Even Buddy Media Folks Don’t Want SalesForce Stock

Even Buddy Media Folks Don’t Want SalesForce Stock
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Even Buddy Media Folks Don’t Want SalesForce Stock

Remember the last deal salesforce.com, inc. (NYSE:CRM) did?

They bought Buddy Media. The deal included $467 million in cash, $184 million in Salesforce stock and $38 million in vested options and restricted stock. Additional payments would be made if certain milestones were met, making the total amount as much as $745 million.

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TD1655 Newsletter Placement 1Dear Friends of the Fund, Please find enclosed our Q2 2022 investor letter for your review.  Qualivian reached its four-year mark in December of 2021. We are actively weighing investment proposals. Please refer to our Q2 2022 investor letter for our performance and commentary on the second quarter of 2022. A fact sheet is 

Here is what the folks at Buddy Media had to say when the deal was announced

Pretty powerful combination and ought to drive salesforce.com, inc. (NYSE:CRM) and its business and its stock ever higher…..right?

Well, CRM filed an S-3 regarding those shares paid to Buddy Media folks…..

How much of the stock they received in this new combined entity are they selling? The answer: 99%

Here is the list:

Capture607 624x95 Even Buddy Media Folks Dont Want CRM Stock

Now, I get founders want to cash in on their hard work and monetize the asset. Really I do. But they did get $467M in cash, that is a bit of liquidity. This isn’t even a liquidity issue, this is a clean break.

When a company is hot to use its stock to acquire other companies, it means even they realize the value of that stock is overstated. When $1 of stock is worth much more than $1 of cash, you use it as a currency. Even those receiving it in this case realize that and are cashing in before that $1 of stock is in fact only worth $1.

So again, I ask the question. If insiders are selling the stock on a weekly basis, often exercising options years early and even companies they acquire dump the stock they get as soon as they are allowed to…..why is anyone else buying it?

By: valueplays

Todd Sullivan is a Massachusetts-based value investor and a General Partner in Rand Strategic Partners. He looks for investments he believes are selling for a discount to their intrinsic value given their current situation and future prospects. He holds them until that value is realized or the fundamentals change in a way that no longer support his thesis. His blog features his various ideas and commentary and he updates readers on their progress in a timely fashion. His commentary has been seen in the online versions of the Wall St. Journal, New York Times, CNN Money, Business Week, Crain’s NY, Kiplingers and other publications. He has also appeared on Fox Business News & Fox News and is a RealMoney.com contributor. His commentary on Starbucks during 2008 was recently quoted by its Founder Howard Schultz in his recent book “Onward”. In 2011 he was asked to present an investment idea at Bill Ackman’s “Harbor Investment Conference”.
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