When it comes to marketing at least, Kevin O'Leary knows what he's doing

News report: Kevin O’Leary leaves CBC, joins CTV

I know that you are probably expecting me to be critical of CTV’s decision to take Kevin O’Leary back, five years after he quit BNN to join Amanda Lang and the CBC. Quite frankly, I just can’t bring myself to do it. It wouldn’t be right, to be honest, as CTV is just displaying the natural tendency that we all have to let a talented marketer convince us to do something that might be against our better judgment. What Mr. O’Leary has taught Canada over the past decade isn’t about business or investing, but how to market yourself to the world in the face of tough odds, and that deserves acknowledgement and applause.

Hat tip. Clap.

Just imagine the challenge that Mr. O’Leary had to keep the “Decade of Daddy” rolling along to his financial satisfaction. The CBC recently lost the TV rights to NHL hockey and is undergoing massive budget cuts as a result. This left little in the kitty to pay KO for his contribution to Ms. Lang’s CBC show; he’s no longer doing these TV gigs solely to sell mutual funds or mortgages, since we know that at least two of Mr. O’Leary’s TV-generated start-ups are not working out as planned (see prior posts “RRSP season unkind to Kevin O’Leary’s fundraising hopes” June 5-13 and “Kevin O’Leary closes failed mortgage startup” Apr 14-14). The lack of budget at CBC put Mr. O’Leary’s agent in a tough spot. His client “gots to get paid.” There aren’t that many doors to knock on in Canada, and he was left to go back to the parent company of BNN (a specialty channel I love), which launched Mr. O’Leary on the unsuspecting Canadian public circa 2005, to see if they’d forgive and forget.

That’s where the salesmanship comes in.

According to CTV’s parent, Bell Media, Mr. O’Leary is a “financial expert.” Now, according to a lot of other media outlets (see The New York Times, Canadian Business Magazine or the ROB Magazine), and not just we backwater bloggers (see prior representative post “Highlights of our Kevin O’Leary Blog Posts” Sept. 27-12), this is, shall we say, debatable.

In its press release, CTV touted Mr. O’Leary’s last real corporate role as evidence of his “strong business acumen”:

Previously, O’Leary founded and was president of SoftKey (later called The Learning Company), a global educational software company, and negotiated its $4 billion acquisition by Mattel.

If you’ve ever seen Mr. O’Leary talk about his time with TLC on television, you likely heard him bark something like “when I sold my company for $4 billion dollars” in the direction of an entrepreneur on Dragon’s Den who thought he knew better than KO himself. We know from the NYT that Mr. O’Leary earned all of about $7 million after tax from that TLC-Mattel transaction, half of which came in the form of severance. Whatever. $7 million is a still lot of money, CTV might say, even if it isn’t $4 billion (see prior post “What is the origin of O’Leary’s “billionaire” moniker?” Jan. 24-10).

The TLC-Mattel story is an odd place to go if CTV is using Mr. O’Leary’s negotiation of the Mattel deal as proof of his “business acumen”. Why, you ask? Because a massive shareholder lawsuit flowed from the same O’Leary negotiation that CTV cites. Mattel shareholders wrote off the entire $4 billion purchase price barely a year after their company acquired TLC, and Mr. O’Leary, among others, was sued in the United States District Court of California for “stock fraud”, amoung other market non-nos:

…making “false statements”, “stock fraud”, “artificial inflation in Mattel’s stock price”, trading “while in possession of and using material non-public information”, “improper revenue recognition”, and financial statement “manipulation”….

Before the case went to trial, Mr. O’Leary, Mattel and his fellow defendants paid US$122 million in 2003 to settle the fraud accusations. Although he never talks about it publicly, and it isn’t mentioned in any of the O’Leary Funds disclosure documents on SEDAR, the producers at CBC’s Redemption Inc. felt the settlement had to be disclosed on that shows’ website as part of Mr. O’Leary’s bio circa 2012.

That was two years ago, which is a lifetime in the television age. And it’s not just Canadian television producers who are susceptible to the art of salesmanship.

If you ever watch CNBC, you’ll have noticed that Mr. O’Leary has become a quasi-regular market commentator of late; when he does double-enders, O’Leary Funds logos float behind his head. No chance is missed to market his fund company, despite its performance (see representative prior post “Shed a tear for O’Leary’s Yield Advantaged Convertible Debenture IPO investors” Mar 24-13). CNBC sees KO on Shark Tank, hears about the $4 billion sale to Mattel, and assumes he’s a business guru.

Which leads to further marketing opportunities. On July 22nd, the CNBC show anchor asked KO what he was doing with “your funds” based upon Mr. O’Leary’s belief that interest rates would be rising sooner than expected. Mr. O’Leary responded:

“I have shortened the duration in my funds” “to 36 months”.

According to the current disclosure documents for O’Leary Funds on SEDAR, such as those dated June 18, 2014, Stanton Asset Management Inc. is the Portfolio Advisor to the O’Leary Funds and “manages the investment portfolio of each of the Funds.” To my knowledge, Mr. O’Leary has no accreditation to actively manage investment capital in any Province in Canada.

As such, there is no way that he is in a position to shorten the duration of the funds being managed by Stanton. Mr. O’Leary is not employed by Stanton, and is never referred to as member of the team performing the Portfolio Advisor role for O’Leary Funds. Quite the contrary, as one recent Prospectus discloses:

“The Portfolio Advisor has also engaged O’Leary to provide consulting services to the Portfolio Advisor in respect of the Portfolio. The Portfolio Advisor, together with O’Leary, will implement the investment strategy of the Portfolio Trust. O’Leary will identify markets and investment opportunities but will not recommend the purchase or sale of specific securities by the Portfolio Trust. The Portfolio Advisor is ultimately responsible for the investment decisions of the Portfolio Trust and will review opportunities identified by O’Leary and make the investment decisions on behalf of the Portfolio Trust.”

You got that?

According to the requirements of Canadian Securities Regulators, Mr. O’Leary can give advice about duration strategy, but Stanton’s team is responsible for the investment decisions of the various funds. That’s not how Mr. O’Leary depicted it on CNBC last month, when he advised retail investors across Canada and the USA that “I have shortened the duration” of “my” bond investments, but those are just petty regulatory details.

For a talented marketer, you just keep on pitching. As Mr. O’Leary has proven, if you keep at it long and hard enough, someone will buy, no matter what.

Every entrepreneur should take heart.

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