The Nerd Taint Is Even Stronger Than Imagined

by Johnny Debacle

Last year, we highlighted the deleterious effect on shareholders’ value of having a nerd as CEO of a publicly traded company. The case we presented was Sharper Image (NYSE: SHRP) and we recommended a buy based on the fact that the company should rise to its nerd-free valuation of $20 per share.

In light of the fact that the company’s stock has now fallen a further 95% from its former levels and the company today filed for bankruptcy, we are updating our models to appropriately reflect the lingering effects that the taint of a nerd leaves on a company. Previously, we believed that this taint would not present a hairy problem and that it was a problem that would easily be excised. In this we were mistaken — the taint of a nerd CEO runs deeper and darker than even we could have anticipated.

Recommendation: We maintain our position that there is an activist shareholder opportunity in finding companies whose CEOs are avid LARPers or who live in an exact replica of the Borg’s ship. We effectively tweaked our model such that the previous implied taint lag is 40% longer and we have great confidence in using it to invest your money.

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