Some "Cold Hard Truth"

It is hard to believe that there is anything else to write about our man, Kevin O’Leary. But credit is due to the Globe and Mail’s John Allemang, who used the guise of KO’s book launch to explore where The Dragon has actually arrived in life, rather than the huckster schtick that has recently come to define it.

How appropriate that the Globe’s business section writers appear to have washed their hands of the KO topic, leaving a skilled and insightful TV critic to review the Cold Hard Truth bio; for KO is television’s creation, after all. The “tycoon” business label belies what’s actually at the core these days, as the Globe pointed out:

Kevin O’Leary is selling a dream to his business-show followers and to the investors who have handed over their money to O’Leary Funds, a venture that has leveraged his fame and grown from zero to $1.5-billion in 30 months. But something is missing at the core of his legendary life.

I didn’t think it was my place to mention KO’s separation when I first heard about it a few months ago; this space may be critical at times, but we don’t broadcast breakups or delight in the personal misfortune of others. That said, one must admit that it was a polite turn of phrase for Mr. Allemang to discuss how KO had “lost” his wife — as though she was a charm that had once been attached to a 24 carat gold bracelet. In normal parlance, when your spouse passes, people refer to it as a “loss”. Or perhaps a child might lose a dog, when, you know, they never find it again. But if your wife of 21 years can’t take the “Decade of Daddy” another moment, but is easily found in Toronto’s Rosedale, is it appropriate to pretend that a marriage accident happened, and the wife has somehow gone missing?

Not much of a Cold Hard Truth.

Despite all of KO’s live TV training, Mr. Allemang still got his subject to find some new ways to spin the old horrow stories, as this Globe excerpt demonstrates:

He has talked about the storage business he built up, about how miserable he was when he was paid $5-million not to work in a non-compete after he sold an educational-software business called The Learning Company to Mattel for $3.5-billion in 1999. “I went to every beach around the world, I saw them all, I partied everywhere, I was bored out of my mind.”

According to The New York Times, the $5 million non-compete is a new “fact” in the O’Leary CV. Our readers already know about the US$5.2 million Mr. O’Leary received when he left Mattel in late 1999, right before The Learning Company acquisition cost Mattel US$3.5B in writedowns (see prior post “O’Leary Fund promises to share the wealth and wisdom” May 8-08).

According to the NYT, as excerpted below, that US$5 million KO referred to in his Globe interview was actually paid as severance (right after the once profitable Mattel lost US$100 million in a single financial quarter), not for a non-compete attached to the original sale of TLC to Mattel (see prior post “What is the origin of O’Leary’s “billionaire” moniker?” Jan 24-10):

Softkey also acquired the Minnesota Educational Computing Corporation, known as MECC, Compton’s New Media and Broderbund Software Inc., and pursued a strategy of cutting prices and increasing distribution. For a time this plan resulted in increased revenue, but the new ownership also resulted in an exodus of talent, many no doubt dismayed by Mr. O’Leary’s oft-quoted remark that creating software titles was no different from blending new flavors of cat food.

Learning’s revenue growth had already slowed before Mattel closed its acquisition. And in August, Mr. Perik and Mr. O’Leary sold a majority of their Mattel stock for $5.9 million each. They left the company in November, after Learning reported a third-quarter loss of $100 million; They each received $5.2 million in severance pay.

How’s that for a Cold Hard Truth?

Mr. Allemang refers to KO’s “anonymous Bay Street critics, who call him a caricature of greedy capitalism and a media-fixated self-promoter”, as though not a single question has been raised on the record since KO crashed onto the scene circa 2003 with his modest personal investment in TSX-listed EnGlobe (one of our Fund II portfolio companies). And here I’d thought that we’d beaten the topic to death for almost four years — certainly long before the CB, the Globe, Time Magazine and Variety breathed a word. I think our first actual post about the brewing KO phenomenon dates back to January 22, 2008 (see prior post “Just sit tight – unless you’ve got the chance to raise capital“), when I saw him crow about now (then) being a great time to buy stocks…even though his broker was advising against it:

If you were listening to Kevin “Simon” O’Leary on BNN TV after the close yesterday (CNBC was in reruns for the U.S. holiday so I had little choice), you’d think now was the time to buy. Simon relayed a story about him calling his stockbroker at 3:55 p.m. yesterday with a shopping list of stocks. “We’re not buying now!” was his brokers reply; but good old Simon knows better. Avner Mandelbaum might be worried about this being month one of a three year correction, but not Simon.

The next morning, the market fell another 455 points on the open. The Dow Jones proceeded to drop 29.6% during the following 11 months.

Now there’s a real Cold Hard Truth.

Of course, by KO’s own definition, Mr. Allemang’s piece concludes that he’s already succeeded. By any calculation, his record as a fundraiser is remarkable (see prior post “Kevin O’Leary is a rock star” June 30-08). It might be a Cold Hard Truth that some O’Leary Fund investors are being paid promised distributions out of their own investment capital and not profits generated by KO’s stock picks (see prior post “O’Leary: ‘We have never dipped into the principal’” June 7-11).

But that’s beside the point, I suppose, if all that matters in life is the destination.

MRM
(this post, like all Blogs, is an Opinion Piece)