Tuesday, February 23, 2010

Dung Heaps

InterOil (IOC) has a market cap of $3 billion, 40% of which is institutionally owned. A company of this size is expected to maintain some standard of decorum in dealing with the public, which is what makes the following e-mail quotations (directed at a company critic) from the company's Senior Manager for Media Relations extremely surprising:

"As far as I am concerned you are a gutless coward of the highest order, a jealous and envious SOB...You are a loser, a non-achiever and a sour-grape."

"Frankly, you are a known crook, conman, convicted felon, a psychopath and a pathological liar...You are a scum of the earth, a creepy-crawlie who should have been locked away and the key thrown away too so that you rot away like the dung heap you are. You are a coward of the highest order"

"Who gave you the authority to investigate InterOil, you piece of shitty non-entity? You are nothing more than an internet pirate, a low-life manipulator who is out to profit by your dishonest, fraudulent, slanderous and cowardly methods. Up yours."

No, these comments were not directed at me, though I have received my fair share of angry e-mails since starting this site! The full e-mail exchange between the participants is available here.

Of course, it is possible that this bewildering exchange never actually took place. Consider the source of the allegations, Barry Minkow. If the company representative was right about one thing, it's that Minkow is an ex-con, as he defrauded a slew of stakeholders in the 1980s in a Ponzi scheme.

Minkow's claim is that InterOil has boosted its stock price to absurd valuation levels with misleading and inappropriate use of press releases. Whether this is true or not, InterOil's response is clearly inappropriate (if true).

Some investors avoid investing in companies who don't respond to inquiries. Even more investors are likely to spurn a company that reacts in this manner, which is what makes the comments so surprising.

So far, investors don't appear concerned. The company continues to trade at many multiples of its book value, in the hope of future earnings growth. For value investors, however, the company's response would reek of trouble!

Disclosure: None

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