Despite the Securities and Exchange Commission's attempts to encourage more corporate disclosure, it's disturbing how little investors know about the companies they own. In some cases, even when key events are reported, the news is delayed or spun in the best possible light.
At this point, owning stock is a ``buyer beware'' investment.
Take the case of 700 acquisitions in three years. If you're not familiar with Tyco International Ltd., that figure might sound like a wild exaggeration.
But to manufacturers of plastic film and hangers, the Wall Street Journal's Feb. 4 scoop should come as no surprise.
The Journal reported last week that Tyco spent about $8 billion in the past three fiscal years on more than 700 acquisitions that the company never announced to the public, including its shareholders.
Tyco also made plenty of acquisitions that it did reveal. The difference is that Tyco isn't required by the SEC to report events that are not material to its results. To a behemoth like Tyco, deals valued at less than $100 million happen - well, obviously, nearly every day. Until last week, executives saw no reason to share the news of each tiny purchase, beyond reporting the net cash impact on the firm's quarterly financial statements.
Investors punished the company in the wake of the nondisclosure disclosure, with Tyco's shares dropping 19 percent in one day. In the midst of the Enron Corp. meltdown, Wall Street isn't in the mood for anything that smells like an accounting scandal. We know from experience that trying to keep up with Tyco's deal makers can be exhausting.
Consider the film side, where Tyco started with Armin Plastics of Jersey City, N.J., in 1979, added Carlisle Plastics Inc. of Phoenix in 1997, and then, in the past three years, put its acquisition team in overdrive.
In 2000, Tyco acquired:
* Mohawk Plastics Inc., a Riviera Beach, Fla., film and bag producer with sales of $19.5 million.
* Amcel Corp., a liner and cutlery maker in Watertown, Mass. The film operations posted sales of $47.5 million.
* North American Plastics Corp., a large maker of trash bags and film based in Aurora, Ill., with 1998 sales of $90 million.
Tyco kept up the pace last year, starting with a big piece of Pactiv Corp. - the polyethylene packaging business formerly owned by Mobil Chemical Co.
Last summer, in one week word leaked out that Tyco was buying World Class Films Corp. (with annual sales of $54 million) and the British plastics film operations of Macfarlane Group plc (sales of $44 million). Later in the year came news that Tyco's Sunbelt Manufacturing Inc. unit had purchased Rexam plc's PE film plant in Lakeville, Minn. The business had annual sales of $37 million.
Those are just the plastic film deals that we have written about. Because Tyco does not disclose deals that are not ``material'' to its results, we have no doubt that we've missed a few. Most of the time that we do get wind of a deal, we get the tip from the seller or a competitor, because Tyco officials rarely comment, which is their prerogative.
But the lack of disclosure of this incredible volume of ``small'' deals, in Tyco's case, does point to a problem. Shouldn't investors know the facts about the company's acquisition strategy, which apparently is a key to its growth plans?
Tyco's strategy seems quite sound. But its failure to share the details with investors is turning out to be a nightmare.