A Private Bankruptcy

In a unique bankruptcy filing, GT Advanced Technologies argued that it could not reveal why it had filed for bankruptcy, nor could the company reveal its turnaround plan. GT, which is expected to be a supplier of sapphire glass for Apple, argued that confidentiality agreements prohibited the company from revealing more about the reasons for the bankruptcy. A lawyer from the Office of the U.S. Trustee, which acts as a government watchdog on bankruptcy cases, criticized GT's lack of disclosure in the case. The judge granted the request by GT on a temporary basis. Another hearing to make the ruling permanent is scheduled for October 21st.  

Darden Board Fired

In most proxy fights, only a few board members are replaced at any time. New York hedge fund Starboard Value has been in a protracted battle with the Darden Restaurant, Inc., Board of Directors and management regarding the direction of the company. Today, it was announced that Starboard had convinced enough investors to replace all 12 Darden directors. Although replacing an entire board of directors does happen, it usually occurs with smaller companies. This vote was unique as Darden is the largest full-service restaurant company in the U.S., with 2013 sales of $8.55 billion.

GoPro Unlocked Early

Video camera company GoPro went public on June 26, 2014. Since the IPO, the company's stock has almost tripled. Like most companies, GoPro had a lockup provision that prevented insiders from selling shares until 180 days after the IPO. However, founders Nicholas and Jill Woodman broke the lockup on 5.8 million shares today. The unlocked shares will be used to provide initial funding for a new charity. On news of the unlocking, shares in GoPro have dropped more than 12 percent on the day.

Female Board Nominees Increase

Since 2008, the number of female board nominees at S&P 500 companies has risen from 15 percent to 30 percent. For Russell 3000 companies, the number of female board nominees has also doubled over the same period, from 11 percent to 22 percent. Surprisingly, even with the large increase in female nominees, the number of female board members at S&P 500 companies has only risen from 16.3 percent to 18.7 percent. The increase in female board members is international as the number of female board members in Great Britain and Canada has increased as well.

Tesla's EFN

Few companies publicly announce EFN numbers. However, today Goldman Sachs announced that Tesla will likely need to raise at least $6 billion between 2017 and 2025. Tesla has currently raised $2.3 billion toward its $5 billion gigawatt plant in Nevada. This outlay, combined with other projects that the company has announced, indicate that Tesla will need to raise significant capital over the next several years.

Changing Zs

The Altman Z-score is designed to measure the financial strength (or lack thereof) for a company. But, as corporate financing decisions have changed, so has the Z-score. Historically, a Z-score less than 1.8 indicated possible financial distress, but Edward Altman argues that now negative Z-scores indicate financial difficulty. Currently, there are are six companies in the S&P 500 with negative Z-scores. Of course, the Z-score was designed to measure the financial strength of manufacturing companies. For non-manufacturing firms, the Double Z Prime score is more appropriate

Investing In An Efficient Market

If we assume that the stock market is efficient, where should you invest? In an efficient market, the best alternative is likely a passive index fund. For example, funds that track the S&P 500 exactly mimic the portfolio composition of the S&P 500. Stocks are bought or sold only when changes are made to the companies included in the S&P 500. As a result, there is no management decision on which stocks to buy or sell, so management costs are small and the return of the fund will almost exactly track the S&P 500. With an actively managed fund, the manager must outperform the market in order to offset the management fees, a daunting if not impossible task in an efficient market. Eugene Fama, the Nobel prize winning father of the efficient markets hypothesis, argues that a passive investment strategy is likely the best performer. And none other than famed investor Warren Buffett has directed that most of his wealth be invested in passive index funds after his death.