Monday, January 08, 2007


The WSJ reports that in a move that could complicate one of the US Air Force's most important and politically sensitive weapons programs, Northrop Grumman (NOC) is threatening to shun a competition against Boeing (BA) for aerial-refueling planes b/c of concerns over the bidding rules. Northrop officials have hinted for months about quitting the race for the decades-long program, valued at $100bn or more, if they don't think the co has a fair shot of winning. Late last week, Northrop officially warned the Air Force in writing that it may not bid. Northrop officials believe draft bidding guidelines effectively favor Boeing's less-expensive refueling plane b/c they don't lay out detailed criteria for how the Air Force will evaluate extra capabilities, such as cargo and passenger capacity, that Northrop's proposed airplane offers.

“Heard on the Street” column out saying that for many investors in Escala Group (ESCL), the only thing that stands between the co and its life as a forgotten penny stock: its listing on the Nasdaq. The continued listings of firms that chronically miss securities-filing deadlines and lose scores of execs amid fraud and accounting investigations confound some investors and analysts who say the exchanges go light on certain co’s for business's sake. "The exchanges are definitely easy on co’s and don't boot them off when they really should," says Mark Grothe, of Glass Lewis & Co. "The listings are a source of income for them, and they don't want to miss out on those listing fees." As a result, investors are left to trade on potentially specious financial information, and analysts can't value the stocks b/c of the lack of reliable earnings data. That leads to irregular trading volumes and erratic price swings that can whipsaw investors. In recent weeks, eyebrows have been rising over Escala. Its shares had languished in the $5 range since plummeting more than 85% in May amid allegations of a massive stamp fraud at its Spanish majority owner, Afinsa. Afinsa, which until recently controlled 67% of Escala, was taken over by the Spanish govt in May, amid allegations of fraud, money laundering and other legal infractions. Spanish authorities have said Afinsa will be liquidated. Spain's govt said in a court filing that an inquiry by the SEC focused on whether Escala inflated the price of stamps sold to Afinsa. Escala has acknowledged that it is under investigation by the SEC but hasn't disclosed the focus of the SEC's examination. Investors want to know if the internal inquiry puts Escala in the clear with Nasdaq, or whether the co will still be delisted.

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