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We're Not All Gordon Gecko - Dan Loeb Defends 'The Activist' Investor

Tyler Durden's picture




 

Excerpted from Third Point LLC's letter to investors,

Lately, a varied chorus of powerful union bosses, politicians and candidates, an asset management company executive, and a few ivory tower types have asserted that activism is short term in nature, engaged in by “hit and run”  investors who care only about making a quick buck while leaving a company and its employees in ruins.

 

They assert that activists blackmail their targets to choke off long-term growth initiatives like research and development in favor of financial gimmicks that artificially and temporarily inflate share prices.

It might surprise people to hear that we agree completely that the sort of activism they describe is abominable.  Luckily, it does not really exist, and certainly not at Third Point.

Activists today are very different from corporate raiders of the ‘80’s (about whom these criticisms might have been leveled fairly).  Our activist investments, which we consider to be those in which we seek to use our minority shareholding to obtain board seats, have been some of our most complex and have been held for well over the one year threshold identified as offensive by the critics.  In almost every example – from Ligand to Yahoo to Sotheby’s – our influence has contributed meaningfully to the sustainability and growth of the companies in question.  In each of the three investments above, for example, we brought in all-star CEOs and gave them extensive runway to implement ambitious turnaround plans that would take years to come to fruition.  A strong CEO with a coherent operating plan can create value for shareholders along the way as their plans are implemented.  Our investors have benefitted from our ability to install visionary leaders like John Higgins, Marissa Mayer, and Tad Smith. 

Not every politician is a critic.  As you may recall, the case we made for good governance, and implicitly activism, in Japan two years ago was later adopted by Prime Minister Abe and his policy makers to successfully encourage economic momentum and wage growth.  His approach has been a success, as better corporate governance principles have led companies like Fanuc to adopt more shareholder friendly approaches and led to increased foreign investments in individual Japanese companies and the overall market. 

We believe that activism serves an important function not only for our investors, but also for capital markets and society in general.  The success of America’s large and robust capital markets – the greatest in the world – rests on a framework based on principles of democracy like freedom of speech, transparency, and rule of law.  The reason that companies (with the exception of a few in the tech space) are able to raise capital so smoothly is because investors understand that a governance structure known as a board is in place to hold management accountable, be responsible for management’s fair compensation, and oversee important capital and strategic decisions.  The fact that shareholders have the right to vote for or sometimes remove directors is critical to the ecosystem of the capital markets.  

We are proud of the returns we have generated from being engaged, constructive, and sometimes “activist” investors, and even more so that our activities have led to more efficient organizations that are better able to compete, grow, and innovate.  We hope the critics will educate themselves about how activists contribute to the American economy.  Regardless, we believe the environment for constructive engagement with management teams is one of our more exciting areas of opportunity today and look forward to further successes in this strategy.

*  *  *

Thanks to our long and successful track record, we have a particular advantage in the area of shareholder activism.  We are confident that opportunities will continue to exist to bring our owner’s perspective on capital allocation, profitability, and strategy to corporations.We will also continue to serve as an agent of change in extreme cases, when corporate boards are unable to make necessary management changes due to incompetence or unwillingness to take action. 

 

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Sun, 08/02/2015 - 12:30 | 6381537 CaptainAmerika
CaptainAmerika's picture

Eye-opening Gordon Gecko seminar on investing in Doom Index Funds : http://www.philiacband.com/propaganda.html

 

Sun, 08/02/2015 - 13:04 | 6381687 James_Cole
James_Cole's picture

Speaking of professions which should be wholly automated...

Sun, 08/02/2015 - 12:26 | 6381548 The Delicate Genius
The Delicate Genius's picture

what a pile of shit.

Sun, 08/02/2015 - 12:28 | 6381554 ebworthen
ebworthen's picture

Sure Dan, and without ZIRP and $15+ Trillion of public debt slathered on Wall Street along with a complete failure to enforce the rule-of-law on banks/corporations/insurers - parasites like you might actually have to work for a living.

Sun, 08/02/2015 - 12:32 | 6381568 Brokenarrow
Brokenarrow's picture

This is the third time I have heard these lies in my lifetime. I'm looking forward to a day when the people that are exploited by these criminals direct their acrimony at the real problem instead of eachother. A hundred thousand people on the upper west side of manhatten for a start.

Sun, 08/02/2015 - 12:37 | 6381584 Renewable Life
Renewable Life's picture

Let me finish that statement for you..........

With guns!

There, now you might get this POS tyrannical .gov to take notice! Otherwise your just fucking fooling yourself (and getting some exercise)????

Sun, 08/02/2015 - 12:34 | 6381576 falak pema
falak pema's picture

Lol, a leopard and his spots! 

Out out damned spot! 

Where is lady Macbeth? 

I see her in Hillary who said : Its time to think  longer than quarterly !

Right on cue ! Lady M for her 2016 bid as Queen. 

Shades of return trajectory  to  "I did not have sex with that woman but I did repeal Glass-Steagall"... Mr Clinton-Macbeth.

Sun, 08/02/2015 - 12:39 | 6381587 JC-BI
JC-BI's picture

The only activism we need is the ROn Paul kind. Shut the corrupt FED down!

https://biblicisminstitute.wordpress.com/2014/08/24/the-corrupt-federal-...

Sun, 08/02/2015 - 12:42 | 6381598 epicurious
epicurious's picture

Gee I thought High Frequency Trading was a form of hit and run. 

Sun, 08/02/2015 - 15:34 | 6382237 dexter_morgan
dexter_morgan's picture

isn't it technically insider trading? even if having the knowledge is only nanoseconds before everyone else?

Sun, 08/02/2015 - 12:57 | 6381663 Laughinggrizzley
Laughinggrizzley's picture

Yea, talk to some pilots and stewardesses at TWA!

Sun, 08/02/2015 - 12:58 | 6381664 Laughinggrizzley
Laughinggrizzley's picture

.

Sun, 08/02/2015 - 13:22 | 6381776 gregga777
gregga777's picture

Self-serving propaganda by the rich oligarchy.

The 20th Century saw the complete severance between management and corporate shareholders. Corporations are laws unto themselves subject to no national or international laws, law enforcement or standards of conduct. They are now completely criminal enterprises.

Very, very large rich shareholders are the only type of shareholder capable of affecting decisions by entrenched criminal managers. But, it is entirely a clash between the rich criminal elites. They are not acting for the benefit of anyone except for themselves. They'll gut any company, destroy it's long-term viability, fire all of the American workers, in the case on nominally American corporations, and send those jobs to slave labor countries to produce goods and services for export back to the United States.

His name is on The List.

Sun, 08/02/2015 - 13:53 | 6381836 Nostradumbass
Nostradumbass's picture

"We hope the critics will educate themselves about how activists contribute to the American economy..."

Alrighty then - South America is America - yes?


"Jewish difficulties in penetrating close-knit Far Eastern monopolies, many of which are open in their belief that Jews are capable and ruthless opponents in business, thus persist. East Asians are seemingly aware that giving Jewish businessmen an inch will normally lead to non-Jews losing a mile. It is this honest grappling with the facts that kept Daniel Loeb off the board at Sony, and prevented Elliot Associates from making even slight gains at Samsung."

"The Far East also appears less prone to Jewish moralizing about the “dangers” of anti-Semitism, and one finds that criticism of Jewish behaviors enjoys a considerably higher level of intellectual and cultural respectability. A good example is when Foumiko Kometani won the 1986 Akutagawa award, Japan’s top literary prize, for her novel Passover. Based on her real-life experiences with her Jewish husband and severely retarded bi-racial son, Kometani’s novel was subjected to excoriating criticism from Jewish critics who denounced her unflattering (but presumably quite accurate) depictions of Jewish figures in the book as “anti-Semitic.” Japanese critics, on the other hand, were notably unaffected by negative Jewish press treatment of the book, and found the treatment of Jewish clannishness and “distasteful” religious practices to be enriching qualities which gave the work a greater sense of authenticity and honesty.

Switching our focus to South America, high-profile figures in Argentina have also been accused of pushing “anti-Semitic conspiracy theories” for their responses to Elliot’s parasitism. After Singer’s firm won an extortionate judgment against Argentina at the US Supreme Court last year, Argentina President, Cristina Fernández de Kirchner, described Singer on her personal website as the “Vulture Lord.” But Jewish power-brokers were left even more aghast at Kirchner’s open denunciation of a “global modus operandi” that “generates international political operations of any type, shape and color.” They “contribute to financial attacks or simultaneous international media operations, or even worse, covert actions of various ‘services’ designed to destabilize governments.”

"As Singer continues to tighten the screws on Argentina, the nation and its President continue to provoke accusations of “anti-Semitism.” During a July 2 visit to a Buenos Aries school, Kirchner told students that to better understand Argentina’s economic crisis, they should read Shakespeare’s The Merchant of Venice. On Twitter Kirchner recounted how she had asked students she met which Shakespeare play they were studying. When they told the president they were studying Romeo and Juliet, Kirchner said she responded, “I said, ‘Have you read The Merchant of Venice to understand the vulture funds?’ They all laughed. “No, don’t laugh,” I said, “Usury and the bloodsuckers were immortalized by the best literature for centuries.” The Delegation of Argentine Jewish Associations, quickly issued a statement condemning Kirchner’s comments and accused her of having “anti-Semitic” motivations behind her invocation of the play. Abraham Foxman then waddled onto the stage, urging Kirchner to “stop reinforcing anti-Semitic stereotypes.” “We are deeply concerned that President Cristina Fernandez de Kirchner is once again promoting anti-Semitic stereotypes,” whined Foxman. “The Merchant of Venice — with its nefarious character Shylock — reinforces stereotypes of Jews and presents them as money-hungry, conniving and cruel, and by suggesting students to study this play, she is sending a message to Argentina’s youth that Jews are somehow connected to the economic woes of her country.”

http://www.theoccidentalobserver.net/2015/08/paul-singer-and-universalit...

Sun, 08/02/2015 - 13:46 | 6381859 MASTER OF UNIVERSE
MASTER OF UNIVERSE's picture

Consider yourself bankrupt, Mr Loeb.

 

NOTE: Wall Street 2 really did suck IMHO. I expected MOAR when that was released. And the soundtrack was pure crap-O-la too.

Sun, 08/02/2015 - 13:46 | 6381862 XqWretch
XqWretch's picture

This was a gem: "As you may recall, the case we made for good governance, and implicitly activism, in Japan two years ago was later adopted by Prime Minister Abe and his policy makers to successfully encourage economic momentum and wage growth.  His approach has been a success..."

HA!

Sun, 08/02/2015 - 13:48 | 6381869 Batman11
Batman11's picture

Like most investors I am a lazy sod who prefers to get my capital working rather than doing anything myself.

Staring up your own company means putting all your eggs in one basket, the risk is frightening.

Investing means spreading your risk and is so much safer.

Money is the only thing that matters these days, why produce anything useful or provide a useful service yourself?

Investing is the future.

  Regards Warren Buffett

P.S. I have topped the global rich list, so I know what I am talking about.

Mon, 08/03/2015 - 15:20 | 6386141 clade7
clade7's picture

 I'm considering the 'Leopold Stotch' get rich quick methodology and investing in a 'kissing club' franchise...

its sort of like SoulCycle...I want to make some motherfuckin money. 

Do you know what I'm saying?

Sun, 08/02/2015 - 14:32 | 6382043 Chris88
Chris88's picture

Amen, Dan.  Tired of explaining ourselves to the ignorant, class warfare, free shit crowd.

Sun, 08/02/2015 - 14:59 | 6382114 RaceToTheBottom
RaceToTheBottom's picture

WallStreet Bankster spouting revisionistic garbage.

Kill them all and then apologize for the few who did not deserve to die.

 

Sun, 08/02/2015 - 22:05 | 6383390 Chris88
Chris88's picture

Banker, hedge fund manager, not like you know or care about the difference.  Another HuffPo moron.

Mon, 08/03/2015 - 00:57 | 6383777 RaceToTheBottom
RaceToTheBottom's picture

Yep, don't care. Both feeding off the bailout tit.

Mon, 08/03/2015 - 15:05 | 6386062 Chris88
Chris88's picture

How many hedge funds recieved bailouts after the crisis?  Oh hang on lemme add them up....oh yeah!  Zero!  Fucking moron.  Hey there's a clean up in aisle 4, go take care of it pissant.  Typical, ignorant loser.

Mon, 08/03/2015 - 22:58 | 6387692 RaceToTheBottom
RaceToTheBottom's picture

Thanks for your eloquent response.  Not worth a reply.  Except the following one. Drop dead.

 

Mon, 08/03/2015 - 22:56 | 6388011 RaceToTheBottom
RaceToTheBottom's picture

OK, are you going to sit there and tell me that some dickhead Hedge fund manager has not been benefited from a 0% interest environment forcing the entire world into equities????  The entire US stock market is 50%+ too high because of WS bailout and FED machinations with the expressed purpose of making sure Hedge fund dickheads like you survive when you should be dead.

 

Stop the fucking posting and go ahead and commit suicide, you are too fucking stupid for me to bother with any more keystrokes.

Sun, 08/02/2015 - 15:27 | 6382202 dexter_morgan
dexter_morgan's picture

Dear God, save us from the fricking do-gooders paving the road to hell with good intentions.

Sun, 08/02/2015 - 16:57 | 6382494 gmak
gmak's picture

It's not the activist investor that I object to. It's the LBO clowns who leverage up a company to give themselves ownership and a big fat fee and one-time dividend payout. Then they use that ownership position and "we're all in the same boat" speech (when they've already gotten their pay out) to get employees to borrow money - often against their houses) and buy equity (guess who gets the money via the fees and dividends). 

 

Now those employees are stuck earning less money and working long crazy hours because they will only get made whole if the company wildlly succeeds. The LBO clowns don't really care at this point because they've taken all of the future cash flows that they can imagine and left the dried-out husk behind.

 

How many of these deals succeed (maybe 1%).  This isn't capitalism. It's theft, pure and simple.

Mon, 08/03/2015 - 15:11 | 6386097 Chris88
Chris88's picture

If you knew shit about leveraged finance you'd realize that LBO lending is 1) not theft and 2) much more successful than your gut feeling stats.

Sun, 08/02/2015 - 22:44 | 6383491 mkhs
mkhs's picture

Marissa Mayer.  Enough said.

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