'Dear Santa' - An Activist Hedge Fund Manager Addresses St. Nick's "One Long Party"

Tyler Durden's picture

To: St Nicholas Enterprises

From: Counting House Capital

Dear Santa Claus,

I am an activist investor in your company who has been infuriated for many years by your wilfully eccentric approach to capital allocation, pricing, brand strategy and supply chain management. Some of your devotees have urged me not to criticise your strategy in the season of goodwill, to which I reply: “Bah, humbug!”

I have always regarded your recourse to fourth century philanthropy and wasteful use of working capital as characteristic of an entrenched founder whose energy has been devoted to delighting underage customers at great expense while ignoring all management discipline. You have displayed little interest in covering your cost of capital, let alone exceeding it.

Life at St Nicholas is one long party. Free food for your elves, who receive generous compensation to make bespoke, non-standardised products. Presents offered to anyone who writes you a begging letter and has been “good” according to some vague metric. Jingle bells, rides in one-horse open sleighs, eggnog cocktails: Oh, what fun you have with my money.

Your entire enterprise exists to supply presents one day a year, yet everyone is on the payroll for 365 days. You will not even extend your franchise to Black Friday, which is a blatant missed opportunity. Meanwhile, you insist on delivering down chimneys, ignoring the fact that only one segment of your target demographic lives in a house. What is wrong with doors?

In short, St Nicholas is one of the least innovative companies I have ever encountered. It is as fat and happy as its chief executive, sticking religiously to an ageing business formula that exposes it to being disrupted. I know of several technology start-ups that are raising capital to create applications on which children could bid for presents that would be made by contract artisans and delivered by unicorns.
Given your lack of research and development, I have consistently argued that any surplus capital should be returned to shareholders as one-off tax-efficient distribution close to the year end — on December 25, for example. You have ignored my requests, choosing to brighten up children’s lives at random, rather than rewarding investors whose interests are aligned.

Since you are too busy to engage in constructive dialogue, I held discussions this year with other hedge funds. We devised a plan for a merger of your business with related companies, followed by a series of spin-offs and initial public offerings to create more focused corporations. The structure was approved by several investment banks and law firms that are paid by the deal.

By combining St Nicholas, Walmart, Macy’s, WPP and Federal Express, and then splitting them up, we would create a set of vertical businesses in the gift making, fulfilment, merchandising and events spaces. They could license the Father Christmas brand and be incorporated in Lapland for tax purposes.

Recently, however, I was visited at home by three ghostly analysts, bearing fundamental research into your business. They warned me that, although I base my investment model on dividends flowing into my counting house over three to five years, the intrinsic value of St Nicholas can only be grasped on a panoramic view of the past, present and yet-to-come.

Santa, I have listened to many conference calls and seen many presentations, but none has struck me with the force of these insights. It is not an exaggeration to say that I have undergone a complete conversion in my view of St Nicholas. Warren Buffett advises investors to seek exceptional managers and I now see that few achieve your longevity.

You embodied the new economy before the idea had been conceived. St Nicholas is a global business, receiving signals from far corners of the earth and delivering packets over an integrated network. It works at super-high speed, faster than broadband in South Korea, and knows no boundaries. The internet is antique by comparison.

Your lack of interest in profitability struck the traditionalist in me as foolish but I have come to understand the virtues of reinvesting revenues over several centuries in order to dominate your market and entrench your monopoly.

Jeff Bezos, your closest logistics competitor, has copied your tactics but, although Amazon crushes small shops, department stores and big box retailers, it cannot topple you.

This has helped you to build the biggest social network in the world, putting Facebook to shame. Everyone includes your messages in cards and parents pretend the gifts they buy for their children come from you — you outsource many deliveries at zero cost. By combining a jolly presence with sophisticated viral marketing, you have expanded your reach everywhere.

Since these revelations, there has been a spring in my step. Coca-Cola once used your image in advertising, prompting rumours that it had invented Father Christmas, but it has nothing to teach you about branding and consumer appeal. My investment in St Nicholas has even greater potential than Mr Buffett’s stake in Coke, and I intend to hold it in my portfolio indefinitely.

It used to be cold, bleak, biting weather outside, but now it feels quite warm for the time of year.

Merry Christmas to one and all,

Ebenezer Scrooge

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Originally posted at The FT

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skinwalker's picture

I always liked Scrooge and couldn't understand the dislike he garnered. 

Chris Dakota's picture

Jews cheer death of small Arab child at wedding.

http://sputniknews.com/middleeast/20151225/1032278683/netanyahu-shocked-...

Israeli planes spray crop killing chemicals on Gaza farms.

http://www.presstv.ir/Detail/2015/12/24/443019/Israel-chemical-substance...

In other news French Muslims guard Christian church during Christmas mass.

http://sputniknews.com/europe/20151225/1032306236/french-muslims-church-...

 

Diet Coke and Floozies's picture

What exacly is an "activist investor"? Is that like a person who invests in activism?

Ralph Spoilsport's picture

A classic from 1958: Stan Freberg's Green Christmas.

https://www.youtube.com/watch?v=I5IXlfJSEi4

freewolf7's picture

Merry Christmas,everyone.

Tylers, thanks for being here.

Richard Hannay's picture

I always liked Scrooge myself, an example to follow.

He wasn't bad at all, he was simple, sage and sensible, just like the Gold Standard.

Isy's picture
A life filled with happiness and prosperity is a life well lived… Scientists have found that when you are happy, you are 5 times more focused in your tasks, which in turn allows you to function more efficiently and eventually become more successful. http://www.enriqueiglesias.com/profiles/blogs/the-instant-switch-review-...
Motorhead's picture

Well, god damn then, let's bust out the egg nog and spiked mulled wine.

deflator's picture

Scrooge forgot to tell the part where he borrowed the, "money" at 0% interest for the leveraged buyout of Christmas by decree of the government.

Firing all the elves and reindeer while raiding their pension funds was just icing on the cake.

algol_dog's picture

I wake up in the morning In a similar analogous way -

Fuku Ben's picture

Santa is certainly not employing his usual visionary excellence when it comes to the ghost of Christmas future in spite of the best efforts of he and Mrs. Claus. He's becoming myopic much like the hedge funds that are increasingly failing. He's losing some of his Virtu. Mrs. Claus has been approached by the usual cast of obstreperous trouble making clowns to perform a hostile takeover and wield the reigns at the North Pole. She has refused to participate in the hostile takeover and also refuses to sel.

Our consulting firm is recommending that a merger is the best course of action for all parties. This will maximize shareholder value, improve chances for an increase in patents and IP throughout the winter wonderland, increase future growth and expansion opportunities, eliminate the possibility of supply chain interruptions, ensure maximum employment opportunities and skill sets to meet future demand and help attain peace on Earth and good will towards all men. The benefits of reversing the current polarization, if handled properly, should result in vast rewards for everyone. And while Santa is insistent on the time is money meme in light of the holiday season there will be no fee charged for our efforts above.

If all parties take our advice please consider our firm for further guidance in your merger, leadership, restructuring or other consultative needs. We also provide arbitration services for disputes. Our fee structure versus your ROI will be unparalleled and a complete list of products, services and fees are available upon request.

Merry Christmas to everyone