Money Matters - Simplified

This Week's 5 Dumbest Stock Moves

 Stupidity is contagious. It gets us all from time to time. Even respectable companies can catch it. As I do every week, let's take a look at five dumb financial events this week that may make your head spin.

 

 1. Sears for fears

There's a new digital-streaming juggernaut in town, and it's a maven of blue light specials.

Kmart? Really? Sears Holdings(Nasdaq: SHLD) discounter is teaming up with Sonic Solutions (Nasdaq: SNIC) to begin offering piecemeal digital rentals and downloads.

Haven't consumers already decided that they prefer unlimited digital libraries to sift through? If they're going to set up Wi-Fi connectivity in their homes and invest in the appliances to make streaming in a home theater setting possible, why go with the same pricing and selection that they could get from their local cable provider's on-demand without taxing their home network?

This isn't going to work. The small subset of Kmart shoppers who likely have tethered living rooms are probably already smart enough to know better.

2. Facebook the music
The ever-escalating price tag of Facebook continues. The latest transactions on SharesPost -- a marketplace where insiders and ex-employees can unload stakes in privately held companies -- value the leading social network at a whopping $42.37 billion.

It's not a perfect science. Lacking audited financials, it's hard to fathom Facebook generating the kind of cash flow and growth that would justify that stiff price tag. However, one can't discuss Facebook's valuation without bringing up Yahoo!'s (Nasdaq: YHOO) failed bid to gobble up the company for roughly $1 billion four years ago.

It's hard to imagine what price would have swayed Facebook CEO Mark Zuckerberg to cash out at the time, but he wouldn't have entered negotiations if it wasn't realistic for Yahoo! to walk away with the company.

So how would a $42 billion Facebook look on Yahoo!'s arm had the deal gone through? Well, Yahoo! commands a market cap of just $22 billion -- and far less once you back out the company's cash and overseas investments.

3. Batteries not included
It's a shame that Research In Motion's (Nasdaq: RIMM) PlayBook tablet can't run on hype. Kaufman Bros. analyst Shawn Wu is claiming that RIM's anxiously anticipated gadget may be delayed by a few months over its unimpressive battery life.

If Wu's assessment is spot-on, this is a lose-lose situation for RIM. It can rush out the PlayBook, only to watch it fizzle as consumers realize it lacks the juice time provided by existing tablets. If RIM decides to do the right thing -- delaying the PlayBook until it can crank out a competitive battery life between charges -- the months squandered will merely pad the market share of the tablets already on the market. Apple (Nasdaq: AAPL) may already be onits second generation before RIM hits the shelves with its first.

Poor RIM. It was unfashionably early to the smartphone space, and now it may be unfashionably late to the tablet party.

4. Eyes over ayes
The Food and Drug Administration is the Simon Cowell of clinical trials. It's blunt, even if it means that it is crushing dreams and careers.

The agency nixed Alimera Sciences(Nasdaq: ALIM) Iluvien, an eye drug that treats diabetic macular edema. Shares of Alimera took an intraday hit of nearly 23% on Monday, before making a little more than half of that back by the close.

The silver lining here is that the FDA's concerns aren't insurmountable. The agency wants to see another year's worth of trial data, but if that data continues to be promising, then that's not a big deal. Also, worries over the manufacturing process should be an easier fix than it would be if Alimera had to start from scratch.

5. Act as if you belong up there
BioSante Pharmaceuticals
 (Nasdaq: BPAX) was so pumped after its stock surged 27% on Monday, that it went ahead and announced the recent sale of 10.6 million shares along with warrants that can be exchanged for another 5.3 million shares.

The move will raise $18 million -- which any hungry biotech needs -- but it also sends the wrong message. The secondary sale was at a price well below Monday's close, and that's before baking in the value of the warrants.

It wasn't a surprise to see BioSante give up most of Monday's huge gains on Tuesday.

© 2010 UCLICK L.L.C.