Bear Stearns CEO sells stock

James Cayne sells 172,621 shares of the investment bank in what a spokesperson calls a routine sell. He still owns 5.6 million shares.

NEW YORK (AP) -- Bear Stearns Chief Executive James E. Cayne sold $15.4 million of the investment bank's stock this month, at the end of a year in which he found himself at the forefront of a global credit crisis.
Cayne, who is also Bear Stearns' chairman, exercised and sold 172,621 shares of stock vested under a capital accumulation plan last Friday, according to a filing with the Securities and Exchange Commission late Thursday.
He fetched $89.01 per share, according to the filing. At the beginning of the year the stock traded at more than $160.
Cayne still owns 5.6 million shares, or about 5 percent of the company.
Every year, Bear Stearns grants executives "CAP units" entitled to a share of the company's annual profit and dividends. After five years, the CAP units become stock. The stock Cayne sold this month was acquired through CAP units granted in 2002.
A spokeswoman for Bear Stearns said executives for tax reasons typically sell stock acquired through CAP units. She pointed out Cayne and most other executives sell stock vested through their CAP units every year.
"The sale of stock by the members of the executive committee is in line with what each of them has done in the past," the spokeswoman said.
Bear Stearns has been at the heart of this year's liquidity crisis, which has pushed scores of mortgage lenders out of business, bled more than $100 billion from Wall Street's books, and coaxed the Federal Reserve to cut interest rates by a full percentage point.
Some people point to the collapse of two Bear Stearns hedge funds established to bet on risky mortgage debt as the trigger for the subprime crisis.
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Bear Stearns executives triggered a 2.6 percent one-day sell-off in the stock market this summer when they compared the lack of liquidity plaguing financial markets to the bond market crisis of the late 1990s, the bursting of the tech bubble, and the stock market crash of 1987.
Cayne later came under fire after the Wall Street Journal reported that as the two hedge funds were going bankrupt, he was playing golf and bridge without access to e-mail or a telephone.
Bear Stearns' profit plummeted 89 percent in fiscal 2007 as the bank wrote billions of dollars of bad debt off its books. The company's stock has lost almost 47 percent of its value this year and on Friday registered its cheapest trade in three years.
Still, Cayne has managed to hold on to his job even as colleagues like Citigroup's (C, Fortune 500) Charles Prince and Merrill Lynch & Co.'s Stan O'Neal have been ousted from their offices.
Last year, the company granted Cayne a compensation package worth $38.1 million. Bear has already said Cayne will not take a bonus this year.
British investor Joseph Lewis has poured money into a growing stake in Bear Stearns (BS), having acquired 11.1 million shares for a 9.6 percent stake to become the bank's biggest shareholder.
Earlier this week, Lewis disclosed he bought nearly 2 million shares, most of them at more than the stock is worth because he had granted or sold options to another investor.

StubHub's winning ticket

The lively online market for the big Patriots game shows how an upstart site has changed ticket sales - and why it is our Sports Business of the Year.

NEW YORK (CNNMoney.com) -- When the Patriots try to finish off an undefeated season tonight, thousands of Pats fans will come out to Giants Stadium and thousands of Giants season ticket holders will be counting the money they collected by selling them the tickets.
To some people, those simple business transactions between football lovers were signs of the apocalypse, or at least proof that fans have become as disloyal as free agent players or owners who move their teams in the middle of the night in pursuit of a sweeter stadium deal from a new set of taxpayers.
And greasing many of those transactions, and catching some of the flack along with the Giants fans dumping their tickets, is StubHub, the leading online ticket resale service that has handled the sale of more than 6 percent of tickets at Giants Stadium for the big game.
But the secondary market - the formal name for the slur known as ticket-scalping - has always been a part of sports. And this weekend's game shows that the secondary ticket market benefits everyone the more developed it becomes.
Giants fans who have to shell out big bucks for season tickets can make back a bit of that money by reselling their seats for a game that means little to the team, which has already earned an entry to the playoffs.
For the Giants, the secondary market ensures that the stadium will have few empty seats.
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And Patriots fans will have a weekend getaway and the chance to see a game they might be able to tell their grandchildren about.
A lot of these fans found one another online. Ticket resale Web sites have blossomed, growing as much as 50 percent this year to become a $2.5 billion business, according to an Forrester Research.
No company has done more to transform that business, and the business of sports overall, than StubHub - and that's why I've named it my first annual Sports Business of the Year.
It's been a busy year in the business of sports. Clashes between sports networks and cable giants. Free agent contract dramas that overshadowed the World Series. Industry-changing sponsorship deals.
But nothing has been more significant, or will have as long-lasting effect, as the rise of the market for ticket reselling.
StubHub, which handled more than 5 million ticket sales in 2007, or more than it had done in its six-plus year history leading into 2007, is clearly the leader in that field.
It's name is on its way to becoming the shorthand for those buying and selling tickets, the way "to Google" has come to mean conducting an Internet search.
More than 5,000 of those ticket sales on StubHub were for this Saturday's Patriots-Giants game, a bit more than double the number of Giants tickets the site handles in a typical week. About a quarter of the tickets sold went to buyers in New England states, while just over half stayed in the New York-New Jersey area, meaning there's a good chance more Giants fans than Patriots fans got tickets to the game through StubHub, despite the gnashing of teeth.
The most expensive seats sold to Saturday's game went for $1,600 a ticket. The average was $222.
StubHub was launched by a couple of Stanford Business School students, Jeff Fluhr and Eric Baker, after the Internet bubble burst in 2000. Fluhr said his parents were upset when he left school to start the company. But he and Baker, along with their investors, saw some business advantages to an online ticket marketplace, including a proven revenue stream and an existing off-line version of a fragmented industry.
"We knew that on every transaction we were making money," said Fluhr. "This was existing consumer behavior. It wasn't like we were trying to create a new behavior. We were just trying to provide an easier and safer way to do it."
Baseball close to catching NFL as top dollar sport
Baker left the company soon after it started, and eventually founded Viagogo, a European competitor that is moving into the U.S. market. Fluhr left soon after he sold StubHub to eBay (EBAY, Fortune 500) for $300 million at start of this year. He remains a consultant to the company.
The new leadership at StubHub comes from eBay, which has allowed it to essentially continue to operate as a stand-alone company, said Chris Tsakalakis, the president of StubHub, who had been with eBay since 2003, most recently running its ticketing business.
Earlier this year, StubHub passed parent eBay for the first time in the total number of tickets sold, according to Tsakalakis.
Tsakalakis said he understands that some fans blame StubHub and other online sites for driving up prices of tickets to hot events. But he believes he's simply opening up the marketplace. Many tickets end up selling for less than their face price, particularly as demand for the tickets falls.
For example, the average ticket price on StubHub for Sunday's Jets-Chiefs game - a contest being held in the same stadium as the Patriots-Giants game but with far less at stake - was $74. And tickets for the Seahawks-Falcons game in Atlanta, a game with even less demand, was going for only $49.
Tsakalakis doesn't apologize for the forces of supply and demand.
"If par value of stock were treated like face value, we wouldn't have a stock market," he said. "People put a lot of faith in face value. But there's a big difference between face value and market value. The market value of a product really varies over time. The real demand is highly variable, highly dynamic."
But this was also a year when not just fans embraced the online ticket resale market. Finally, so did the leagues and many teams.
The eBay ownership of StubHub was a key to the company becoming the official ticket reseller of Major League Baseball.
And that sponsorship deal is a sign that many sports teams and leagues have finally figured out that the secondary market is not only something they can't fight, it's something they can and should embrace. And that is helping that market to start to reshape the business of sports.
The fewer no-shows means increased concession sales. More important, teams are seeing greater, not reduced, demand for their original ticket sales.
Fans are more willing to buy seats if they know there's a safe, liquid market to resell tickets. It makes them more willing, and able, to buy season and partial-season ticket packages. Even baseball's top officials concede the sport's record attendance this year was helped, not hurt, by the growth of StubHub.
There are still some states, such as Massachusetts, where the resale of tickets at a profit is basically illegal, but those laws are on their way out. Not surprisingly, StubHub led the charge to change the laws governing reselling tickets in many states, including New York.
Of course, some teams are still trying to fight the trend. Most notable in this category are the Patriots, which sued StubHub in November 2006 for violating the team's policy on ticket resale and Massachusetts law.
A month later StubHub countersued, accusing the the team of monopolization, conspiracy to restrict trade and unfair trade practices. Both suits are pending.
The legal battle probably didn't help the company in its effort to reach a sponsorship deal with the NFL similar to its MLB deal. Last week, the NFL signed up with IAC/InterActiveCorp (IACI, Fortune 500) unit TicketMaster for a sponsorship deal.
But that sponsorship loss is not as serious setback for StubHub. In fact, with TicketMaster making a push in the ticket resale market, it can only serve to grow the overall online ticket resale industry. And that's a winning ticket for both fans and teams in the long-run.

Analysts in fantasyland

Despite years of reform, the latest numbers show that Wall Street prognosticators are every bit as deluded and inaccurate as they ever were.
By Geoff Colvin, senior editor-at-large

NEW YORK (Fortune) -- Maybe Wall Street analysts are more honest and less compromised than they were pre-SarbOx, but recent events show that they're still awful at their most important job: predicting bad news. They haven't lost their habit of falling in love with the companies they cover and refusing to face unpleasant realities until everyone else has already done so. Now, eight years after they were inflating the bubble, we again have to question whether analysts do retail investors any good.
The latest evidence: Analysts have only just discovered that corporate profits in the fourth quarter aren't going to be nearly as strong as they had supposed a month or two ago. The consensus view going into the quarter was that S&P 500 profits would go up 12 percent to 15 percent, a large jump coming on top of the 20 percent rise in last year's fourth quarter. In light of the credit crunch, the housing collapse, and the towering price of oil, that forecast seemed highly - one might say insanely - optimistic. This it proved to be, but only after the quarter began did the consensus view finally lurch into the real world. Their growth forecast is now about 1.5 percent and still falling.
It has been obvious for many months that profit growth would have to slow way down simply because it couldn't continue at recent rates. Profits have been rising sharply the past few years, which makes sense after the hole they fell into in 2001 and 2002. But by early this year they had grown to 12 percent of GDP, way above their historical average of 9 percent. Analysts knew all this, and in case they didn't, various commentators (including Fortune's Shawn Tully) were insistently pointing it out. But the analysts, ever hopeful, chose to believe that U.S. companies would perform magic.
They still believe it. To see the stubbornness of Wall Street's Pollyannas, look at new data from Merrill Lynch. The firm's chief North American economist, David Rosenberg, regularly and realistically forecasts S&P 500 profit growth. He cut his 2008 forecast sharply (to zero growth) in June, even before the credit crunch. He has since cut it twice more, and it's now -3 percent.
But Merrill's analysts hold a far different view. Add up their 2008 profit growth forecasts for individual S&P companies, and you get 14 percent. In analyst-land, 2008 is going to be another knockout year, with profits yet again growing several times faster than the economy. What's more, Merrill's analysts have actually been increasing their 2008 growth forecasts in recent months. In their bizarre world the logic goes like this: Since we must now admit that 2007 profits will be much lower than we expected, and since we're still certain that 2008 will nonetheless be totally fabulous, then the percentage increases will be even bigger than we thought.
How these nonsensical situations arise is no mystery. Each analyst can accept that the future may be tough overall while still believing that the companies he or she covers are special and will beat the trend. The analysts individually think they're being reasonable, but in the aggregate, they're crazy.
It's similar to what happened in subprime mortgages in recent years or stocks in the late 1990s: Many players realized the situation wasn't sustainable but figured they were especially perceptive and would get out ahead of the pack.
In the days of the market bubble, when many analysts failed to cut their earnings estimates until the collapse was underway, we blamed their motivation. They were afraid their firm's investment-banking arm would lose business. That problem has at least been reduced by SarbOx and by fear of public scrutiny. But if analysts are still predicting fantasy earnings, who cares why? Individual investors are no better off than they were.
Not every analyst gets it wrong. It's always possible in retrospect to find some who hit bull's-eyes. The trouble is, you never know who they'll be. Of course, you may be tempted to believe that while analysts in general are poor, the ones you're relying on are special and will ... no, wait. We know how that turns out.

Battle of the business plans

MuscleMorph
Founders: Rodrigo Alvarez, 31; Howard Katzenberg, 28; Rahul Kothari, 30 Date launched: April 2006 Startup capital: $26,000 in prizes from business plan contests School: The Wharton School, University of PAProduct or service: A muscle-like device to replace traditional motors in prosthetic and orthopedic limbs, providing a quieter, less bulky and less expensive alternative, according to its founders.Chief scientist Rodrigo Alvarez (left), created a new kind of flexible artificial muscle made of plastic. With two MBA students from the Wharton School, Rahul Kothari (right) and Howard Katzenberg, Alvarez launched MuscleMorph, which aims to use that artificial muscle to transform the prosthetics industry by providing a new way to move artificial limbs. Much like a human muscle, Alvarez's device is composed of thousands of strands of microfibers, which respond to electrical charges from a battery by contracting smoothly and silently. In the lab, the founders claim, MuscleMorph's prototype has proved as strong and as responsive as human muscle. The company holds two provisional patents on the technology.MuscleMorph's device comes at a critical time for the prosthetics industry. There are about 1.8 million amputees in the U.S., and their numbers are expected to increase because of a rising incidence of heart disease and diabetes. Several motorized prosthetics have come on the market in the past year, but they are bulky, noisy and power-hungry machines that cost between $50,000 and $100,000. Limbs using MuscleMorph's technology will have more lifelike motion, could cost significantly less - and will be completely silent, claims Kothari.To speed its path to market, MuscleMorph is seeking $1.5 million from angel investors. It already faces some brawny competition. Artificial Muscle in Menlo Park, Calif., was spun off in 2004 from SRI International, one of the world's largest contract research institutes, and has attracted about $10 million in venture capital. Last January, Artificial Muscle introduced its first "muscle," using technology similar to MuscleMorph's. However, this rival says it does not intend to focus initially on the prosthetics market, but on the consumer electronics, automotive, and industrial markets, leaving MuscleMorph with a good shot at putting millions of amputees back on their feet. --Patricia B. Gray.

Collectica
School: University of ChicagoProduct or service: Online community for collectors of stamps, coins and other items.Visitors can use Collectica.com to upload, link and trade with peers as well as use auction and appraisal services. The site generates revenue through e-commerce and advertising. Pictured (from left to right) are founder and president Michael Dworecki, a serial Internet entrepreneur; VP of software development Tu Nguyen, who has designed software for major institutions; Samuel Dixon, head of community development and buzz marketing; and William Thoburn, head of community development and partnership marketing.

Internet Security Company
School: University of GeorgiaProduct or service: The team intends to develop a line of internet security products under the brand name SecureSurfer to market to Internet service providers.Founded at the University of Georgia, Internet Security plans to market a suite of products that blocks viruses and prevents sensitive information such as passwords from being monitored during online transactions. The company's first product contains its patent-pending NarrowGate software, which closes off access to a PC's operating system, existing software and writable memory during Web browsing. Co-founders Andrew Maliszewski (left) and Stephano Righi each have more than 20 years of experience in computer product development.

Liveiniowacity.com
School: University of IowaProduct or service: A Web site that allows students looking for low-cost apartments near the school's campus to search listings of more than 17,000 rental units.President Michael Hubbard (left), a finance major, VP of operations David Oliver (right), who has been a branding consultant and VP of technology Brian Clark, an engineer, aim to build similar sites in more than 75 other markets across the country. Clark and Oliver previously acquired the Police Law Institute, an online training company, and grew their client base by 65 percent in two years.

Cash2Bet.com
School: University of MiamiProduct or service: This startup handles promotion and marketing services for online gambling and entertainment companies.The company enables customers to wager first-time bets of up to $50 on its partner casino and sports booking sites, which Cash2Bet refunds at the end of betting. Prior to launching Cash2Bet, the firm's undergraduate founder Jeffrey Blum owned and operated a Web site design firm.

Precision Reproduction
School: University of California at Los AngelesProduct or service: A patented procedure for in-vitro fertilization that, according to its founders, gives doctors the ability to consistently deliver an embryo to an ideal implantation site - eliminating the risk of ectopic pregnancy and reducing multiple births.Chief science officer Michael Kamrava, M.D., is director of West Coast Infertility Clinic. Other team members include Sanjaya Mohottala (left), a former brand manager; Jeff Kendig (center), a former business analyst and healthcare consultant; and chief business officer Gregory Samson (right), a former investment banker.