today, as a wholly owned subsidiary of Daimler AG, the Affalterbach-based company represents the sporting spearhead of the Group. For each of the now around 1600 employees, the focus will be on the brand promise of “Driving Performance”, which unites the core strengths of AMG: cutting-edge technology and a passion for dynamic, emotionally appealing products. The basis for this is the phenomenal engine technology of Mercedes-AMG. And the company from Affalterbach has lastingly underpinned its high development capabilities with the two in-house designed sports cars, the SLS AMG and the AMG GT. AMG started into the anniversary year with record figures under its belt, delivering almost 100,000 vehicles in 2016 and thus growing by more than 40 percent while being in the middle of the biggest strategic model initiative in the company’s history.
The models have made Mercedes a lot of money, and they have burnished its reputation at the same time.
Toyota Motor Corp. (NYSE: TM) vies with Volkswagen for the world crown in car companies by unit sales, yet the Japanese manufacturer is the world’s most valuable car brand. Among the top 100 brands, VW has one of the lowest values.
According to Interbrand, Toyota’s brand is valued at $56 billion, up 9% from 2015. Two luxury brands are next on the list. Neither sells as many cars at the largest companies, but each sells premium brands. Mercedes has a brand value of $43 billion, up 18% from the previous year. BMW has a value of $42 billion, up 12%.
The only U.S. car brand on the list, as Brand Channel points out, is Ford Motor Co. (NYSE: F) at $13 billion, up 12%.
The Brand Channel had an interview with Interbrand’s managing director and auto sector expert Daniel Binns. The publication pointed out that:
With 15 auto brands on Interbrand’s 100 Best Global Brands 2016 list, the automotive sector is crucial. Autos also are a top-growing sector, rising 9.5 percent in total value this year to more than $256 billion.
Binns commented that:
This is impressive for an industry that can get bogged down by large legacies, infrastructures and ingrained processes. But while the speed of change is growing exponentially, many of these brands are keeping pace by responding to consumers’ evolving needs and embracing the technology that’s changing the way the world thinks about cars.
Incidentally, VW’s brand value was down 9% to $11.4 billion. Even the parent company’s luxury division did better. Audi’s brand is worth $11 billion, up 14%. The information shows how far VW will have to climb to get toward the top of the auto brand list.
MAY NEWLETTER 4
50 YEAR ANNIVERSARY
GMS Inc. (NYSE: GMS) recently filed an amended S-1 form with the U.S. Securities and Exchange Commission (SEC) for a secondary offering. No pricing details were given in the filing, but the company plans to offer 5.0 million shares with an overallotment option of 750,000 shares. At the most recent closing price $32.87, the entire offering is valued up to $189.0 million.The underwriters for the offering are Barclays, RBC Capital Markets, Credit Suisse, Raymond James, Baird and Stephens.
This is the leading North American distributor of wallboard and suspended ceilings systems. Its product offerings are designed to provide a comprehensive solution for its core customer, the interior contractor who installs these products in commercial and residential buildings.
Since its founding in 1971, it has grown its business from a single location to over 200 branches across 42 states through a combination of both organic growth and acquisitions. Over time, the company has increased its market share in the distribution of wallboard and ceilings, which management currently estimates is 15% for wallboard, based on volume produced in the United States and Canada, and 17% for ceilings, based on sales dollars in North America.
In the filing, GMS detailed its finances as follows:
For fiscal 2016, we generated $1.9 billion in net sales, $12.6 million of net income and $138.2 million of Adjusted EBITDA. … Net sales and Adjusted EBITDA grew 18.3% and 30.6%, respectively, in fiscal 2016 as compared to fiscal 2015. From the beginning of fiscal 2013 through fiscal 2016, net sales and Adjusted EBITDA grew at a compound annual growth rate, or CAGR, of 17.0% and 43.7%, respectively.
The company will not receive any proceeds from the offering; instead the selling stockholders will receive all the proceeds.
Shares of GMS closed most recently at $32.87, with a consensus analyst price target of $37.17 and in a 52-week trading range of $19.28 to $36.99.
GM HAS SECONDARY OFFERING
TOYOTA MOST VALUABLE CAR BRAND