Washington Redskins owner Dan Snyder has come up with a trick play -- call it the stock market equivalent of a double reverse -- to try to end the long losing streak by the stock of Snyder Communications Inc.
Shares of the multi-national marketing and advertising agency that made Snyder rich enough to buy the team have been as weak as last year's Redskin defense.
In about 18 months Snyder Communications stock has slipped to less than $20 a share from $45, prompting considerable scrambling by the owner who vowed he will not tolerate a losing football team.
Snyder's big play is more complicated than anything announcer John Madden has ever sketched on a Telestrator, filling hundreds of pages of documents filed with the Securities and Exchange Commission. As Madden might say, this one develops slowly, with a lot of ball handling in the backfield, but it's not hard to follow when you see it in slow motion.
It starts with a handoff in which Snyder Communications spun off its medical marketing division into a new company called Ventive Health Inc., whose shares started trading on the Nasdaq Stock Market Sept. 23.
Then comes a second handoff, with Snyder Communications giving its shareholders another new stock called Circle.com that also will trade on Nasdaq.
When the razzle-dazzle restructuring is done, a stockholder who owned 100 shares of Snyder will also own 33 shares of Ventive and 25 shares of Circle.com.
All investors are receiving is more paper, however, because they will still be stockholders in the very same business they owned when Ventive and Circle.com were part of Snyder Communications.
But if the double handoff works the way it is supposed to -- and Wall Street's play-by-play commentators think it will -- the trio of stocks will be worth more than the Snyder stock was before.
Slicing the Snyder pie will yield three pieces whose value could to add up to 50 percent more than the whole pie was worth, said Steven Bergman, director of research for Horizon Research Group in New York.
The idea that the sum of the parts is greater than the whole defies the rules of mathematics but not the rules of Wall Street, at least not the way the stock market game is being played this season.
The Redskins may be short on talent, but Snyder's investment bankers are All-Pro, recruited with the help of his savvy partners -- real estate and publishing magnate Mortimer Zuckerman and numbers man Fred Drasner.
Wall Street has helped Snyder leverage the already successful marketing business he started with his sister Michele. Selling stock of Snyder Communications to the public in three offerings generated the millions required to buy Snyder the owner's box in the stadium formerly known as Jack Kent Cooke Stadium in the town formerly known as Raljon. And using the shares, Snyder Communications bought an array of other companies, building a far bigger business than could have been done without publicly traded stock.
Unfortunately for shareholders, Snyder stock peaked around the time of the third public offering in May 1998. Investors who bought stock at that time paid $42 for shares that soon slipped into the thirties, then into the twenties and the teens.
The price of the stock probably has not been helped by Snyder's purchase of the Redskins. The team is viewed as a potential distraction that could keep the highly regarded young entrepreneur from devoting full attention to his day job.
But Dan Snyder clearly has been paying attention, and by the time the Redskins began spring camp this year, he had embarked on a plan to "enhance shareholder value." Since Dan and Michele Snyder, Zuckerman and Drasner are the biggest shareholders, they will be "enhanced" the most.
The strategy for getting the stock price up includes buying back shares -- 5.4 million of them acquired so far at a cost of about $100 million. Chief financial officer Clay Perfall said the board authorized spending up to $150 million on the buyback and that there is plenty of cash to complete those purchases.
Buying back your own stock to boost the price is the financial equivalent of running the ball up the middle. Three yards and a cloud of dust don't guarantee touchdowns, so Snyder came up with a more sophisticated play based on his investment bankers' scouting reports on what will work on Wall Street.
The trouble with Snyder Communications, they told him, is that nobody is quite sure what it is -- advertising agency, outsourced marketing machine or Internet site builder. Internet analysts can put a price tag on Circle.com. Health care specialists can evaluate Ventive. But when those businesses are under the same roof as one of the nation's biggest advertising and direct marketing agencies, calculating the value gets confusing.
That identity crisis is shared by all diversified companies, which is why corporate conglomerates are out of favor with investors, and many of them have been split up.
To give Wall Street what it wants, Snyder is breaking up into two companies, but with three separate stocks -- Snyder, Ventive and Circle.com.
When the accountants look back at last year's operations and reconstruct the books as if the split-up had already occurred, Perfall said this is what they got: The Internet operations of Circle.com generated about $14 million in revenue and basically broke even. Ventive Health took in $181 million and generated operating profits of $42 million. The rest of Snyder had revenues of $480 million and $98 million in operating profits.
The way the business is being divided is what makes Snyder's restructuring so complicated. Ventive becomes a separate company, while Circle.com remains part of Snyder but with its own stock.
Snyder Communications still owns 25 percent of Ventive -- and Dan Snyder and the other insiders are still its biggest shareholders. But the rest of the stock is in the hands of Snyder Communications' other shareholders.
Prudential Vector Health analyst Amy Brodsk issued a "strong buy" recommendation on the stock last week, predicting the shares, which closed Friday at $9.03, could hit $18 within a year. She called Ventive a "leading pure-play contract sales organization that works with pharmaceutical companies to help them drive product sales, with an impressive list of clients and a strong management team."
Circle.com, Snyder's Internet division, is not being spun off as a separate company, but is getting its own stock. It is called a "tracking stock" because it reflects the value of Circle.com as a stand-alone company even though it is still part of Snyder.
Creation of a tracking stock requires the approval of shareholders, so Snyder has scheduled a vote on the plan for Oct. 22.
Spinoff specialist Bergman thinks that as an Internet investment, Circle.com could do well, even though tracking stocks have a spotty history. (CarMax, for example, has been a disaster, dropping to $3.18 a share Friday from $20.)
"On the other hand," Bergman said, "the financial markets all seem to have their seasons, and lately the tracking stocks seem to be working rather well."
Despite the endorsement of such disinterested observers and accolades from analysts who work for investment firms that are working for Snyder and its spinoffs, the reverse play has so far produced a modest few yards for Snyder stock.
Snyder shares hit an all-time low of $14.05 a share on Sept. 21 and closed Friday at $14.06. But since stockholders now also have one-third of a share of Ventive Health, for each share of Snyder, the total value of their Snyder-related holdings is about $17.25 a share.
The Circle.com tracking stock will put a couple more dollars in the pot, but that upcoming windfall has yet to trigger any buying frenzy for Snyder shares.
That's the way it is with trick plays. Sometimes they work and you get a big gain. Sometimes you get sacked. At least they're fun to watch.