80th Edition – August 16, 2020
Fraud is not a trade secret. I refuse to allow bullying, intimidation, and threat of legal action to take away my First Amendment right to speak out against wrongdoing.Tyler Schultz – Theranos Whistleblower
1. The Theranos Story Continues
Imagine growing up idolizing a man who is your grandfather who eventually tells you as a young adult, “I don’t believe you,” and instead, blindly puts his faith in a lie.
Former Secretary of State, George Shultz, did not use those exact words, but he implied them when his whistleblower grandson tried to tell him the truth about Theranos.
Thicker Than Water was just released by Audible this month and already has nearly 2,200 reviews with an average 4.8 rating. Tyler Shultz tells his full story in his own words about the stressful months when his conscience guided him to expose the truth about Theranos. Silence was never an option.
I nearly had to pull over while listening to a heartfelt letter he read to his grandfather expressing his disappointment in him who eventually stepped away from the Theranos Board of Directors. The short book – less than 4 hours – is honest, authentic, bold, and sad. You may need a prayer meeting after some of the stories you hear about Sonny and Elizabeth.
I’d give the audio 10 stars if I could.
2. Tyler’s Story Reminds Me of Cynthia Cooper’s
Extraordinary Circumstances is the most riveting book I’ve ever read on accounting fraud and its detection by an internal auditor. Cynthia Cooper was the whistleblower who exposed the financial reporting problems at WorldCom.
In a presentation she gave which can be viewed on C-Span, Cynthia mentions the book, Whistleblowers: Broken Lives and Organizational Power by Fred Alford. While Tyler and Cynthia have moved on with their lives, Alford reveals about half the people who blow the whistle lose their jobs and run the risk of never working in their fields again. For instance, Alford states that nuclear engineers who were once at the top of their fields have become sales reps.
Here’s trusting we all follow in Tyler’s and Cynthia’s footsteps should we encounter wrongdoing in the workplace.
3. Juror #8 Couldn’t Remain Silent Either
If you search ’12 Angry Men Leadership Training’ you’ll find too many results even though Google tells me there are nearly 27 million links – I don’t buy it.
12 Angry Men is a drama originally developed for television about 12 male jurors who have to decide if a teen defendant murdered his father. All but one juror originally casts a guilty verdict.
I will not give away the ending if you have not seen the movie version starring Henry Fonda, but several bloggers believe the eighth juror possessed great leadership skills because of his gift of persuasion. I have a differing point of view. Like Tyler Shultz, this juror followed his conscience and spoke the truth.
Given the civil unrest we’ve witnessed over the past few weeks, this story of our flawed human nature and prejudices is worth watching (or revisiting).
4. Acquisition Number 64
According to Crunchbase, Salesforce has acquired 63 companies, and one more could be added to that total – Datadog.
According to the rumor, this would be an all-stock deal. Why? Who benefits? It’s a great answer – everyone. That includes the buyer, the seller, and shareholders of both parties.
Let’s say RedCo is valued at $10 million and earns $1 million for a PE ratio of 10x. With 1 million shares outstanding, it has an EPS of $1.00 per share.
BlueCo also earns $1 million on its 1 million shares, but they are valued at $20 million or a PE ratio of 20x. Similarly, its EPS is also $1.00 per share.
BlueCo can acquire RedCo for 700,000 shares of its stock for a price of $14 million (700,000 x $20). The merged company now has $2 million in earnings with 1.7 million shares outstanding for a new EPS of $1.17. With an original PE ration of 20x, the new price should be priced at $23.52.
Don’t forget, this is even before synergy savings are realized during the first two years of a merger. It goes without saying that the non-cash math on all-stock deals is fascinating.
5. Who the Heck are Jennifer Rock and Michael Voss?
I looked it up, and it looks like good holiday reading. Jennifer and Michael have another book entitled, B.S., Incorporated and that one looks tempting too.
Podcast – In addition to our discussion with the hosts of the Chad and Cheese podcast, we were thrilled to visit with the author of Boyd: The Fighter Pilot Who Changed the Art of War.
Thank You For Reading. Thank you for making this a successful newsletter.
If you like the content above and the posts at CFO Bookshelf, may I ask a favor? Feel free to share this with other readers along with commenting on your favorite blog posts on LinkedIn, Twitter, or Facebook.
Always be learning.