Audit Notes: Daily Beast, Countrywide shareholders, a liberal in NYC

Tina Brown is out as editor of the money-bleeding website

It looks like The Daily Beast is in real trouble.

Barry Diller is getting rid of Tina Brown, according to BuzzFeed’s Peter Lauria and it’s clear the site just doesn’t work financially and won’t anytime soon:

As for the future of The Daily Beast website that Brown edits, no decision has been made. Included among the options IAC is considering are a sale, closure, or continuing to operate it under a new editor. According to the source, the latter option would require “looking at the business to see if it can be turned around.”

“The financials need to make some sense,” this source said.

AdWeek reported last month that The Daily Beast is on track to lose $12 million this year.

That is a huge number, particularly since the site’s revenue is surely not much more than that, if it is at all. Two years ago, The Atlantic reported that the site brought in just $8 million a year in revenue.

But you wouldn’t know about anything about the financial woes from Pravda The Daily Beast itself, which writes about its “irrepressible” editor’s “next big move” and writes only that the site “has seen steady growth of traffic, up 22 percent year to date to nearly 16 million unique visitors in August, as well as advertising growth of 23 percent year over year.”

That 23 percent growth is good, but it’s off a low base. It would take three or four years of such growth along with flat costs to get to the breakeven point.

— The top court in corporate haven Delaware has barred former Countrywide shareholders from suing the company (bought by Bank of America five years ago), something that’s gotten almost no coverage, beyond an Associated Press brief and this Reuters Breakingviews column:

Dozy shareholders have allowed the board of Countrywide Financial to dodge some serious liability. The Delaware Supreme Court says investors lost the right to sue on the mortgage lender’s behalf after it was sold to Bank of America in 2008. That squelches one way to hold the likes of former Chief Executive Angelo Mozilo accountable. It’s also a reminder that litigious investors should cover all their bases sooner rather than later.

Pursuing dodgy directors is often easier through so-called derivative suits rather than, say, securities fraud class-actions, which require stronger initial evidence. But there’s a catch. If shareholders relinquish their stock in an acquisition, they give up legal standing to go to court.

Former Countrywide investors, however, thought they had found a loophole. If a transaction’s sole purpose is to shield a board from liability, shareholders can still sue. And though that wasn’t the reason for the BofA deal, a related Delaware high-court opinion suggested litigation could also proceed if directors’ alleged wrongdoing made an acquisition necessary, just as Countrywide investors argued.

Now Delaware says director fraud leading to a deal doesn’t provide an exception to the legal standing requirements.

But when Countrywide went to its shareholders on whether to sell to Bank of America, only 69 percent of them voted “yes.” So even the 31 percent shareholders who didn’t vote for the deal can’t sue for the fraud and such that cost them so much money? How is that fair?

The New York Times reports that New York City’s wealthiest are trembling like it’s 2009 all over again.

The threat: That the liberal city might elect a liberal to run the place.

They are startled and unsure how to react. “Terrifying,” is how one banker put it.

Many in New York’s business and financial elite, stung by the abrupt ascent of Bill de Blasio, an unapologetic tax-the-rich liberal, are fixated on a single question: What are we going to do?

The angst, emanating from charity galas and Park Avenue dinner tables, has created an unexpected political opening for Joseph J. Lhota, the Republican nominee, whose once-sleepy candidacy is now viewed by players in both parties as their last, best hope for salvaging the business-friendly government of the Bloomberg era.

This is how the powerful rule, even when they don’t get their preferred candidates:

In some of these conversations, Mr. de Blasio has played down his unabashedly liberal positions, pointing out that no public-sector union has endorsed him, and saying that he would represent the wealthy as well as the 99 percent if elected mayor, according to people familiar with the discussions.

Politicians, even the so-called populist ones (with Elizabeth Warren perhaps excepted), still think they have to bow to a tiny sliver of the electorate to get things done.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum. Tags: , , , ,