December 19, 2006
Selling Yourself Short . . .
Posted by Fred Tung

. . . ain't the hazard it used to be, at least not if you want to run Coca-Cola.  Coke just appointed Muhtar Kent as its president and COO, making him the No. 2 behind CEO Neville Isdell, as well as Isdell's likely successor.  Almost ten years have passed since Kent was fired from a senior position with Coca-Cola Amatil--a regional bottler based in Sydney--for shorting 100,000 of his own company's shares just hours before the company issued a serious profit warning that caused a drop of $2.5BB in the company's market cap, almost a 30% loss.  Kent had been managing director of the bottler's European division.  He apparently made about $324,000 from the sale.  After an investigation by the Austrialian Securities Commission, Kent coughed up the profits and another $30,000 to cover the costs of the investigation. 

This past October, Kent denied prior knowledge of the impending profit warning, calling it all a "bad coincidence."  The current official story from Coke is of the "dog ate my homework" variety:

Mr Kent was advised by his financial adviser to diversify his financial portfolio, which at the time consisted solely of KO stock and CCA stock options. . . . He accepted the proposal and left it to the financial adviser to execute. In doing so, he did not fully understand that it would involve a short sale or the elements of a short sale. As a result, he also did not know the specific timing of the transaction.

So he didn't know about the impending profit warning.   And he didn't know about the impending short.  Hmmm . . .  Sorta sounds like Martha Stewart's oral stop loss order.  I'm also not sure how short-selling diversifies his portfolio.  And why was he shorting his own company anyway??  When Kent was made president of Coca-Cola international in January, less than a year after rejoining Coca-Cola, it made Colin Barr's The Five Dumbest Things on Wall Street This Week at TheStreet.com.  Or you can watch the video.

In any event, CEO Isdell (declining to be interviewed) recently issued a written statement:  "Without doubt, Muhtar is a man of the highest integrity and deepest skills."

When Coke sneezes, Emory catches a cold.  So we tend to follow our local benefactor quite closely.

Business Ethics, Businesses of Note, Management, Securities, White Collar Crime | Bookmark

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Comments (1)

1. Posted by 2012 Timberland on December 4, 2011 @ 9:47 | Permalink

It's great to hear from you and see what you've been up to. In your blog I feel your enthusiasm for life. thank you.

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