Most expensive listed company is a fraud.

CEO Marc Benioff of

Go to this stockscreener here:…/

Scroll down to:


Show me stocks: 

Fill out as follows:

with a P/E ratio from to 300 to 300000

with a market capitalization from $ 15000 to $ 1500000 (the numbers you enter are in $ millions)

Then do the screen.

How many results do you get? And what does that tell you about the result(s)?

Okay, let me answer that right away: The only result is CRM, or as the company names itself:, which in my view should be renamed to

It tells you that CRM is by far the most expensive large cap company on Wall Street with a market cap above 15 billion dollars. A feat that you can figure out yourself if you know that CRM has a current market cap of 20 billion dollars for projected sales of 2.17 billion dollars in fiscal 2012 and a trailing Price/Earnings ratio (PE) of 326.  Investors are currently willing to pay 10 times the forecasted revenues for this year and 326 times the profit of last year.

The reason is that they are led to believe that CRM is growing like hell, both in revenues and profits. They believe that this year’s PE will be 82. Nothing could be farther from the truth as they are being defrauded and misled by Salesforce’s management, with the help of some popular Wall Street analysts like Jim Cramer and CRM underwriter Morgan Stanley.

Let me explain.

Even Yahoo doesn’t get it. They are mixing GAAP EPS with NON GAAP EPS. The trailing PE of 326 is based on GAAP EPS (47 cents). This is correct, as it should be done, no complaints there.…

However, the forward (estimated) PE of 82 is based on NON GAAP EPS. GAAP stands for Generally Accepted Accounting Principles. This falsely implies that true EPS (= GAAP EPS) is wildly growing, while nothing is farther from the truth. GAAP EPS is plummeting , in fact it is projected to slash to 1 to 3 cents LOSS. Repeat: It is projected to slash to 1 to 3 cents LOSS.

That forward PE should not read 82, but N/A. Non Applicable, as there will be no E (earnings)  to measure the price against.   Or maybe it could read 15,000 if they manage to beat their own estimate by 3 pennies and press out a 1 cent profit. Or we could introduce the term Price/Loss ratio. Which would then –  with 2 cents loss – be around  7000. I’m not sure if that figure needs a minus (-) as prefix.

Anyway, Yahoo is mixing apples with oranges, giving a completely false picture. Opposite of the truth. Pretending earnings and earnings growth that is completely absent! But uninformed investors base their decisions on these figures and press releases that are cranked out. The source of this false information is the company (Salesforce) itself. And of course they do nothing to correct it. On the contrary, they make every effort to hold up the lie.

Hence I grow increasingly amazed that even the financial websites and analysts do not see, let alone report, on this disturbing imbalance in presentation and make believe by Salesforce. This should be forbidden! It’s pure embezzlement.

The more you let it sink, the more you realize that CRM is nothing short of a scam. They are basically misrepresenting their numbers and it is inevitable that investors will see that with coming quarters when they have to report losses. When the big drops are coming, investors could (and probably will) file class action suits as with many Chinese and other scam stocks. Don’t be surprised to see in the list of “new cases” here:

You see, this is nothing less than a bold faced lie:

“ Inc. (CRM), the largest supplier of online customer-management software, rose 8 percent after the company forecast fiscal second-quarter sales and profit that topped estimates.

Excluding some costs, earnings will be 29 cents to 30 cents a share, with sales of $526 million to $528 million, San Francisco-based Salesforce said yesterday in a statement. Analysts in a Bloomberg survey had estimated profit of 27 cents and revenue of $505.2 million for the period ending in July.”

My comment: Excluding some costs? What is “some”? The word suggest “little”? And what are those costs? The truth is those costs completely wipe out the estimated profit of 29 cents. There will be NO profits next quarter and there will be a loss of 1 to 3 cents for the whole year. AND THEY KNOW IT! So that makes it willfullly misleading.

Where the forecast for next quarter is a lie, the actual presentation of the last quarter and the conference call is even more a lie:

For the quarter ended April 30, posted a profit of $530,000, or less than a penny a share, down from $17.7 million, or 13 cents a share, a year earlier. Excluding items such as stock-based compensation, earnings fell to 28 cents from 30 cents.

What they fail to emphasize is that the new earnings of 28 cents are based on Non GAAP accounting  instead of GAAP, where the old earnings of 30 cents were based on GAAP.  GAAP stands for Generally Accepted Accounting Principles, which are required by law for financial reporting to the SEC (Security Exchange Commission) . The thing is that they changed from GAAP to Non GAAP in this quarter. Apologists might argue that they DO mention this, but it is presented as a non issue, therefore essentially hidden. Moreover the results are clearly presented as a major improvement over previous results, while in fact they are a major detoriation. The publication of the actual SEC filing , in which the true GAAP results are mandatory,  is usually delayed by a week, and it is anticipated that in this hyped press release the average investor doesn’t bother to study the fine print. And hyped it was!  Just look at all the superlatives CEO Marc Benioff uses in his conference call:

I have emphasized the euphemisms in CAPITALS:

Thanks, David. Our first quarter was indeed a FANTASTIC kickoff to fiscal year 2012, continuing the MOMENTUM we experienced in fiscal year 2011. And I’m THRILLED to report that just one quarter into our fiscal year, we have crossed the threshold of the $2 billion annual revenue run rate. (to say “we have crossed” is a lie, as it is just a forecast)As you can see from the revenue, we are absolutely DELIGHTED now to be at a new level of performance of our company, and our revenue growth rate is accelerating.

Let me begin by briefly reviewing some of our financial highlights of the quarter. Revenue of $504 million was 34% from the year-ago quarter. Deferred revenue also accelerated to $915 million, a 38% year-over-year increase. INCREDIBLE. And we also delivered $140 million of operating cash flow. And over the past 12 months, we’ve generated roughly $460 million in operating cash, an increase of more than 40% from a year-ago period.

Finally, David, we are PLEASED to be able to raise revenue guidance to $2.15 billion to $2.17 billion, a SIGNIFICANT (?) increase once again (?) to our revenue guidance for fiscal year 2012, and our second increase this year, the first one after we acquired Radian6.

My comment: If Benioff is so pleased, delighted and thrilled, why did he sell so many shares at lower levels in december 2010? More than 500,000.00 shares in that month alone  to be exact. How much money is that?

And why do his fellow directors keep selling shares like crazy even after this “monster quarter”, as  Benioff called it?

See insider transactions at Yahoo to get a grip on the massive unloading of shares by management.

If you still need more insight in the preconceived conjob that Benioff pulled on the investor community, then realize that right after this conference call he made a pre-arranged appearance on the show of CNBC’s Jim Cramer, who openly calls Benioff  “my friend”. See how the pump job by Cramer puts a big satisfied nodding grin on Benioff’s face:

To me this is a display of greedy deceiving Wall Street at its finest!

Cramer: “I love it! Congratulations on a MONSTER quarter!”

Benioff: “Yes, it WAS a MONSTER quarter! Thanks so much and feel better!”

I am still trying to figure out why a guy that treats his audience as viewers of Sesame Street , including all the funny sounds, and told them that “Bear Stearns is fine”, is taken seriously:

Although it may be a coincidence that Benioff shares the last syllable of his name with Bernie Madoff, he sure masters the skills of misrepresentation, investor fraud, lying, whatever you want to  call it, but that’s what it is. It is immoral if not illegal and investors buying on this forecast and “guidance” have good legal grounds to file complaints once they lose their money. Fraud on Demand.

This article by Todd Sullivan documents the deceit perfectly:

The more I look into (CRM)…..the more irritated I become….this is a follow up to last week’s post.

Here is the thing. I started reading the annual reports and proxy statements and I keep getting stuck on the removal of “stock compensation” from GAAP earnings so the company can report positive EPS under “non-GAAP” earnings. This was removed in FY 2011 as GAAP EPS fell 25%, the change enabled them to say “non-GAAP” EPS fell only 7%. In FY 2012 they will lose money under GAAP earnings. This means EPS has actually fallen from $.63 to $.47 to ($.02) since FY 2010. Meanwhile, “non-gaap” or “earnings without all the expenses in them” will still fall, but they will at least show a “pretend” profit.

Now let’s have a look at the actual SEC Filing, published days after,  disclosing the real quarterly EPS, or GAAP EPS, which is the only EPS that matters, or should matter to the shareholder. The real EPS, as opposed to the widely publicized EPS “beat” of 28 cents.

They are nowhere near the Non GAAP fake “pretend” earnings of 28 cents. They are EXACTLY : ………….ZERO, ZIP, NADA! Opposed to $ 0.14 for the quarter a year ago.  A decline of 14 cents compared to the EPS a year ago, and a whopping decline of 30 cents compared to the EPS of the previous quarter.

Look for yourself:…

Scroll down to page 4:

Basic net income per share attributable to common shareholders = $0.00
Diluted net income per share attributable to common shareholders = $0.00

That’s right! $0.00

And by the way: common shareholders = YOU!

Does anyone truly believe the stock would act the way it did if they had reported the truth of zero net profits? Instead of their fake 28 cents in their press releases and headlines?

So what happened to the 28 cents? Well, they were eaten up by “some costs”, namely “stock compensation for employees and management”.

As Todd Sullivan puts it in his previously mentioned article:

So, they know it is an expense, it is just when they want to report earnings, they want to pretend it isn’t.

Now, what have the folks done with these shares? Are they holding them? Are they increasing their holdings in a bet on the future of the company? No, they are dumping them as fast as they get them. How does it affect you?

Todd had already put the finger on the sore spot in an earlier article:

Putting Lipstick on a Pig

What (CRM) is doing here ought to be illegal. They are reporting GAAP EPS but headlining “non-GAAP” eps that excludes “stock based compensation.”

Here is the only line you need to know from CRM’s earnings release today “For the full fiscal year 2012, the company expects to report a GAAP net loss per share of approximately ($0.03) to ($0.01).” 

So lets put the “accelerating growth” of into perspective:


2007 $ 0.00
2008 $ 0.15
2009 $ 0.35
2010 $ 0.63
2011 $ 0.47
2012 (forecast) $ – 0.02

Isn’t that great “accelerating growth”? Or is it accelerating decline?

Isn’t that creating shareholder value? Or is it detoriating shareholder value?

Some Salesforce fans argue that the revenue growth should be “monetized” at some far away point in the future. But why is that growth not monetized now? Why is the only monetizing that is going on, aimed at enriching the owners of the company at the cost of its investors?

I have more bad news coming down the pipe for those investors, most of whom don’t know it yet. It’s called a “secondary offering”, meaning that insiders are going to sell more shares at lower prices than the current stock price. Why don’t they know it yet? Because it wasn’t widely published yet. It was only filed with the SEC but not put on the wires.

Here is the SEC filing:

It’s right there on page 1:

436,137 shares at a maximum proposed price of $ 132.49

It’s just more evidence of the deceiving nature of a management that is interested in lining their own pockets only. They knew about this secondary before earnings, but they waited to trump up their false earnings (zero EPS pretending it’s 28 cents) in pre-arranged media hypes with CNBC Cramer etc, so they could raise the offering price.

It’s all carefully timed and nothing short of a scam. If longs that bought on “great earnings” are not disgusted now, they are truly bigger idiots than I thought.

This is a classic case of ignorant investors  jumping the momentum bandwagon without knowing why, except because they are being told by others.

There is still an army of insiders eager to unload at current prices before the crash. They all know that the markets will get wind of CRM’s accounting shenanigans soon.

Don’t be surprised if the upcoming secondary offering cannot be executed at the proposed maximum price of 132.49.

If justice is done, it will fall far below that price before these 436,137 insider shares can be sold.
Never ever in my investment career have I seen a price go up on the announcement of a secondary offering for which the price has not been set yet, especially not if the proceeds do not go the company, but directly to the insiders. But hey, this could be the first time 🙂 because hardly ever have I seen a more deceiving company than  What I have only seen is stocks plunging below that offering price as soon as the announcement hits the wires. But maybe that’s the reason? That it hasn’t hit the wires yet? After all, why pay more for a stock that insiders will soon be selling on the open market at a much lower price?

If this dilution is not yet enough,  CRM has more in store for its fans. EPS losses for 2012 and 2013, and then even more huge dilution:

Todd Sullivan: We should also talk about the Convertible notes the company issued. Why? Well in 2015 shareholders will get another 6.7million shares dumped on them as these bonds convert to shares:“In January 2010, the Company issued at par value $575.0 million of 0.75% convertible senior notes due January 15, 2015 (the “Notes”). Interest is payable semi-annually in arrears on January 15 and July 15 of each year, commencing July 15, 2010.”

Here’s another bullseye analysis from Nicholas Southwick Lewis:

CRM — CRM shares are in a bubble, much like LNKD shares. The stock is trading for an amazing P/E multiple well over 300X earnings, while the business has yet to prove itself on the profit and loss side of things. CRM is a great company and idea, but the stock is simply not worth half of its current market cap. Shorting CRM seems like a no-brainer after the company revealed that they will be losing money over the next year or two on a GAAP basis (which is what analysts should use).

Like AMZN, if analysts back out the rising accounts payable and increasing short term liabilities on CRM’s cash flow statement, they will see that this business is not generating very much at all in the way of free cash flow and the company is now operating at a loss on earnings. CRM looks to be the perfect short to compliment a long position in an AAPL or GOOG at these prices/valuations.

Aside from the ridiculous bubble valuation, there is simply too much (yet hidden) ugliness to be discovered soon. The secondary offering (not yet published) at a maximum proposed price of 132.49 is still peanuts compared to the fact that true (GAAP) EPS will be negative for the next two years. It is not for nothing that all insiders want to cash in as fast as they can at current prices, and even much lower. Once the longs wake up to the fact that they have been duped and deceived, the punishment on the stock will be relentless. I can hardly imagine that this will take very much longer.

But I sincerely state they should also be punished legally for their latest scam on this “monster quarter” earnings report, during which GAAP profits were nowhere near the published 28 cents, but the nice round figure of NIL, ZERO, NADA.

They ought to be delisted and put on the pink sheets.  I am dead serious when I say this.

Josh Brown recently wrote an article titled:

Invasion of the Chinese Reverse Mergers: “We Are Under Attack,”

“Let’s be realistic about what this is all about: This is about gaining a foothold on U.S. exchanges, doing a secondary, raising a boatload of money, insiders sell, and then all of a sudden ‘oops’ we may have misstated earnings.”

Well, America, look in the mirror! It’s not just the Chinese!

Most of these  halted or delisted Chinese stocks, like RINO,  CELM, CBEH, PUDA, etc, collapsed after a report was published on them by an anonymous author, often claiming “fear of  retaliation by the company”. Well, I don’t need to be anonymous because I stand by every word I wrote and I don’t fear deceiving crooks  that are only out for their own wallets with Enron like figures.


Wim Dankbaar

The king of cloud computing


Over Wim Dankbaar

Dit bericht werd geplaatst in Uncategorized. Bookmark de permalink .

2 reacties op Most expensive listed company is a fraud.

  1. misterjhpost zegt:

    Good gedaan, meneer.
    (caveat: my dutch is not as good as your english)

    Op did momment CRM is lager -US$6.85 and 2.6 milloon shares traded. Somebody is still buying. Surely not all of tehm are covering their shorts.

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