By Jeffrey Goldfarb The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Fender’s initial public offering documents read like the 12-bar blues. The iconic maker of guitars favored by the likes of Eric Clapton and Jimi Hendrix is aiming for a rich valuation. But the company has questionable global expansion plans, is loaded with debt, depends on a big shaky customer and generates only pick-thin margins. There’s just too much to make investors fret.

The best thing Fender has going for it is an association with rock royalty. It’s also an asset the company hasn’t fully exploited. Less than 1 percent of revenue comes from licensing fees and royalties, leaving room to expand in this area. The IPO will leverage the brand, too. Owning shares of the creator of the Stratocaster is the closest a slew of middle-aged portfolio managers and individual stock-pickers will ever get to Eddie Van Halen or Joe Walsh.

But the numbers aren’t anywhere near as cool. While Fender’s revenue increased by 53 percent, to $700 million, between 2007 and 2011, the cost of goods sold and operating expenses grew at an even faster clip. Net profit margins were less than 3 percent last year. And while the newly raised capital is earmarked to pay down some of its $260 million of debt, Fender is loaded with it, at about five times 2011 EBITDA.

At the top end of Fender’s $13 to $15-a-share range, it would be valued at approximately $395 million. That’s over 20 times last year’s net earnings while also valuing the whole enterprise at a multiple of about 13 times last year’s EBITDA. Those sorts of figures imply a lot of growth ahead.

Fender is counting on Europe for much of it, but economic woes there mean continentals will be stuck playing a lot of air guitar for some time. And some 17 percent of first-quarter sales came from Guitar Center, a retail chain with debt troubles – Standard & Poor’s in May described its liquidity profile as “less than adequate” – and the same private equity owner as Fender.

That leaves little for potential stock buyers to riff on beyond Fender’s 65-plus years of history and cachet. Any purchase at the guide price would be worthy of the classic Clapton-enhanced refrain, “While My Guitar Gently Weeps.”

By Jeffrey Goldfarb The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Content’s reign in TV Land is secure for now but maybe not for long. As media moguls gather for their annual Sun Valley confab, U.S. cable operator Comcast struck a deal to sell its minority stake in A&E Television Networks to its partners for $3 billion. That implies a healthy valuation of over $19 billion, all the more impressive given the fight elsewhere that represents the industry’s future.

Feuds between program creators and distributors have become as ugly as the one in “Hatfields & McCoys,” the hit May mini-series on A&E’s History Channel. Just Wednesday, Nickelodeon, MTV and other Viacom channels were yanked from DirecTV’s 20 million customers as the two sides squabbled over how much the satellite-TV operator should pay to carry them.

These battles have grown more intense as cable networks fight for higher fees from distributors. The likes of Comcast and DirecTV have long been hampered in such negotiations because they’re the ones who must face the customer backlash when desired channels disappear from the lineup or bills rise. The latest scrap with Viacom suggests a tipping point of sorts. Its Nickelodeon kids channel is one of the most valuable on the dial. But audiences have tumbled, emboldening DirecTV to take a harder line.

By contrast, ratings for many of A&E’s channels are improving. “Hatfields & McCoys” was the most watched non-sports program ever broadcast on ad-supported cable. That helps explain why the 15.8 percent stake in A&E secured $1 billion more than where Comcast pegged it at the end of March. Based on SNL Kagan’s 2012 estimates, the deal with Disney and Hearst valued A&E at 15 times 2012 cashflow.

It’s true Disney owns the ESPN sports hub, which commands 20 times the price that the average cable network does per customer. That gives it significant leverage in negotiations with carriers for all its channels. But the heady growth of fees also isn’t sustainable. In the decade through 2011, so-called affiliate revenue increased on average 10.7 percent annually to nearly $27 billion, according to SNL Kagan. For the next four years, that rate is expected to slow to 6.4 percent. Content is still king, but uneasy must lie the head that wears the crown.

By Jeffrey Goldfarb The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Rupert Murdoch has all but erased the discount he inflicted on his media conglomerate. When scandal struck News Corp last year, a Breakingviews calculator found the company trading around 30 percent below the sum of its parts. The possibility of splitting the company in two, confirmed on Tuesday, may complete an improbable run to close the gap.

The phone-hacking affair at the company’s British tabloids exacerbated the “Murdoch discount.” This special breed of conglomerate markdown took hold because of the octogenarian mogul’s affinity for newspapers despite their low margins and lack of growth and his undisciplined approach to acquisitions.

But the misdeeds have sharpened News Corp’s focus. In the past year, the company has increased its dividend and announced $10 billion of stock buybacks. After Murdoch’s son, James, was sidelined, Chase Carey, Murdoch’s right-hand man, took a more prominent role and considered shareholders who don’t bear the family name.

News Corp still trades at a discount to peers like Time Warner and Walt Disney. But the market’s valuation now more closely adheres to the sum of its disparate parts, according to an updated Breakingviews analysis using divisional profit forecasts by Barclays and comparable valuation data from Thomson Reuters.

Put the company’s cable operations, including Fox News, on a multiple of nine and they’re worth nearly $30 billion. Earnings from its studio, producer of films like “Prometheus,” and its U.S. Fox broadcast network, home to hit shows like “Glee,” are more unpredictable, but should be valued at over $13 billion together. Sky Italia and various private holdings add about another $4.5 billion. Stakes in publicly traded companies including BSkyB contribute almost $9.5 billion more.

The publishing unit, which includes HarperCollins and the Wall Street Journal, is worth a mere $2.5 billion. But the idea it might be spun off added 8 percent to News Corp’s market value on Tuesday, bringing it to nearly $53 billion. Ignoring the unprofitable digital unit and stripping out net debt of almost $5 billion, the company’s pieces should add up to more than $54 billion, or just about 4 percent more than where they trade. In a way, the scandal may have been the best thing to happen to News Corp.

By Jeffrey Goldfarb The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

It was an important milestone for Facebook’s timeline on Monday. The newly public $69 billion company made Chief Operating Officer Sheryl Sandberg the first female director. But joining a rubber-stamp board that Facebook’s chief executive treats haughtily won’t much enhance Sandberg’s already sterling reputation. Leading women executives like Sandberg would be better off pushing for representation where they can make a real difference.

Females are in short supply in the American boardroom. Only about one in six Fortune 500 directors are women, according to Catalyst. The problem is even more pronounced in Silicon Valley, where the ratio is less than one in 10, Spencer Stuart found. Facebook’s much-hyped initial public offering last month made its board’s homogeneity all the more glaring.

Until Monday, it was a group of seven white men, including tech grandees like Marc Andreessen and Washington Post Chief Executive Donald Graham. Shareholders and activists railed against the composition. The $150 billion California teachers’ pension fund sent a critical letter to Facebook in February, pushing it to diversify the board ahead of the IPO.

Adding Sandberg, who also owns nearly $1 billion of Facebook restricted stock, seemed like a no-brainer. The former Google executive and Treasury official helped founder Mark Zuckerberg accelerate the social network’s transformation from a plaything into a very profitable business. She also has championed gender diversity in corporate America. While it can’t hurt for Sandberg to become a director at Facebook, it’s questionable whether her elevation helps women more broadly achieve the goal of exerting greater influence in male-dominated companies.

Zuckerberg controls Facebook, so directors serve at his whim. The group’s shareholder structure, which gives him more than half of the votes, means the board needn’t have a majority of independent members, unlike at, say, Walt Disney, where Sandberg also is a director. And Zuckerberg made clear just before the IPO what he thinks of the board by dropping $1 billion on Instagram without consulting them. Sandberg’s presence lends unnecessary credence to the puppet show.

The 28-year-old Facebook mastermind already holds Sandberg in high regard, so maybe she can be as influential as a director as she has as Zuckerberg’s right-hand woman. But the timing of her appointment also makes the matter look like an afterthought. It seems more likely that Sandberg will enhance the diversity statistics without truly advancing the cause of diversity.

By Jeffrey Goldfarb The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Say what you will about JPMorgan’s stupid trades, the bank has at least owned up to its failings. That’s more than can be said for some U.S. authorities, who are exploiting the fiasco to point fingers at their UK counterparts. This convenient distraction is really an effort to grab international power. The best hope is it revives dragging global efforts to coordinate the rules.

Britain-bashing escalated on Capitol Hill last week. Gary Gensler, chairman of the U.S. Commodity Futures Trading Commission, spearheaded the rhetoric, rattling off anecdotal examples of risky dealings in London that came “crashing back to our shores.” They included AIG’s financial products unit, the London affiliate of Lehman Brothers and Citigroup’s off-balance-sheet vehicles.

Carolyn Maloney, a Democratic representative from New York, pinned the problem on Britain’s financial capital, too. “It seems to be that every big trading disaster happens in London,” she said. Maloney pressed JPMorgan’s primary regulator, Comptroller of the Currency Thomas Curry, about shifting more resources from the Potomac to the Thames.

It’s all a bit of sleight of hand. London is a big financial center bound to have its fair share of misdeeds. But for every AIG, Citi, or JPMorgan trader, there’s a Long Term Capital Management, MF Global and Bernie Madoff that operated unnoticed by U.S. watchdogs. In JPMorgan’s case, there’s no reason the Whale’s trading positions couldn’t have been more closely scrutinized in New York.

Broadly speaking, London may be known for a lighter touch and Washington for tougher enforcement on certain matters. But the American regime is also hamstrung by overlap and turf wars between rival agencies. Witness Gensler’s attempt to extend his reach by applying U.S. swaps rules internationally. That bold initiative also looks like a stab at enveloping other regimes in the U.S. web.

The opportunism fills a void. Following the crisis, the G20 agreed to take steps to bring financial regulation into better accord. There has been little visibility on such initiatives, if they have happened. The euro zone mess is a distraction. But if global authorities don’t get their acts together, U.S. regulators will continue to use every misstep as a reason to extend their reach.

By Jeffrey Goldfarb The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Private equity firms say they find their best opportunities in the worst of times. This year’s U.S. presidential race gives them a chance to translate that idea to reputational management. Mitt Romney has weakly rebutted the president’s attacks on his Bain Capital tenure. Those who see the good side of leveraged buyouts are gradually speaking up. But the buyout barons themselves need to seize the moment.

In the face of anticipated and sometimes misleading attacks by Barack Obama, including in a campaign ad about a Bain-owned firm that went bankrupt, Romney has managed only ham-fisted responses. The presumptive Republican nominee has talked about creating jobs while leading the private equity shop and having left it before the steel company in question went under.

Support for the buyout industry has emerged, however, including from politicians in Obama’s own party. Also publicly standing by private equity’s side have been some of its biggest beneficiaries. A handful of normally quiet public pension funds have spoken up about the better-than-market returns provided to pad ordinary people’s retirement nest eggs.

The business of course has its greedy side. Some private equity-owned companies crater under excessive debt, as Obama’s team has accentuated. Others slash jobs to improve the bottom line, sometimes only buying a little time. Then again, there are also stories of turnarounds undertaken by private equity firms away from the public eye. The positive testimonials from relative bystanders – elicited by the campaign barbs – should help promote understanding of buyouts. But private equity may still want to wheel out its big guns.

Many still mistakenly see presidential politics as Romney’s problem, not their own. Only recently has Bain tried to defend itself. KKR’s Henry Kravis, Blackstone’s Stephen Schwarzman or Carlyle’s David Rubenstein normally wouldn’t get a hearing for a paean to their business. Now, they have a captive audience of curious journalists and voters.

Buyout captains can make the case for their investment choices themselves, explaining how they have deployed capital across America, in good times and bad. A new Carlyle website launched on Wednesday may be a step in that direction. By firing the opening shot, Obama has given private equity firms the opportunity. If they can capitalize on it, they’ll owe him a debt of gratitude.

By Jeffrey Goldfarb The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Give Facebook the tiara. The social network may be worth more than $100 billion on its debut. As a result, the art of valuing Facebook has officially entered what economist John Maynard Keynes called the “beauty contest” realm. In justifying such a lofty number, Facebook’s supporters are resorting to increasingly wacky rationalizations, from the old chestnut monetization of eyeballs to comparing the company to credit scorers. But Facebook’s value, like beauty, is merely in the eyes of the beholder.

There is, of course, a lot to like about Mark Zuckerberg’s company. It’s not every day a new stock comes available sporting a business with some 900 million customers and an operating profit margin approaching 50 percent. And yet the latest potential IPO valuation of as much as $104 billion, achieved after it raised the maximum price from $35 to $38 a share, is difficult to defend using any fundamental analysis.

The investment community is bending over backwards to reverse engineer an answer. They run the gamut, from assumptions about Facebook’s ability to disrupt the traditional advertising market; comparisons to payment systems like Visa and PayPal; extrapolations from Google, Amazon and other internet firms; to the promise of digital goods.

Among the more creative methodologies, Evercore Partners presented a “marketing funnel,” its conical illustration of how Facebook will “demystify brand advertising” for marketers and others to support its projected valuation of up to $160 billion. And Sanford C. Bernstein analysts attempt to quantify the possible upside for Facebook by contemplating how its booty of consumer information may argue for a valuation in line with credit bureaus like Experian and Transunion.

In the end, it’s impossible to accurately gauge Facebook’s ability to reap profits from its successful social engine. And so investors are pricing its shares not on future income projections but rather on the basis they think everyone else sees great things for the company. In the “General Theory,” Keynes likened the scenario to a newspaper competition requiring readers to pick the prettiest faces from a series of pictures, with a prize for choosing the one that corresponds to the average preference. Sometimes capitalism is no thing of beauty.

By Jeffrey Goldfarb

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

If checklists can save lives, surely they can help shareholders. The scandals at Yahoo, Green Mountain Coffee, Chesapeake Energy and other U.S. companies suggest boards of directors could do with some simple reminders to prevent them from making stupid mistakes. Breakingviews has drawn up a starter set.

The pressure on companies to find competent leadership has grown in tandem with their complexity. And in their quest for chief executives and directors who can deliver on a range of diversified financial and strategic initiatives, the basics are too often being forgotten and leading to avoidable failings. Just as surgeon Atul Gawande showed, in his recent bestseller “The Checklist Manifesto,” how a 90-second checklist reduced deaths in the complicated world of intensive care, boards could preserve shareholder value with a Post-it note of sorts.

College, degree, work history and military service confirmed? At Yahoo, a straightforward bit of due diligence, like the kind conducted by activist investor Dan Loeb, would have uncovered Chief Executive Scott Thompson’s misrepresented scholastic credentials.

Doing any moonlighting we should know about? Among his many undisclosed and still-unexplained activities, Chesapeake boss Aubrey McClendon was running a hedge fund on the side.

Do you have a close personal relationship with any of the senior management here? The designated stewards of Rupert Murdoch’s media empire are limited in their ability to restrain the mogul and his whims. But having the godfather to one of his grandchildren – whose father is also a director – officially designated as an independent should be a stark reminder to others.

By Jeffrey Goldfarb The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Sirius XM sold its soul and could pay a hefty price to retrieve it. When the U.S. satellite radio service stared down bankruptcy in 2009, it beat a rescue path to John Malone’s door at Liberty Media. For a financial lifeline, Sirius pledged a 40 percent stake and power over most big decisions to the wily cable magnate. But now he has come to collect.

Malone’s method looks unseemly. After a three-year standstill provision expired last month, he asked the Federal Communications Commission for its blessing to be custodian of Sirius with only a minority stake. That would help lay the groundwork for Liberty to take control without paying a premium to the rest of its shareholders.

Sirius is, broadly speaking, in a weak negotiating position. With its shares trading at about 10 cents apiece three years ago, the company agreed to borrow money from Liberty at 15 percent. It also sold Malone preferred shares for a pittance that convert into 40 percent of Sirius and confer final say-so over any significant deal, stock issuance and other major moves.

Things still turned out well. Revenue at Sirius has increased by about 20 percent to $3 billion, the company is now in the black and the stock trades around $2.25. Malone’s stake, once converted, would be worth some $6 billion.

He almost certainly wants more, however. Nearly $8 billion of net operating losses at Sirius would be useful to Liberty but may not be transferable and are probably too costly to access anyway. But Liberty can block any strategic initiatives Sirius boss Mel Karmazin and his board may want to make, so Malone could press them into another of his fiendishly complex deals.

It would start with Liberty increasing its stake in Sirius to over half, spinning off a new entity created with the Sirius stake and another Liberty-owned operation and then ending with Sirius buying that company with newly issued shares. The advantage of this so-called reverse Morris Trust transaction is that it would be tax-free for Liberty, giving it the most bang for its highly profitable Sirius investment.

By Jeffrey Goldfarb The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Warren Buffett seems to have learned something from a fellow corporate titan. The 81-year-old investing icon disclosed on Tuesday he was diagnosed with early-stage prostate cancer last week and pledged to keep shareholders updated about his health. The candor is a refreshing contrast to the way in which Steve Jobs guarded details of the illness that eventually killed him. Unfortunately, Buffett is shrouding his succession plan in the same sort of mystery the Apple boss did.

The prognosis sounds good for the Oracle of Omaha. Doctors have told him his life isn’t in any danger from the cancer, which isn’t an uncommon form for men his age, and that it hasn’t spread to other parts of his body. He plans to keep running Berkshire Hathaway as he undergoes two months of radiation treatment over the summer. The cheeseburger- and root beer float-loving Buffett doesn’t expect any further changes in his condition for a good long while.

Jobs, though younger, confronted a more insidious disease. Yet in the years following the diagnosis, he was reluctant to keep shareholders informed much about his treatment – or, as it turned out, the lack thereof. Jobs’ biographer wrote that for months he refused surgery for his pancreatic cancer – and came to regret it. Apple insisted his health was a private matter. It may well have been, but Jobs’ gaunt appearance fuelled endless media and market speculation, as did substitute appearances at conferences by his lieutenants.

Unfortunately, Buffett’s candour doesn’t extend to identifying his replacement. He said rather bizarrely a couple months ago that he knows who it is but the chosen one doesn’t. That leaves open the possibility the individual may not want the job managing the $200 billion conglomerate, a task even Buffett and his partner Charlie Munger have struggled with in recent years. And given that a man once on the shortlist, David Sokol, left amid a scandal last year, shareholders shouldn’t necessarily put full faith in Buffett’s selection skills.

Buffett expects to stick around for a while. Here’s hoping it’s long enough to realize he should reveal who will step into his big shoes.