activist fund / activist shareholder / activist investor

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pages: 302 words: 80,287

When the Wolves Bite: Two Billionaires, One Company, and an Epic Wall Street Battle by Scott Wapner

activist fund / activist shareholder / activist investor, asset allocation, Bernie Madoff, corporate governance, corporate raider, Credit Default Swap, Mark Zuckerberg, Ponzi scheme, price discrimination, Ronald Reagan, short selling, Silicon Valley, Tim Cook: Apple, unbiased observer

“Create a big, positive narrative around (CEO) Michael Johnson,” it recommended. “THIS is the good guy.… Convey his energy, enthusiasm, and vision for Herbalife.” It advised Herbalife to “right-size the threat” and to “keep the focus away from Ackman personally and on the substance of his criticism. Any publicity centered on Ackman, even negative publicity, can play into his public persona as an ‘activist shareholder.’” The battle with Ackman had consumed the company since December 2012, when Ackman had first laid out his stunning case and his billion-dollar short. Now—finally—for the very first time, Johnson and Herbalife’s other executives felt they could begin to understand why the war had happened in the first place. It was a war that began with little more than a phone call. 2 THE PITCH William Ackman was sitting in his office at 888 Seventh Avenue, on Manhattan’s West Side, when the phone rang.

And thank you boys for asking me more times than I can remember, “Daddy, what if you don’t finish the book?” At least now we don’t have to worry about that! NOTES Introduction: The Masters of the Universe 1. Leo E. Strine Jr., “Who Bleeds When the Wolves Bite? A Flesh-and-Blood Perspective on Hedge Fund Activism and Our Strange Corporate Governance System,” Yale Law Journal, April 2017. 2. Jeffrey Sonnenfeld, “Activist Shareholders, Sluggist Performance,” Wall Street Journal, April 1, 2015. Chapter 2: The Pitch 1. William Cohan, “Is Bill Ackman Toast?,” Vanity Fair, Oct. 17, 2016, www.vanityfair.com/news/2016/10/is-bill-ackman-toast; Gretchen Morgenson and Geraldine Fabrikant, “A Rescue Ploy Now Haunts a Hedge Fund That Had It All,” New York Times, Jan. 19, 2003. 2. Gotham Partners, “Is MBIA Triple A?,” December 9, 2002. 3.

.: characterized) public persona of, 8 restructuring Herbalife short position, 148–149 at Robin Hood Investment Conference, 149–150 sister Jeanne, 25 at Sohn special event in 2012, 78–80, 81, 83, 89 statement to author about Hallwood issue, 102 taking Pershing Square public, 180 and Valeant, 174–175, 178, 210 visit to FTC headquarters, 142 worst investment of, 40 See also Pershing Square Capital Management Ackman-Ziff real-estate brokerage firm, 24 Actavis, 170 activists. See consumer activists; shareholder activists Albright, Madeleine, 148 Alexander’s department store chain, 27 Allen, Claudia, 38 Allergan company, 169 Allied Capital, 62–63 Allied Financial, 58 American Airlines, 124 American Car and Foundry, 121–122 Amway, 44, 59, 66 Andry, Doran, 20, 79–80 AOL, 127 Apple, 1, 39, 184–188 buyback of Icahn’s stock, 184, 185, 186–188 arbitrage, game of, 118, 119 Auletta, Ken, 115 Automatic Data Processing Inc., 215 AXA Center on Seventh Avenue, 76, 78, 89, 111, 158, 159–162 Bank of England, 134, 139 bankruptcy, 10, 16, 27, 29, 31, 63, 125, 126 of Lehman Brothers, 64 Barbarians at the Gate, The, 126 Barnes and Noble, 37, 70 Bartz, Carol, 92 Bausch and Lomb, 169 BBC, 162 Bear Stearns, 11 Beckham, David, 53 Benoit, David, 197 Berkowitz, David, 27–29, 31, 33 Berkshire Hathaway, 171 Big Short, The (Lewis), 12 Biogen, 128 Boesky, Ivan F., 121, 125–126 Boies, Schiller firm, 97, 176 Borders Group, 70–71 Boston Market restaurant chain, 62 Botox, 169 Boyd, Roddy, 173 Brazil, 58 Brussels, Belgium, 19, 54 Buffett, Susan, 27 Buffett, Warren, 26, 27, 129, 171, 211 BurnLounge company, 14 Business Insider, 103, 109, 147 BuzzFeed News, 213 Calderon, José, 143 Canadian Pacific railway, 71, 72, 209 Carlisle, Tobias, 119 Carmona, Dr.


pages: 302 words: 86,614

The Alpha Masters: Unlocking the Genius of the World's Top Hedge Funds by Maneet Ahuja, Myron Scholes, Mohamed El-Erian

activist fund / activist shareholder / activist investor, Asian financial crisis, asset allocation, asset-backed security, backtesting, Bernie Madoff, Bretton Woods, business process, call centre, collapse of Lehman Brothers, collateralized debt obligation, computerized trading, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, diversification, Donald Trump, en.wikipedia.org, family office, fixed income, high net worth, interest rate derivative, Isaac Newton, Long Term Capital Management, Marc Andreessen, Mark Zuckerberg, merger arbitrage, Myron Scholes, NetJets, oil shock, pattern recognition, Ponzi scheme, quantitative easing, quantitative trading / quantitative finance, Renaissance Technologies, risk-adjusted returns, risk/return, rolodex, short selling, Silicon Valley, South Sea Bubble, statistical model, Steve Jobs, systematic trading, zero-sum game

SECInvestor, September 8, 2008, www.secinvestor.com/2008/09/08/Ackman+Fights+For+More+In+Longs+Deal.aspx. “Ackman on the Rating Agencies: ‘Wait to Rate,’” New York Times Dealbook, June 2, 2010, http://dealbook.nytimes.com/2010/06/02/ackman-on-the-ratings-agencies-wait-to-rate/. “Ackman Questions Lampert on Sears,” New York Times Dealbook, May 6, 2008, http://dealbook.nytimes.com/2008/05/06/ackman-grills-lampert-on-sears/. “Activist Investor Bids for Barnes & Noble, Borders Merger,” Business Pundit, December 7, 2010, www.businesspundit.com/activist-investor-bids-for-barnes-noble-borders-merger/. “Bill Ackman.” http://en.wikipedia.org/wiki/Bill_Ackman. “Bill Ackman Buys Sears Holdings Corp., Target Corp., Greenlight Capital Re, LTD., Sells Staples Inc.” Guru News, November 17, 2007. http://www.gurufocus.com/forum/read.php?1,17371. Burton, Katherine. “Ackman’s Reputation May Get Marked Down in Target War (Update1).”

Trian Fund Management, who own nearly 30 percent of the company, has been working with Wendy’s management on operational improvements as well as the use of cash to buy back a significant amount of stock. This has led to downgrades of the company’s credit rating. “S&P has rated it CCC,” says Weinstein. “Not too good, and Moody’s is just a little better, at B—. We actually think it’s kind of a solid single B.” Weinstein then consults the credit spread, which at 230 basis points for CDS is more typical of a better-rated BB company. “We think a leveraged company with activist shareholders and an aggressive stock buyback program should not be trading at 230 basis points,” says Weinstein. And actually it was as low as 150 basis points in 2010 when we put the trade on. But we’re keeping it. And we own the stock.” Meanwhile, Weinstein keeps other developments in mind. “The restaurant sector has seen more than its share of LBOs, with Burger King as the most important example.

And this is where Maneet Ahuja’s book comes in forcefully and effectively. This interesting book takes you on a journey through the fascinating and still-mysterious world of successful hedge fund managers. You will make many interesting, and in some cases surprising stops along the way, getting to know managers, their philosophies, styles, quirks, and working practices. Maneet will tell you about the world of activist investors whose objective is to unlock hidden value in companies, either through operational improvements or through the more controversial company restructurings and asset stripping. She will also expose you to the inherently cynical and always-suspicious short sellers who obsessively plunge into the details to sort out underlying fundamentals from often intricate and possibly obfuscating packaging.


pages: 515 words: 132,295

Makers and Takers: The Rise of Finance and the Fall of American Business by Rana Foroohar

accounting loophole / creative accounting, activist fund / activist shareholder / activist investor, additive manufacturing, Airbnb, algorithmic trading, Alvin Roth, Asian financial crisis, asset allocation, bank run, Basel III, bonus culture, Bretton Woods, British Empire, business cycle, buy and hold, call centre, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, carried interest, centralized clearinghouse, clean water, collateralized debt obligation, commoditize, computerized trading, corporate governance, corporate raider, corporate social responsibility, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, crowdsourcing, David Graeber, deskilling, Detroit bankruptcy, diversification, Double Irish / Dutch Sandwich, Emanuel Derman, Eugene Fama: efficient market hypothesis, financial deregulation, financial intermediation, Frederick Winslow Taylor, George Akerlof, gig economy, Goldman Sachs: Vampire Squid, Gordon Gekko, greed is good, High speed trading, Home mortgage interest deduction, housing crisis, Howard Rheingold, Hyman Minsky, income inequality, index fund, information asymmetry, interest rate derivative, interest rate swap, Internet of things, invisible hand, John Markoff, joint-stock company, joint-stock limited liability company, Kenneth Rogoff, Kickstarter, knowledge economy, labor-force participation, London Whale, Long Term Capital Management, manufacturing employment, market design, Martin Wolf, money market fund, moral hazard, mortgage debt, mortgage tax deduction, new economy, non-tariff barriers, offshore financial centre, oil shock, passive investing, Paul Samuelson, pensions crisis, Ponzi scheme, principal–agent problem, quantitative easing, quantitative trading / quantitative finance, race to the bottom, Ralph Nader, Rana Plaza, RAND corporation, random walk, rent control, Robert Shiller, Robert Shiller, Ronald Reagan, Satyajit Das, Second Machine Age, shareholder value, sharing economy, Silicon Valley, Silicon Valley startup, Snapchat, Social Responsibility of Business Is to Increase Its Profits, sovereign wealth fund, Steve Jobs, technology bubble, The Chicago School, the new new thing, The Spirit Level, The Wealth of Nations by Adam Smith, Tim Cook: Apple, Tobin tax, too big to fail, trickle-down economics, Tyler Cowen: Great Stagnation, Vanguard fund, zero-sum game

By May 2015, Icahn’s stake in Apple had soared 330 percent, to more than $6.5 billion, and Apple had pledged to spend a total of $200 billion on dividends and buybacks through March 2017. Meanwhile, the company’s R&D as a percentage of sales, which has been falling since 2001, is creeping ever lower.5 What these sorts of sugar highs portend for Apple’s long-term future is anyone’s guess, but one thing is clear: the business of America isn’t business anymore. It’s finance. From “activist investors” to investment banks, from management consultants to asset managers, from high-frequency traders to insurance companies, today, financiers dictate terms to American business, rather than the other way around. Wealth creation within the financial markets has become an end in itself, rather than a means to the end of shared economic prosperity. The tail is wagging the dog. Worse, financial thinking has become so ingrained in American business that even our biggest and brightest companies have started to act like banks.

But in July of that same year, it embarked on $20 billion worth of stock buying, and the share price promptly rose by 7 percent.31 It’s a pattern that’s being repeated more recently at a record number of companies, including Yahoo, where CEO Marissa Mayer, backed by hedge fund titan Daniel Loeb, began boosting the firm’s share price several years ago by handing back cash to investors who hadn’t been persuaded by Yahoo’s underlying growth story. (Mayer later found herself under pressure from yet more “activists” looking to dissuade her from using a cash hoard from the proposed spin-off of Yahoo’s core search business for acquisitions rather than buybacks.32) She’s certainly not alone. The year 2015 set a new record for buybacks and dividend payments, as well as demands for even greater payouts issued by activist investors like Loeb, Icahn, Einhorn, and many others.33 What’s more, though many of us don’t know it, we ourselves are part of a dysfunctional ecosystem that fuels all this short-term thinking. The people who manage our retirement money—fund managers working for firms like Fidelity and BlackRock—are typically compensated for delivering returns over a year or less.34 That means they use their financial clout (which is really ours) to push companies to produce quick-hit results, rather than to execute longer-term strategies.

Chapter 2 will examine how financial thinking came to dominate American corporate life by telling the story of General Motors and of former secretary of defense Robert McNamara and the Whiz Kids, whose obsession with numbers decisively contributed to the loss of the Vietnam War, the decline of the American auto industry, and the ultimate spread of financialized thinking into every corner of American business today. Chapter 3 will delve deeply into the history of US business education and examine how and why it came to focus on balance sheet manipulation to the exclusion of real managerial skills. Chapter 4 will deconstruct our conventional wisdom around shareholder value by looking at how activist investors like Carl Icahn now call the shots at the country’s largest and most successful firms—such as Apple—at the expense of innovation and job creation. Chapter 5 will show how much of corporate America has come to emulate banking—how we’re all glorified bankers now—by tracking the history of General Electric, which is one of the great American innovators, but which became the country’s fifth-largest bank before trying to reclaim its roots in industry.


pages: 324 words: 92,805

The Impulse Society: America in the Age of Instant Gratification by Paul Roberts

2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, 3D printing, accounting loophole / creative accounting, activist fund / activist shareholder / activist investor, Affordable Care Act / Obamacare, American Society of Civil Engineers: Report Card, asset allocation, business cycle, business process, Cass Sunstein, centre right, choice architecture, collateralized debt obligation, collective bargaining, computerized trading, corporate governance, corporate raider, corporate social responsibility, creative destruction, crony capitalism, David Brooks, delayed gratification, disruptive innovation, double helix, factory automation, financial deregulation, financial innovation, fixed income, full employment, game design, greed is good, If something cannot go on forever, it will stop - Herbert Stein's Law, impulse control, income inequality, inflation targeting, invisible hand, job automation, John Markoff, Joseph Schumpeter, knowledge worker, late fees, Long Term Capital Management, loss aversion, low skilled workers, mass immigration, new economy, Nicholas Carr, obamacare, Occupy movement, oil shale / tar sands, performance metric, postindustrial economy, profit maximization, Report Card for America’s Infrastructure, reshoring, Richard Thaler, rising living standards, Robert Shiller, Robert Shiller, Rodney Brooks, Ronald Reagan, shareholder value, Silicon Valley, speech recognition, Steve Jobs, technoutopianism, the built environment, The Predators' Ball, the scientific method, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, total factor productivity, Tyler Cowen: Great Stagnation, Walter Mischel, winner-take-all economy

Telling the Market to Back Off For decades, conservatives complained that government was so deeply embedded in the economy, and had so much influence on the decisions of producers and consumers alike, that prosperity was no longer possible. Today, we can make a similar complaint about the financial markets, whose penetration into every part of our economic lives lies at the heart of the Impulse Society. In everything from the expansion of consumer credit to the rise of “activist” shareholders, the financial sector has gradually injected its requirements for high yields, quick returns, and capital efficiency into all walks of commercial life—and much of the rest of society as well. Financialization’s most infamous symptom is the overuse of consumer credit, and, clearly, we could strike a serious blow against the Impulse Society by helping consumers to rethink the practice of gratifying the present by borrowing from the future.

Since the shareholder revolution of the 1980s, not only have corporate managers become more eager to please financial markets—fully two-thirds of the average senior executive’s compensation is now in stocks and options7—but those markets are much harder to satisfy. The stock market today is ruled by so-called institutional investors—pensions, mutual funds, hedge funds, and, especially, hedge fund “activists”—investors who buy up large stakes in companies and then seek to influence share price. For these big institutional players, which collectively control around three-quarters of the shares of big, publicly traded companies,8 the hunt for yield is life’s overriding goal. To prosper—indeed, to survive—the institutional investors must please their own clients (everyone from retirees to billionaires), and this they do by setting aggressive quarterly “return targets” for their portfolios—targets that, as economists Eric Tymoigne and Randall Wray have pointed out, are generally well above the growth rates projected for the American economy as a whole.

Given the power that our new technologies give us to secure short-term rewards, it’s hard to see why we would have any incentive to behave otherwise. In a truly efficient market, such short-termism would be recognized and punished. But in the self-centered economy, the market is in on the scam. Thus, shareholders cheer when Microsoft or Apple or Intel spends tens of billions of dollars on share buybacks. Consider the following: in August 2013, Carl Icahn, the corporate-raider-turned-activist-investor, announced (on Twitter, naturally) that he had acquired a $1 billion stake in Apple, and was demanding that the company spend $150 billion to buy back its own shares. Such a move, Icahn insisted, would lift Apple’s share price from $487 to $625 (and, others noted, net the raider a $280 million capital gain48). It was a classic Impulse Society move: Icahn has no expertise in computer technology or organizational structure, or any of the things that go into true innovation.


pages: 716 words: 192,143

The Enlightened Capitalists by James O'Toole

activist fund / activist shareholder / activist investor, anti-communist, Ayatollah Khomeini, Bernie Madoff, British Empire, business cycle, business process, California gold rush, carbon footprint, City Beautiful movement, collective bargaining, corporate governance, corporate social responsibility, Credit Default Swap, crowdsourcing, cryptocurrency, desegregation, Donald Trump, double entry bookkeeping, end world poverty, equal pay for equal work, Frederick Winslow Taylor, full employment, garden city movement, germ theory of disease, glass ceiling, God and Mammon, greed is good, hiring and firing, income inequality, indoor plumbing, inventory management, invisible hand, James Hargreaves, job satisfaction, joint-stock company, Kickstarter, knowledge worker, Lao Tzu, longitudinal study, Louis Pasteur, Lyft, means of production, Menlo Park, North Sea oil, passive investing, Ponzi scheme, profit maximization, profit motive, Ralph Waldo Emerson, rolodex, Ronald Reagan, shareholder value, Silicon Valley, Social Responsibility of Business Is to Increase Its Profits, Socratic dialogue, sovereign wealth fund, spinning jenny, Steve Jobs, Steve Wozniak, stocks for the long run, stocks for the long term, The Fortune at the Bottom of the Pyramid, The Wealth of Nations by Adam Smith, Tim Cook: Apple, traveling salesman, Uber and Lyft, uber lyft, union organizing, Vanguard fund, white flight, women in the workforce, young professional

What is significant is that it has happened at the global corporation most committed to a patient, long-term plan to implement enlightened practices.7 About the time Unilever was under threat of a hostile takeover in Britain, America’s Whole Foods Corporation faced a similar challenge from activist investors dissatisfied with its rate of financial return. Like Unilever, Whole Foods was known for its stakeholder-oriented and environmentally sensitive practices. Again, like Unilever, it was profitable—but not profitable enough for the activist investment firms holding large blocks of the company’s stock. Citing what they perceived as Whole Foods’ too rapid expansion and insufficiently profitable mix of products, in 2017 those investors demanded changes in company management or, failing that, its sale to a traditionally managed grocery chain. The company’s combative founder and CEO, John Mackey, characterized the activist investors as “a bunch of greedy bastards running around exploiting people, screwing their customers, taking advantage of their employees, dumping their toxic waste in the environment, acting like sociopaths.”

As explained in chapter 18, twenty-seven American states grant benefit corporation charters that allow companies to be legally structured so that their officers and directors are permitted to make decisions benefiting society, even if those actions are not in the immediate interest of shareholders. Thus, at least theoretically, benefit status shields socially engaged companies from the threat of activist shareholder suits based on the doctrine of shareholder primacy. It is testament to Chouinard’s deep commitment to social and environmental causes—and, equally, his distrust of investors—that he filed for benefit status. After all, it was completely unnecessary for him to have done so, given that Patagonia has no shareholders! Well, one can never be too careful. A Social Entrepreneur Chouinard’s adamant commitment to family ownership is rare, even among the for-profit companies that are part of the fast-growing “social enterprise” movement.

YET, REALISTS NOTE, THE majority of businesses have not joined in those movements, and the few who have often discover that it is difficult to sustain their efforts, finding it nearly impossible to advance beyond relatively inexpensive and easy to implement initial steps—such as shifting from incandescent to LED lighting—in their environmental practices. Many companies that have pledged to become carbon neutral, to use only recycled and recyclable materials, and to source only fair-traded commodities have discovered after years of trying to meet those goals that they are still decades away from doing so. More significantly, a number of companies committed to social engagement have come under attack by activist investors claiming that such efforts reduce the profits belonging to them, the legal owners of those corporations.26 Indeed, a leitmotif running through all the enlightened capitalists’ stories is conflict over the control of company ownership. That is because, in capitalist systems, those who control a corporation’s stock have the final say in setting its policy. In sum, members of the business community seem more open than ever to the idea of expanding beyond their traditional economic role, yet they are uncertain how to do so in practice, not sure if it is possible to do so effectively and efficiently, and greatly concerned about doing so in a way that is profitable enough to satisfy investors.


pages: 318 words: 77,223

The Only Game in Town: Central Banks, Instability, and Avoiding the Next Collapse by Mohamed A. El-Erian

activist fund / activist shareholder / activist investor, Airbnb, balance sheet recession, bank run, barriers to entry, break the buck, Bretton Woods, British Empire, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, carried interest, collapse of Lehman Brothers, corporate governance, currency peg, disruptive innovation, Erik Brynjolfsson, eurozone crisis, financial innovation, Financial Instability Hypothesis, financial intermediation, financial repression, fixed income, Flash crash, forward guidance, friendly fire, full employment, future of work, Hyman Minsky, If something cannot go on forever, it will stop - Herbert Stein's Law, income inequality, inflation targeting, Jeff Bezos, Kenneth Rogoff, Khan Academy, liquidity trap, Martin Wolf, megacity, Mexican peso crisis / tequila crisis, moral hazard, mortgage debt, Norman Mailer, oil shale / tar sands, price stability, principal–agent problem, quantitative easing, risk tolerance, risk-adjusted returns, risk/return, Second Machine Age, secular stagnation, sharing economy, sovereign wealth fund, The Great Moderation, The Wisdom of Crowds, too big to fail, University of East Anglia, yield curve, zero-sum game

Quoting the S&P estimate of more than $900 billion in U.S. dividends and buybacks for 2014, the letter acknowledges that companies face a “business ecosystem [that] has evolved significantly and presents a daunting challenge for companies working to resist short-term market pressures”—this at a time when S&P expected further increases in both dividends and buybacks. Specifically, dividends were projected to maintain their double-digit growth of the last four years, with a similar growth rate for buybacks.3 Larry Fink correctly noted that pressures on companies come from many directions, including “the proliferation of activist shareholders seeking immediate returns, the ever increasing velocity of capital, a media landscape defined by the 24/7 news cycle and a shrinking attention span, and public policy that fails to encourage truly long-term investment.” Notwithstanding this rather daunting list, Larry Fink urges corporate leaders to reverse the resulting “underinvesting in innovation, skilled workforces or essential capital expenditures necessary to sustain long-term growth.”

In the real world, however, it has taken an unusually long time since the financial crisis for such activity to ramp up, and when activity did pick up, the moves being made initially were largely defensive—that is, companies sought to consolidate costs and reduce competition rather than expand aggressively. Coming out of the financial crisis, companies opted to retain earnings and build up a cash cushion, minimizing the chance of being traumatized again by the market grinding to a halt. But with the growing reality of activist investors—that is, financial investors that use various instruments to place considerable pressure on managements and boards to change—it became only a matter of time until money started flowing back to shareholders through share buybacks and higher dividend payments. While in some cases this resulted in better outcomes, in others it forced companies to manage more intensively to short-term pressures rather than longer-term business interests.


pages: 423 words: 118,002

The Boom: How Fracking Ignited the American Energy Revolution and Changed the World by Russell Gold

accounting loophole / creative accounting, activist fund / activist shareholder / activist investor, activist lawyer, addicted to oil, American energy revolution, Bakken shale, Bernie Sanders, Buckminster Fuller, clean water, corporate governance, corporate raider, energy security, energy transition, hydraulic fracturing, Intergovernmental Panel on Climate Change (IPCC), margin call, market fundamentalism, Mason jar, North Sea oil, oil shale / tar sands, oil shock, peak oil, Project Plowshare, risk tolerance, Ronald Reagan, shareholder value, Silicon Valley, Upton Sinclair

Before they took us to the subterranean bunker, a smiling Chesapeake official asked me to sign a form that said I would be removed from the property if I attempted to wander about and interview shareholders or employees. I would not be allowed to grab lunch at one of the company’s three on-site restaurants, which a video screen advertised were serving pan-seared Pacific red snapper in a blood-orange beurre blanc sauce with roasted Japanese eggplant. McClendon was under siege, his leadership and personal finances attacked by activist shareholders. They believed that the assets he had built, leases to drill on millions of acres above US shales and trillions of cubic feet of natural gas, were worth more in the hands of someone else. He had relentlessly—and, some argued, recklessly—created the preeminent shale energy company in the world. Now his hold on the corner suite was tenuous. Shortly after the meeting began at ten o’clock, McClendon took the stage to applause.

The new Chesapeake, he went on, would be “simpler . . . we have what we own, and we are happy with what we own.” At the end of his short remarks, he mentioned the public drubbing his handpicked board members had just received, saying, “We will be studying the results of the vote today and see what else needs to be done.” After he spoke, Vincent Intrieri took the microphone. He worked for Carl Icahn, a well-known activist investor with a reputation for acquiring shares in a company and forcing change. Icahn had been buying Chesapeake shares for several weeks. Intrieri was in his midfifties. He wore an expensive suit and eyeglasses, the uniform of a powerful capitalist. “We believe Aubrey that you are a great oil and gas man,” he said, “but even great leaders need oversight.” The new board of directors, he said, should keep an open mind and consider a potential sale of the entire company.


pages: 253 words: 79,214

The Money Machine: How the City Works by Philip Coggan

activist fund / activist shareholder / activist investor, algorithmic trading, asset-backed security, Bernie Madoff, Big bang: deregulation of the City of London, bonus culture, Bretton Woods, call centre, capital controls, carried interest, central bank independence, collateralized debt obligation, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, disintermediation, diversification, diversified portfolio, Edward Lloyd's coffeehouse, endowment effect, financial deregulation, financial independence, floating exchange rates, Hyman Minsky, index fund, intangible asset, interest rate swap, Isaac Newton, joint-stock company, labour market flexibility, large denomination, London Interbank Offered Rate, Long Term Capital Management, merger arbitrage, money market fund, moral hazard, mortgage debt, negative equity, Nick Leeson, Northern Rock, pattern recognition, purchasing power parity, quantitative easing, reserve currency, Right to Buy, Ronald Reagan, shareholder value, South Sea Bubble, sovereign wealth fund, technology bubble, time value of money, too big to fail, tulip mania, Washington Consensus, yield curve, zero-coupon bond

Conspiracy theorists can follow the chain of ownership back and back without finding a sinister, top-hatted capitalist at the end of it (although when it comes to hedge funds and private equity, it may be a different matter). Some people, particularly company executives, worry that investment institutions will gang together and try to alter the policies of the companies in which they have substantial holdings. This is happening more than it used to, with so-called activist investors often demanding that companies take action to create ‘shareholder value’ and other ethical investors demanding that companies respect the rights of workers in developing countries, adopt sound environmental policies and so on. In the majority of cases, however, institutions do not exercise their power to intervene in the day-to-day running of firms. One reason is that they do not have the time or the expertise to do so.

The hedge fund world is intensely Darwinian; in 2006, while 1,500 funds were set up, some 700 folded. The managers regard themselves as smart people, pitting themselves in daily combat against the whims of the markets. They resent criticism and dislike publicity about their pay packages or their mistakes. But they are not above using the press to promote their positions, particularly in bid situations. This can lead to a lot of resentment, especially when so-called activist funds start to lobby against the decisions of company managers. The Children’s Investment fund, or TCI, is one prominent example. It campaigned against the Deutsche Börse’s bid for the London Stock Exchange, arguing that the German exchange would do better to return cash to shareholders. Not only did the bid fail but the Börse’s chief executive Weiner Seifert was forced out. Then TCI took a 1 per cent stake in the Dutch bank ABN Amro, sparking a bidding war that ended with the bank’s purchase by Royal Bank of Scotland.

Most shareholders wait until the last minute before deciding, in case a higher bid is put on the table. The final count can be agonizingly close – bids have been disallowed because the vital acceptances were delivered just a few minutes after the final deadline. These days hedge funds may often be involved. Some may follow a strategy known as merger arbitrage in which they buy the shares of the target and sell short (bet on a decline in) the shares of the predator. Others may be activist funds that buy stakes and try to force a company’s managers to increase the share price by seeking a bid. Takeovers tend to be terribly acrimonious, although the kind of high-profile advertising that characterized the takeover battles of the early 1980s has been discouraged. They are also very lucrative for the banks, lawyers, accountants and public relations advisers involved. The costs of a substantial bid, successful or not, will run into many millions of pounds.


Deep Value by Tobias E. Carlisle

activist fund / activist shareholder / activist investor, Andrei Shleifer, availability heuristic, backtesting, business cycle, buy and hold, corporate governance, corporate raider, creative destruction, Daniel Kahneman / Amos Tversky, discounted cash flows, fixed income, intangible asset, joint-stock company, margin call, passive investing, principal–agent problem, Richard Thaler, riskless arbitrage, Robert Shiller, Robert Shiller, Rory Sutherland, shareholder value, Sharpe ratio, South Sea Bubble, statistical model, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, Tim Cook: Apple

An engaged shareholder can reduce agency costs by concentrating managers on creating shareholder value instead of pursuing other agendas. Shareholder activists may pursue a multitude of agendas, not necessarily seeking to improve intrinsic value or remove a market price discount, but activist investors seek only to deliver a return. The difference between activist investing and other forms of shareholder activism is the difference between whaling and whaling on the Pequod. The mandate is whales—deep undervaluation—not white whales—shareholder activism. This leads activist investors to seek different ends to other shareholder activists. Activist investors pressure boards to remove underperforming managers, stop value-destroying mergers and acquisitions, disgorge excess cash and optimize capital structures, or press for a sale of the company, all of which are designed only to improve shareholder value.

For a brief period, news of their exploits would extend beyond the business pages and into popular culture, most notably in Michael Douglas’s character Gordon Gecko in Wall Street (1987), Richard Gere’s Edward Lewis in Pretty Woman (1990), and Danny Devito’s Larry “The Liquidator” Garfield in Other People’s Money (1991), notable for a memorable scene in which DeVito draws Graham’s net current asset value formula on a blackboard. Their influence waxed and waned with the ­market. Following the 1987 stock market crash, they gradually retreated again from the public consciousness. A new breed of activist investors emerged in the wake of the dot-com bust in the early 2000s, chasing the cashed-up failures of the information technology and communications boom. As Evans and Icahn had before them, the new activist investors rediscovered the power of the public media campaign, the proxy contest, and the tender offer. The new activists moved in some cases to civilize shareholder activism, allowing institutionalization that attracted new capital, and rendered countless new innovations, from web-based campaigns and “public” private equity.

Seeking to avoid defeat, Icahn contacted Genzyme director Ralph Whitworth, also an activist investor who had recently been added to the board, to see if he could get Denner on the board, too. Whitworth told him he couldn’t have Denner, but he could pick two independent directors. Whitworth had already discussed the offer with Termeer, arguing, “You still have Carl out there, and he’s pissed off now. Let’s quiet things down and get everyone inside working [together].”49 Icahn agreed to Whitworth’s terms, withdrawing his slate a few days later when the two new directors were added to the board. 176 DEEP VALUE If Termeer felt any sense of relief, it was short-lived. Unbidden by Icahn, but apparently sensing the opportunity that the two activist investors had created in Genzyme, pharmaceutical giant Sanofi-Aventis started circling.


pages: 263 words: 80,594

Stolen: How to Save the World From Financialisation by Grace Blakeley

"Robert Solow", activist fund / activist shareholder / activist investor, asset-backed security, balance sheet recession, bank run, banking crisis, banks create money, Basel III, basic income, battle of ideas, Berlin Wall, Big bang: deregulation of the City of London, bitcoin, Bretton Woods, business cycle, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, collective bargaining, corporate governance, corporate raider, credit crunch, Credit Default Swap, cryptocurrency, currency peg, David Graeber, debt deflation, decarbonisation, Donald Trump, eurozone crisis, Fall of the Berlin Wall, falling living standards, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, fixed income, full employment, G4S, gender pay gap, gig economy, Gini coefficient, global reserve currency, global supply chain, housing crisis, Hyman Minsky, income inequality, inflation targeting, Intergovernmental Panel on Climate Change (IPCC), Kenneth Rogoff, Kickstarter, land value tax, light touch regulation, low skilled workers, market clearing, means of production, money market fund, Mont Pelerin Society, moral hazard, mortgage debt, negative equity, neoliberal agenda, new economy, Northern Rock, offshore financial centre, paradox of thrift, payday loans, pensions crisis, Ponzi scheme, price mechanism, principal–agent problem, profit motive, quantitative easing, race to the bottom, regulatory arbitrage, reserve currency, Right to Buy, rising living standards, risk-adjusted returns, road to serfdom, savings glut, secular stagnation, shareholder value, Social Responsibility of Business Is to Increase Its Profits, sovereign wealth fund, the built environment, The Great Moderation, too big to fail, transfer pricing, universal basic income, Winter of Discontent, working-age population, yield curve, zero-sum game

These pressures have been passed on to corporations via the stock market: with equities representing a significant chunk of the assets held by money managers, the pressure on corporations to meet shareholder needs for immediate returns increased.33 In some cases, rather than being responsible to a board of directors and a few disorganised shareholders, corporations have been held to ransom by “activist investors” demanding that their capital is used in the most efficient way possible. This change in corporate governance has also been reinforced and embedded by the emergence of a new ideology: shareholder value. Together, the increasing power of investors and the emergence of an ideology to support this power has led to the financialisation of the non-financial corporation: businesses are increasingly being used as piggy banks for rich shareholders. This, according to the CEO of General Electric, makes shareholder value “the dumbest idea in the world”34. But like many dumb ideas that enrich the powerful, shareholder value took off in the 1980s — and nowhere more so than in the City of London. Corporate Raiders, Hostile Takeovers, and Activist Investors Lord Hanson — aka “Lord Moneybags” — is famous for many things.35 He was engaged to Audrey Hepburn, had a fling with Joan Collins, and also happens to be one of the UK’s most notorious corporate raiders.

CONTENTS Introduction The Interregnum What is the Alternative? Building the Future Chapter One The Golden Age of Capitalism How Does Change Happen? The Rise of Global Finance The Political Consequences of Social Democracy Never Let a Serious Crisis Go to Waste Chapter Two Vulture Capitalism: The Financialisation of the Corporation The Big Bang Corporate Raiders, Hostile Takeovers and Activist Investors From Downsize and Distribute to Merge and Monopolise Chapter Three Let Them Eat Houses: The Financialisation of the Household The Enemy Within Privatised Keynesianism Blowing Bubbles Financialisation and Politics Chapter Four Thatcher’s Greatest Achievement: The Financialisation of the State Thatcher’s Greatest Achievement PFI: Profits for Investors The Bond Vigilantes Illiberal Technocracy Chapter Five The Crash Bubble Economics Financial Globalisation Securitisation, Shadow Banking and Inter-Bank Lending Bailout Britain Transatlantic Banking Crisis or Structural Crisis of Financial Capitalism?

The rise of the institutional investor and shareholder value ideology have had a lasting impact on corporate power in both the US and the UK.7 Most corporations are now structured around the interests of shareholders, with workers’ interests coming last, if they are even considered at all.8 As this process has developed, a battle has emerged between certain types of shareholders over others. Short-term shareholders, like hedge funds, have benefitted to a much greater extent than long-term shareholders, like pension funds.9 Some private executives, intent on maintaining their corporations’ size and power, have sought to protect themselves from hostile takeovers and activist investors. Those that have succeeded have emerged as the most powerful monopolies in human history. Meanwhile, any form of resistance to the emergence of this model has been brutally broken. Where unions may once have acted in the interests of workers against managers acting in the interests of shareholders, the former have been eviscerated by states intent on ensuring that businesses are able to make as much money as possible.


pages: 198 words: 53,264

Big Mistakes: The Best Investors and Their Worst Investments by Michael Batnick

activist fund / activist shareholder / activist investor, Airbnb, Albert Einstein, asset allocation, bitcoin, Bretton Woods, buy and hold, buy low sell high, cognitive bias, cognitive dissonance, Credit Default Swap, cryptocurrency, Daniel Kahneman / Amos Tversky, endowment effect, financial innovation, fixed income, hindsight bias, index fund, invention of the wheel, Isaac Newton, John Meriwether, Kickstarter, Long Term Capital Management, loss aversion, mega-rich, merger arbitrage, Myron Scholes, Paul Samuelson, quantitative easing, Renaissance Technologies, Richard Thaler, Robert Shiller, Robert Shiller, Snapchat, Stephen Hawking, Steve Jobs, Steve Wozniak, stocks for the long run, transcontinental railway, value at risk, Vanguard fund, Y Combinator

The money flooded in, attracting some $220 million.5 The new Ackman would no longer invest passively. Gone were the days of buying a company at a discount, and letting the chips fall where they may. Bill Ackman rose from the ashes of Gotham Partners like a phoenix and came out one of the most aggressive activist investors of his era. An activist investor is one who acquires a large enough shares in a company to enact changes. They'll try to persuade management to be more shareholder friendly, which is code for increase the stock price. If they're not successful, they can push for a seat on the board and enact changes from the inside. Activist investors are a confident bunch. It's one thing to purchase shares in a company, it's another thing entirely to impose your will on a management team and tell them how to run their business. The stakes are high in this arena and when successful, the payoff can be enormous.

In fact, I don't think I've ever seen a fund manager grab a company by the tail and simply not let go the way Mr. Ackman has done with this once‐obscure holding company, whose main subsidiary, MBIA Insurance, is the nation's largest bond insurer.10 After seven years, Ackman would ultimately be vindicated, and he walked away with $1.4 billion in profits.11 But his battle with MBIA was a warm‐up for the war he would have with Herbalife. By definition, activist investors are public, because once you acquire 5% of a company, you must file a 13D registration with the Security and Exchange Commission. Short positions, however, do not have to be disclosed, but Ackman chooses to do so anyway, like nobody has ever done before. Herbalife is a Los Angeles–based company that sells weight loss products and nutritional supplements. Herbalife has been in business for 37 years, and now operates in 90 countries.

On January 9, Dan Loeb, founder of the hedge fund Third Point LLC, filed with the SEC, announcing that he had acquired 8.9 million Herbalife shares, or 8.24% of the stock, which made him the company's second largest shareholder. Loeb wrote a letter to his investors saying that the majority of his stake was purchased “during the panicked selling that followed the short seller's dramatic claims.”18 In the five days since Loeb's filing, Herbalife's stock rose 20%. Then a week later, the Wall Street Journal reported that billionaire activist investor Carl Icahn took a stake in Herbalife, and a month later, disclosures showed he owned 12.98% of the company. Carl Icahn and Dan Loeb against Bill Ackman – a face‐off raging all because Ackman got on his soapbox. It's impossible to know for sure whether Loeb and Icahn actually thought Herbalife was a good business and its stock was undervalued. In fact, that part was sort of irrelevant. What mattered was that Bill Ackman, by publicly acknowledging that he would go to the end of the world with this thing, just put a big, fat bull's‐eye on his back.


pages: 120 words: 33,892

The Acquirer's Multiple: How the Billionaire Contrarians of Deep Value Beat the Market by Tobias E. Carlisle

activist fund / activist shareholder / activist investor, business cycle, cognitive dissonance, corporate governance, corporate raider, Jeff Bezos, Paul Graham, Peter Thiel, Richard Thaler, shareholder value, Tim Cook: Apple

ACKNOWLEDGMENTS I am grateful to the early reviewers of this book, notably Johnny Hopkins, Colin Macintosh, Jacob Taylor and Lonnie Rush at Farnam Street Investments, and Michael Seckler and John Alberg at Euclidean Technologies. ABOUT THE AUTHOR Tobias Carlisle is the founder and managing director of Carbon Beach Asset Management, LLC. He serves as co-portfolio manager of Carbon Beach’s managed accounts and funds. He is the author of the bestselling book Deep Value: Why Activists Investors and Other Contrarians Battle for Control of Losing Corporations (2014, Wiley Finance). He is a coauthor of Concentrated Investing: Strategies of the World’s Greatest Concentrated Value Investors (2016, Wiley Finance) and Quantitative Value: A Practitioner’s Guide to Automating Intelligent Investment and Eliminating Behavioral Errors (2012, Wiley Finance). His books have been translated into five languages.

He attacked the giants of the public markets, which included Texaco, the “Big Red Star of the American Highway,” for which he bid $12.4 billion. He also attacked U.S. Steel, the world’s first billion-dollar corporation, then with a market cap of $6 billion. Other investors took notice. A cottage industry of so-called corporate raiders sprang up. They disappeared with the 1987 stock market crash. But a new breed of activist investors emerged in the wake of the dot-com bust in the early 2000s. We’ll learn about two in the next chapter. 10. NEW GENTLEMEN OF FORTUNE “It seemed a very great world in which these men lived; a world where high rules reigned and every trifle in public conduct counted: a duelling-ground where although the business might be ruthless, and the weapons loaded with ball, there was ceremonious personal courtesy and mutual respect

This is true in the United States, United Kingdom, Europe, Africa, Asia, Australia, and New Zealand. It’s true in developing and emerging markets. It’s true globally. Deep discounts and good returns go together. For most industrial companies, the Acquirer’s Multiple is the best single measure of undervaluation. The Acquirer’s Multiple is a company’s enterprise value compared to its operating earnings. It is the metric private equity firms use when buying companies whole and activist investors use when seeking hidden value. The enterprise value is the true price we must pay for a company. It includes the market cap, which is the share price multiplied by the number of shares on issue. The market cap alone can mislead because it ignores other costs borne by the owner. The enterprise value also examines the balance-sheet and off-balance-sheet items. It rewards companies for cash, and it penalizes companies for debt, preferred stock, minority interests, and off-balance-sheet debts.


pages: 477 words: 144,329

How Money Became Dangerous by Christopher Varelas

activist fund / activist shareholder / activist investor, Airbnb, airport security, barriers to entry, basic income, bitcoin, blockchain, Bonfire of the Vanities, California gold rush, cashless society, corporate raider, crack epidemic, cryptocurrency, discounted cash flows, disintermediation, diversification, diversified portfolio, Donald Trump, dumpster diving, fiat currency, fixed income, friendly fire, full employment, Gordon Gekko, greed is good, interest rate derivative, John Meriwether, Kickstarter, Long Term Capital Management, mandatory minimum, mobile money, mortgage debt, pensions crisis, pets.com, pre–internet, profit motive, risk tolerance, Saturday Night Live, shareholder value, side project, Silicon Valley, Steve Jobs, technology bubble, The Predators' Ball, too big to fail, universal basic income, zero day

They aren’t even called corporate raiders anymore, but rather activist investors. And in general, they’re viewed as good guys because they keep management teams honest and motivated. I recently attended a San Francisco Giants baseball game, and who threw out the first pitch? Our former-hero-turned-prison-inmate, Michael Milken. The crowd set down their hot dogs and beers and applauded him warmly. After serving two years in prison on multiple felony convictions, he had reinvented himself as a philanthropist, and even his once infamous history as the Junk Bond King was now celebrated. Except that nowadays, no one says junk bond. The accepted term is high-yield bond. So Michael Milken is again a hero, junk bonds are high-yield bonds, and corporate raiders have become activist investors. This signals a major evolution in American business, from the time of Steinberg’s attack on Disney through to the current day.

This signals a major evolution in American business, from the time of Steinberg’s attack on Disney through to the current day. While these activist investors can certainly bring about positive results, one unfortunate consequence is that management teams have become laser-focused on the bottom line—and, in particular, the short-term bottom line—often at the expense of investing in and creating the best product three or five years from now. They don’t really have a choice, since the climate in which they operate demands that they deliver strong short-term results. That approach doesn’t seem to be the way to build the happiest place on Earth. So how do we find a middle ground, a place where managers don’t become complacent but are also not frightened into worrying only about today’s profit at the expense of tomorrow’s happiness for customers, employees, and shareholders?

That trust encourages shareholders to “rent” public equities, as it is often described, serving their broader investment objectives with little to no desire for the responsibilities that come with ownership. A significant majority of both ownership and trading volume is now passive or based on computer-driven trading algorithms, which leaves very few shareholders in the position of being watchdogs of accountability. Most of that responsibility is in the hands of the activist investors. Once considered bad guys, now they have become the conscience and protectors of our public markets. In the closing scene of Pretty Woman’s abandoned original script, Vivian is on a Greyhound bus with her roommate and best friend, Kit, who is also a prostitute. Edward had just left Vivian in a ruined heap on the sidewalk, and now the young women have hit the road to blow some of the money Vivian made that week as Edward’s escort.


file:///C:/Documents%20and%... by vpavan

accounting loophole / creative accounting, activist fund / activist shareholder / activist investor, asset allocation, Berlin Wall, business cycle, buttonwood tree, buy and hold, corporate governance, corporate raider, disintermediation, diversification, diversified portfolio, Donald Trump, estate planning, fixed income, index fund, intangible asset, interest rate swap, margin call, money market fund, Myron Scholes, new economy, price discovery process, profit motive, risk tolerance, shareholder value, short selling, Silicon Valley, Small Order Execution System, Steve Jobs, stocks for the long run, stocks for the long term, technology bubble, transaction costs, Vanguard fund, women in the workforce, zero-coupon bond, éminence grise

If you think a director is not doing her job, or if you feel a director's business interests could create a conflict, it's your right— your duty, really— to vote against her, using the ballot that comes with your proxy statement. Unfortunately, removing unacceptable directors from a board isn't easy. Large shareholders, such as pension and mutual funds, tend to vote with management unless the company's share price has plummeted. Boards of directors also are often presented as one slate; you vote for all or none. But as activist shareholder groups and the financial media frown on this practice as a management-protection ploy, companies increasingly are putting individual directors up for annual reelection by shareholders. Why Should You Care? I believe a company's corporate governance is one of the most important factors to consider before investing in a company. Put simply, corporate governance is the relationship between the investor, the management team, and the board of directors of a company.

Dozens of acquired companies were broken up and sold in pieces, thousands of people were laid off, suppliers and customers were disrupted, and local communities were torn apart. The corporate raider movement caused governance experts to look for better ways to improve corporate performance, but with far less turmoil. Goldschmid and others focused on forcing directors to switch their allegiance from management to shareholders. And that gave rise to a new and powerful special interest group: activist shareholders. Institutional pension funds began to use their considerable leverage to pressure companies to get rid of poison pills and take other steps to improve performance. Among the most active were TIAA-CREF (the country's largest private pension fund, formally called the Teachers Insurance and Annuity Association-College Retirement Equities Fund) and CalPERS (the nation's largest public pension fund).


pages: 586 words: 159,901

Wall Street: How It Works And for Whom by Doug Henwood

accounting loophole / creative accounting, activist fund / activist shareholder / activist investor, affirmative action, Andrei Shleifer, asset allocation, asset-backed security, bank run, banking crisis, barriers to entry, borderless world, Bretton Woods, British Empire, business cycle, capital asset pricing model, capital controls, central bank independence, computerized trading, corporate governance, corporate raider, correlation coefficient, correlation does not imply causation, credit crunch, currency manipulation / currency intervention, David Ricardo: comparative advantage, debt deflation, declining real wages, deindustrialization, dematerialisation, diversification, diversified portfolio, Donald Trump, equity premium, Eugene Fama: efficient market hypothesis, experimental subject, facts on the ground, financial deregulation, financial innovation, Financial Instability Hypothesis, floating exchange rates, full employment, George Akerlof, George Gilder, hiring and firing, Hyman Minsky, implied volatility, index arbitrage, index fund, information asymmetry, interest rate swap, Internet Archive, invisible hand, Irwin Jacobs, Isaac Newton, joint-stock company, Joseph Schumpeter, kremlinology, labor-force participation, late capitalism, law of one price, liberal capitalism, liquidationism / Banker’s doctrine / the Treasury view, London Interbank Offered Rate, Louis Bachelier, market bubble, Mexican peso crisis / tequila crisis, microcredit, minimum wage unemployment, money market fund, moral hazard, mortgage debt, mortgage tax deduction, Myron Scholes, oil shock, Paul Samuelson, payday loans, pension reform, plutocrats, Plutocrats, price mechanism, price stability, prisoner's dilemma, profit maximization, publication bias, Ralph Nader, random walk, reserve currency, Richard Thaler, risk tolerance, Robert Gordon, Robert Shiller, Robert Shiller, selection bias, shareholder value, short selling, Slavoj Žižek, South Sea Bubble, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Market for Lemons, The Nature of the Firm, The Predators' Ball, The Wealth of Nations by Adam Smith, transaction costs, transcontinental railway, women in the workforce, yield curve, zero-coupon bond

As Charles Wohlstetter (1993), former chair of Contel, put it, "In sum, we have a group of people with increasing control of the Fortune 500 who have no proven skills in management, no experience at selecting directors, no believable judgment in how much should be spent for research or marketing — in fact, no experience except that which they have accumulated controlling other people's money." Pension funds are the least regulated of the major institutional investors, which is one reason they've been active in the shareholder rebellion, but this makes them accountable on none but purely financial measures. So rather than solving the agency problem, activist shareholding simply adds another layer of potential irresponsibility. And what do they really have to contribute? The best periods of U.S. economic growth have occurred when managers ran corporations and shareholders kept their mouths shut. Admittedly there's a chicken-egg problem here; it's no accident that Berle and Means' book came out during the Depression, that governance issues receded during the Golden Age, and that they returned as economic performance deteriorated in the 1970s.

Mutual funds have also shied away from governance issues; Fidelity, it's said by someone in the know, tried it and withdrew because of bad press, but the company didn't return phone calls asking for comment. Firms like mutual funds with highly visible public images don't want to get caught up in public controversies. But it's highly likely that many of the nonparticipating institutions are happy to have the activist funds in the lead, doing their work for them; they get the benefit of higher share prices without having to take the trouble, or risk their public image by pushing a controversial agenda. shareholders — who needs them? Just because Wall Street's short-termism is a cliche doesn't mean it isn't true. In surveys, CEOs and corporate investor relations managers repeatedly complain of pressure from money managers and Wall Street analysts to produce quick profit grov^h.


pages: 92 words: 23,741

Lessons From Private Equity Any Company Can Use by Orit Gadiesh, Hugh MacArthur

activist fund / activist shareholder / activist investor, call centre, corporate governance, inventory management, job-hopping, performance metric, shareholder value, telemarketer

What may not be so obvious, however, is that not all PE firms track the same things. Some stop with the fundamentals of markets and financial results. Others—the more activist buyers—dig deeper. They track metrics that help them monitor progress toward operational goals before it shows up in the financial results. Rather than waiting to find out if the map (i.e., the blueprint) got them to the right place, activist investors use their onboard navigational systems constantly to make sure that they are headed in the right direction. Thus PE firms focus on operational measures that look forward, point to root causes, and thereby spur action. Measuring “profit per customer,” for example, looks backward. Measuring the “number of high-value customers acquired last month,” by contrast, illuminates a meaningful trend.

Culture is an overused word, but we use it to mean the right managers with a bias for questioning the status quo, getting the facts, taking action, and ultimately driving this “at cause” behavior throughout the organization. We don’t know the specifics of the mind-set that prevails in your business today. But our experience suggests strongly that too many companies have an operating culture that is stuck in the past and ill equips them for the present—let alone the future. In the current business environment, increasingly impacted by PE firms and other activist investors, people demand performance. They demand value creation. They are impatient with results that are only average (or worse). Most of what goes into creating such a mind-set has been included in the previous sections: Define the full potential. Develop the blueprint. Accelerate performance. Harness the talent. Make equity sweat. In this final section, we will add five more prescriptions that can help move your company’s mindset strongly toward results.


pages: 172 words: 46,104

Television Is the New Television: The Unexpected Triumph of Old Media in the Digital Age by Michael Wolff

activist fund / activist shareholder / activist investor, barriers to entry, commoditize, creative destruction, disintermediation, hiring and firing, Joseph Schumpeter, Marc Andreessen, Mark Zuckerberg, Marshall McLuhan, Silicon Valley, Steve Jobs, telemarketer, the medium is the message, zero-sum game

At some point, too, Yahoo and the other traffic portals came in this sense of pointlessness to resemble media companies at their most hyperbolic worst—television at its emptiest—turning into parodies of hierarchical corporate pass-the-buck protect-your-ass bureaucracies. The open Web had become its opposite, with behavior, values, and levels of deadwood and phony-baloney jobs—and corporate-speak so deep and intense that outsiders doubled over in laughter—resembling nothing so much as the kind of companies that were regularly assaulted for being brain-dead in the 1980s and taken over by opportunistic raiders. In 2012, the raider—or “activist investor”—Dan Loeb took a stake in Yahoo, and, with hardly any resistance, gained a dominant voice on the Yahoo board. Old-line software executive Carol Bartz, appointed Yahoo’s chief in 2009, was dismissed in 2011 and replaced by Scott Thompson, who after Loeb accused him of fabricating details on his résumé was fired a few months later. Thompson was in turn replaced by the company’s number two, Ross Levinsohn, an advertising and media executive (Saatchi & Saatchi, HBO) who had become a leading media-tech crossover executive.

However, this fear forced channels to wean themselves off ad revenue. More surprisingly, as channels began to rely on fees from cable companies, those same cable companies came to control the Internet. Viacom, in 2005, divided itself in two, one part a mostly cable programming company, retaining the Viacom name, and then the other part, a new independent CBS, a mostly network broadcaster. Time Warner, after an assault by activist investor Carl Icahn in 2006, spun off its cable system, TWC (completed in 2009). Comcast, in 2009, bought NBC Universal, a content company. Each of these moves suggests doubt about a fundamental direction of the business and is, in some fashion, a circling-the-wagons move. Viacom, in part believing the Internet view that advertising will more and more migrate to digital form, pushes off CBS, its still entirely ad-supported broadcaster, in the hopes that, no longer competing with its cable channel brothers at Viacom (MTV, Comedy Central, Nickelodeon, etc.)


pages: 504 words: 139,137

Efficiently Inefficient: How Smart Money Invests and Market Prices Are Determined by Lasse Heje Pedersen

activist fund / activist shareholder / activist investor, algorithmic trading, Andrei Shleifer, asset allocation, backtesting, bank run, banking crisis, barriers to entry, Black-Scholes formula, Brownian motion, business cycle, buy and hold, buy low sell high, capital asset pricing model, commodity trading advisor, conceptual framework, corporate governance, credit crunch, Credit Default Swap, currency peg, David Ricardo: comparative advantage, declining real wages, discounted cash flows, diversification, diversified portfolio, Emanuel Derman, equity premium, Eugene Fama: efficient market hypothesis, fixed income, Flash crash, floating exchange rates, frictionless, frictionless market, Gordon Gekko, implied volatility, index arbitrage, index fund, interest rate swap, late capitalism, law of one price, Long Term Capital Management, margin call, market clearing, market design, market friction, merger arbitrage, money market fund, mortgage debt, Myron Scholes, New Journalism, paper trading, passive investing, price discovery process, price stability, purchasing power parity, quantitative easing, quantitative trading / quantitative finance, random walk, Renaissance Technologies, Richard Thaler, risk-adjusted returns, risk/return, Robert Shiller, Robert Shiller, selection bias, shareholder value, Sharpe ratio, short selling, sovereign wealth fund, statistical arbitrage, statistical model, stocks for the long run, stocks for the long term, survivorship bias, systematic trading, technology bubble, time value of money, total factor productivity, transaction costs, value at risk, Vanguard fund, yield curve, zero-coupon bond

., creating their own catalyst. 7.5. ACTIVIST INVESTING Another way to create a catalyst is to engage actively in a discussion with the firm’s board, as activist investors do. Activist investing means buying shares in a company that could be worth more with better management and then trying to affect the decisions of the firm. When an investor has bought more than 5% of the shares in a U.S. stock, he must make a so-called “13D filing,” where he reports his position size and declares whether he intends to be active. The mere presence of an activist investor can send a message to management to get their act together. Furthermore, the activist investor may make specific suggestions to the management or board, e.g., by sending a letter suggesting a replacement of the management, changing certain board members, giving cash back to shareholders, cutting costs, or selling assets that are worth more elsewhere and focusing on the remaining firm.

For example, figure 9.8 shows the price discount of BMW’s preference shares relative to the regular shares, a discount that varies over time and has been large for long time periods. Trading on the spread across share classes is not a perfect arbitrage, not just because the spread can widen but also because corporate events can lead to a different treatment of the different share classes. For instance, an activist investor might propose corporate actions that affect the share classes differently, e.g., differential share repurchases. On the other hand, many corporate events can also lead to a collapse of the spread, e.g., this may happen if the company is taken over. Figure 9.8. The price discount of BMW preference shares relative to the ordinary shares. Efficiently Inefficient Arbitrage Spreads: The Case of Twin Stocks Stat arb traders trade on the discrepancy between twin stocks.


pages: 482 words: 149,351

The Finance Curse: How Global Finance Is Making Us All Poorer by Nicholas Shaxson

activist fund / activist shareholder / activist investor, Airbnb, airline deregulation, anti-communist, bank run, banking crisis, Basel III, Bernie Madoff, Big bang: deregulation of the City of London, Blythe Masters, Boris Johnson, Bretton Woods, British Empire, business climate, business cycle, capital controls, carried interest, Cass Sunstein, Celtic Tiger, central bank independence, centre right, Clayton Christensen, cloud computing, corporate governance, corporate raider, creative destruction, Credit Default Swap, cross-subsidies, David Ricardo: comparative advantage, demographic dividend, Deng Xiaoping, desegregation, Donald Trump, Etonian, failed state, falling living standards, family office, financial deregulation, financial innovation, forensic accounting, Francis Fukuyama: the end of history, full employment, gig economy, Gini coefficient, global supply chain, high net worth, income inequality, index fund, invisible hand, Jeff Bezos, Kickstarter, land value tax, late capitalism, light touch regulation, London Whale, Long Term Capital Management, low skilled workers, manufacturing employment, Mark Zuckerberg, Martin Wolf, Mont Pelerin Society, moral hazard, neoliberal agenda, Network effects, new economy, Northern Rock, offshore financial centre, old-boy network, out of africa, Paul Samuelson, plutocrats, Plutocrats, Ponzi scheme, price mechanism, purchasing power parity, pushing on a string, race to the bottom, regulatory arbitrage, rent-seeking, road to serfdom, Robert Bork, Ronald Coase, Ronald Reagan, shareholder value, sharing economy, Silicon Valley, Skype, smart grid, Social Responsibility of Business Is to Increase Its Profits, South Sea Bubble, sovereign wealth fund, special economic zone, Steve Ballmer, Steve Jobs, The Chicago School, Thorstein Veblen, too big to fail, transfer pricing, wealth creators, white picket fence, women in the workforce, zero-sum game

Welch’s strategy caught on, helping fuel the great Wall Street merger boom of the 1980s, and spurred by Bork’s beefy message the administration of President Ronald Reagan took the brakes off.26 ‘The general modus operandi was to break apart the old conglomerates that had been assembled in the 1950s and 1960s,’ says Barry Lynn, a US antitrust expert, ‘and then reassemble the parts in ways that better linked like to like … [the] goal was to reduce competition as much as possible.’ This was profitable enough, but the transformation had a second stage: outsourcing, particularly the outsourcing of labour-intensive production facilities to cheap-labour countries like China or Bangladesh. This was driven especially hard by financial players and activist shareholders. And at the same time, also driven by financial players, bigger firms were aggressively expanding their use of tax havens to cut tax bills. These two related forms of offshoring – each involving taking money or operations elsewhere to escape paying out at home – gave large firms a killer cost advantage over their smaller, more domestically focused rivals, boosting their market power further.

If they choose to speak up, they risk everything – their contract, their land, their homes.’27 James Bloodworth, a British journalist who went undercover as a worker at an Amazon warehouse at Rugeley in Staffordshire in 2016, said he saw a similar problem affecting workers: he claimed conditions were so bad that it was ‘like a prison’.28 These changes in the landscape of economic power have most often been driven by investment funds, activist shareholders and other financial interests, which have forced firms to channel their growing profits not into research and development but into paying bumper dividends. ‘The pressure from financiers to increase profits has resulted in an ever swifter monopolisation of the industrial systems upon which we depend,’ wrote Lynn, and the new model of antitrust ‘builds vandalism right into the system’. This process has been part of the financialisation of large corporations in country after country.


pages: 459 words: 118,959

Confidence Game: How a Hedge Fund Manager Called Wall Street's Bluff by Christine S. Richard

activist fund / activist shareholder / activist investor, Asian financial crisis, asset-backed security, banking crisis, Bernie Madoff, Blythe Masters, buy and hold, cognitive dissonance, collateralized debt obligation, corporate governance, corporate raider, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, diversification, Donald Trump, family office, financial innovation, fixed income, forensic accounting, glass ceiling, Long Term Capital Management, market bubble, money market fund, moral hazard, old-boy network, Ponzi scheme, profit motive, short selling, statistical model, white flight, zero-sum game

Several months later, White returned home to North Carolina and found a box had arrived from New York in his absence. It was from Ackman and filled with books: Graham and Dodd’s Security Analysis, Peter Lynch’s One Up on Wall Street, Benjamin Graham’s Intelligent Investor, Lawrence Cunningham’s The Essays of Warren Buffett, and Thornton O’glove’s Quality of Earnings. These were Ackman’s favorite books on investing, and he wanted White to read them all. Ackman made his reputation on Wall Street as an activist investor, a high-profile role that requires a knack for showmanship. But those who know Ackman well say he is an analyst at heart. “He is the smartest analyst I’ve ever met,” says Rafael Mayer, managing director of Khronos LLC, a family office and fund of funds investor, and a friend of Ackman’s. “He looks at something and he just decomposes it.” That process began with questions, lots of questions, including the one Ackman had badgered White with so many times while they were fishing: “Why?”

He helped Ackman organize vast amounts of material for presentations to regulators and rating companies. Despite all of Ackman’s efforts, “the court of public opinion just wasn’t ruling on MBIA,” Bernstein says. When Bernstein met friends after work for drinks, they asked him what Pershing investments he was working on. He could never tell them that he’d been assigned to work on the profitable ones, the ones that were catapulting Ackman into the news as a successful activist investor. Bernstein recalls a few friends who worked for funds of funds, which invest in hedge funds, sharing their bosses’ views on Ackman: “It’s the MBIA obsession; that’s why our fund isn’t investing with Pershing Square,” they told Bernstein. The consensus on Ackman and his persistence about MBIA was that he was either “a genius or a lunatic,” says Bernstein. Rafael Mayer, an early investor in Pershing Square, says that Ackman’s drive to bring people around to his way of thinking can backfire.

Chapter Nineteen Ratings Revisited To keep the music playing required increasingly egregious excesses—ever greater quantities of increasingly risky loans, structures and leveraging —DOUG NOLAND, DAVID TICE & ASSOCIATES, DECEMBER 2007 IN DECEMBER 2007, Bill Ackman went door to door with his presentation on the bond insurers, launching perhaps the most aggressive “short” campaign in the history of Wall Street. Activist investors typically buy a stake in a company and then pressure management to make changes that will drive up the stock price. Short selling and activism are a much more complex pairing. An activist can’t exactly advocate for changes that will cause the company’s share price to collapse or cause it to file for bankruptcy. At least not very often. Ackman, however, saw his short position in MBIA as a cause.


pages: 193 words: 11,060

Ethics in Investment Banking by John N. Reynolds, Edmund Newell

accounting loophole / creative accounting, activist fund / activist shareholder / activist investor, banking crisis, collapse of Lehman Brothers, corporate governance, corporate social responsibility, credit crunch, Credit Default Swap, discounted cash flows, financial independence, index fund, invisible hand, light touch regulation, margin call, moral hazard, Nick Leeson, Northern Rock, quantitative easing, shareholder value, short selling, South Sea Bubble, stem cell, the market place, The Wealth of Nations by Adam Smith, too big to fail, zero-sum game

Shareholders rightly exercise influence over the companies they invest in, and on their boards. At times, shareholders can put pressure on company boards and executives to take increased risks. Shareholder support – or the lack of it – for companies has clearly affected the behaviour of some banks and investment banks, but such pressure is not always farsighted. In 2007, there was extensive external pressure on HSBC to reform its activities, including pressure from activist shareholders. It became clear from late 2007 onwards, as the financial crisis developed, that while HSBC had eschewed some short-term opportunities for profits, despite highprofile exposure to sub-prime loans in the US, its shareholder value had been more effectively stewarded than that of many other UK and global banks. Institutional shareholders have demanded high returns from commercial banking, potentially higher than could be sustained in the long term from a quasi-utility activity.


pages: 232 words: 70,361

The Triumph of Injustice: How the Rich Dodge Taxes and How to Make Them Pay by Emmanuel Saez, Gabriel Zucman

activist fund / activist shareholder / activist investor, Affordable Care Act / Obamacare, Berlin Wall, business cycle, Cass Sunstein, collective bargaining, corporate governance, Donald Trump, financial deregulation, income inequality, income per capita, informal economy, intangible asset, Jeff Bezos, labor-force participation, Lyft, Mark Zuckerberg, market fundamentalism, Mont Pelerin Society, mortgage debt, mortgage tax deduction, new economy, offshore financial centre, oil shock, patent troll, profit maximization, purchasing power parity, race to the bottom, rent-seeking, ride hailing / ride sharing, Ronald Reagan, shareholder value, Silicon Valley, single-payer health, Skype, Steve Jobs, The Wealth of Nations by Adam Smith, transfer pricing, trickle-down economics, uber lyft, very high income, We are the 99%

But more importantly, corporate executives conceived of their role differently. In the United States today, conventional wisdom holds that the goal of CEOs must be to grow the stock price of their firms. Corporations, according to that world view, are nothing more than a conglomerate of investors pooling their resources together. Although some corporate leaders may lament being hamstrung by activist shareholders, they all consider it their duty to maximize shareholder value. And dodging taxes unquestionably enhances shareholder value. Less tax paid means more after-tax profits that can be distributed in dividends to shareholders or used to buy back shares. But the shareholder-is-king doctrine is not universal, as evidenced by the diverse compositions of corporate boards across the world. In many countries, employee representatives make up a third of the members of corporate boards; in Germany the number is half in large companies.2 Before the 1970s US corporations, although workers’ representatives were not on their boards, were also widely considered responsible to a broad class of stakeholders beyond their owners: employees, customers, communities, and governments.3 Which, for our purposes, has one implication: company executives did not consider it their duty to dodge taxes and did not have much of a tax-planning budget.


pages: 257 words: 71,686

Swimming With Sharks: My Journey into the World of the Bankers by Joris Luyendijk

activist fund / activist shareholder / activist investor, bank run, barriers to entry, Bonfire of the Vanities, bonus culture, collapse of Lehman Brothers, collective bargaining, corporate raider, credit crunch, Credit Default Swap, Emanuel Derman, financial deregulation, financial independence, Flash crash, glass ceiling, Gordon Gekko, high net worth, hiring and firing, information asymmetry, inventory management, job-hopping, light touch regulation, London Whale, Nick Leeson, offshore financial centre, regulatory arbitrage, Satyajit Das, selection bias, shareholder value, sovereign wealth fund, the payments system, too big to fail

The question often came with a cynical laugh as if nothing genuinely serious was at stake; they seemed to anticipate my answer would be ‘greed’, ‘cocaine’ or ‘arrogance’. Many referred to the Gordon Gekko character from the iconic 1987 film Wall Street and his famous quote: ‘Greed, for want of a better word, is good.’ I would resist pointing out that Gordon Gekko was not a banker but a ‘corporate raider’ or ‘activist shareholder’ taking over companies against their will, and instead I’d tell them how some of the things I’d learnt about bankers had ‘lightning-bolted me off my horse’, as the Flemish expression goes. I had had no idea just how much damage the financial sector can do to society let alone how terrifyingly close to the brink we were in 2008. However, what had struck me even more is how such organisations continue to be governed by a system of incentives that seem almost designed to encourage short-termism.


pages: 244 words: 79,044

Money Mavericks: Confessions of a Hedge Fund Manager by Lars Kroijer

activist fund / activist shareholder / activist investor, Bernie Madoff, capital asset pricing model, corporate raider, diversification, diversified portfolio, family office, fixed income, forensic accounting, Gordon Gekko, hiring and firing, implied volatility, index fund, intangible asset, Jeff Bezos, Just-in-time delivery, Long Term Capital Management, merger arbitrage, NetJets, new economy, Ponzi scheme, post-work, risk-adjusted returns, risk/return, shareholder value, Silicon Valley, six sigma, statistical arbitrage, Vanguard fund, zero-coupon bond

To Puk, Anna and Sofia – my three girls Contents About the author Acknowledgements About the second edition Introduction Part One Getting ready for Holte Capital 1 Becoming a hedgie 2 Taking the plunge 3 Starting a hedge fund 4 On the road 5 Limping to launch Part Two Becoming the real deal 6 Mickey Mouse fund 7 Breaking through 8 Scaling up and meeting the Godfather 9 The real deal 10 Being corporate 11 Activist investor 12 A day in the life Part Three On the front line 13 Getting fully examined 14 Blood in the streets 15 Edge 16 Made it? 17 Friends and competition 18 Making your commissions count 19 Are we worth it? Part Four The fast road down 20 Feeling grim 21 A bad day 22 A bad run 23 Going home 24 Rethinking Holte Capital Beyond hedge funds – portfolio tips for amateurs Index Acknowledgements As a first time author I probably needed more help than the journalists and professors that often write about finance, and I am thrilled that such an insightful and helpful group of people helped me to finish the book.

Whenever we performed poorly in bad markets we thus had the double failing of doing poorly and also failing to provide our investors with the protection they had counted on us for. If you had a bad month while other hedge funds did well, you generally felt crap about yourself; and it was a whole month before you could send out an investor letter with a new number. With the weight of a bad monthly return hanging over you, the pressure to shine was even greater. 11 * * * Activist investor The no-BS rule If there was one thing I always enjoyed about small financial shops like Holte Capital, it was the complete absence of internal politics. Compared with Lazard Frères, where even 22-year-old analysts like me quickly learned they had to navigate the office minefield to find the best deals to work on, my hedge-fund experience was simple. If we found meetings a waste of time, we would stop having them.


pages: 304 words: 80,965

What They Do With Your Money: How the Financial System Fails Us, and How to Fix It by Stephen Davis, Jon Lukomnik, David Pitt-Watson

activist fund / activist shareholder / activist investor, Admiral Zheng, banking crisis, Basel III, Bernie Madoff, Black Swan, buy and hold, centralized clearinghouse, clean water, computerized trading, corporate governance, correlation does not imply causation, credit crunch, Credit Default Swap, crowdsourcing, David Brooks, Dissolution of the Soviet Union, diversification, diversified portfolio, en.wikipedia.org, financial innovation, financial intermediation, fixed income, Flash crash, income inequality, index fund, information asymmetry, invisible hand, Kenneth Arrow, Kickstarter, light touch regulation, London Whale, Long Term Capital Management, moral hazard, Myron Scholes, Northern Rock, passive investing, performance metric, Ponzi scheme, post-work, principal–agent problem, rent-seeking, Ronald Coase, shareholder value, Silicon Valley, South Sea Bubble, sovereign wealth fund, statistical model, Steve Jobs, the market place, The Wealth of Nations by Adam Smith, transaction costs, Upton Sinclair, value at risk, WikiLeaks

A passenger took a run-of-the-mill complaint about a musical instrument damaged in a baggage transfer and turned it into a YouTube video called “United Breaks Guitars.”39 The company was caught flat-footed when the video went viral, exacting a nasty reputation hit. Investors have joined in too, though less often. Yahoo! saw perhaps the best-known example in 2007 when Eric Jackson, a retail investor with a handful of shares, stirred a large-scale shareowner revolt through his Breakout Performance social media campaign. The activist investor Carl Icahn started using Twitter in June 2013 as part of a battle over the Dell buyout and quickly gained 76,000 followers.40 Then there is retail shareholder David Webb, in Hong Kong, who writes a blog from his home flat. People feed him tips about insider corporate wrongdoing that could never appear in Hong Kong’s mainstream media, because they are controlled by either the state or major families.

In the United Kingdom, for example, it was RBS, which had embarked on rapid acquisition, and HBOS and Northern Rock, which had been aggressive in the market place, who found themselves in greatest trouble. 32. “Governing Banks” (Global Governance Forum/International Finance Corporation, 2010). 33. Upton Sinclair, “I, Candidate for Governor: And How I Got Licked” (University of California Press, 1994). (Originally printed 1936.) 34. Ronald J. Gilson and Jeffrey N. Gordon, “The Agency Costs of Agency Capitalism: Activist Investors and the Revaluation of Governance Rights,” March 11, 2013, Columbia Law Review, 2013, ECGI—Law Working Paper no. 197, Columbia Law and Economics Working Paper no. 438, Rock Center for Corporate Governance at Stanford University Working Paper no. 130, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2206391. 35. “Tom Jones to Keep Citigroup Fund Unit on Song,” Financial Times, June 16, 2003. 36.


pages: 444 words: 84,486

Radicalized by Cory Doctorow

activist fund / activist shareholder / activist investor, Affordable Care Act / Obamacare, Bernie Sanders, call centre, crowdsourcing, cryptocurrency, Edward Snowden, Flash crash, G4S, high net worth, information asymmetry, license plate recognition, obamacare, old-boy network, six sigma, TaskRabbit

While this failure was unrelated to the Disher/Boulangism doubleheader, it was pretty unfortunate timing, everyone agreed. The twin collapse of Disher and Boulangism did have a shared cause, Salima discovered. Both companies were publicly traded and both had seen more than 20 percent of their shares acquired by Summerstream Funds Management, the largest hedge fund on earth, with $184 billion under management. Summerstream was an “activist shareholder” and it was very big on stock buybacks. Once it had a seat on each company’s board—both occupied by Galt Baumgardner, a junior partner at the firm, but from a very good Kansas family—they both hired the same expert consultant from Deloitte to examine the company’s accounts and recommend a buyback program that would see the shareholders getting their due return from the firms, without gouging so deep into the companies’ operating capital as to endanger them.


pages: 353 words: 81,436

Buying Time: The Delayed Crisis of Democratic Capitalism by Wolfgang Streeck

activist fund / activist shareholder / activist investor, banking crisis, basic income, Bretton Woods, business cycle, capital controls, Carmen Reinhart, central bank independence, collective bargaining, corporate governance, creative destruction, David Graeber, deindustrialization, Deng Xiaoping, Eugene Fama: efficient market hypothesis, financial deregulation, financial repression, fixed income, full employment, Gini coefficient, Growth in a Time of Debt, income inequality, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, knowledge economy, labour market flexibility, labour mobility, late capitalism, liberal capitalism, means of production, moral hazard, Myron Scholes, Occupy movement, open borders, open economy, Plutonomy: Buying Luxury, Explaining Global Imbalances, profit maximization, risk tolerance, shareholder value, too big to fail, union organizing, winner-take-all economy, Wolfgang Streeck

As a result lenders seek far more than in the past to protect their claims by exerting influence on government policies. In the debt state, therefore, a second category of stakeholders appears alongside the citizens who, in the democratic tax state and established political theory, constituted the only reference group of the modern state. The rise of creditors to become the second ‘constituency’62 of the modern state is strikingly reminiscent of the emergence of activist shareholders in the corporate world under the ‘shareholder value’ doctrine of the 1980s and 1990s.63 Like the boards of publicly listed companies in relation to the new ‘markets for corporate control’, the governments of today’s debt states in their relationship with the ‘financial markets’ are forced to serve a further set of interests whose claims have suddenly increased because of their greater capacity to assert themselves in more liquid financial markets.


pages: 305 words: 79,303

The Four: How Amazon, Apple, Facebook, and Google Divided and Conquered the World by Scott Galloway

activist fund / activist shareholder / activist investor, additive manufacturing, Affordable Care Act / Obamacare, Airbnb, Amazon Web Services, Apple II, autonomous vehicles, barriers to entry, Ben Horowitz, Bernie Sanders, big-box store, Bob Noyce, Brewster Kahle, business intelligence, California gold rush, cloud computing, commoditize, cuban missile crisis, David Brooks, disintermediation, don't be evil, Donald Trump, Elon Musk, follow your passion, future of journalism, future of work, global supply chain, Google Earth, Google Glasses, Google X / Alphabet X, Internet Archive, invisible hand, Jeff Bezos, Jony Ive, Khan Academy, longitudinal study, Lyft, Mark Zuckerberg, meta analysis, meta-analysis, Network effects, new economy, obamacare, Oculus Rift, offshore financial centre, passive income, Peter Thiel, profit motive, race to the bottom, RAND corporation, ride hailing / ride sharing, risk tolerance, Robert Mercer, Robert Shiller, Robert Shiller, Search for Extraterrestrial Intelligence, self-driving car, sentiment analysis, shareholder value, Silicon Valley, Snapchat, software is eating the world, speech recognition, Stephen Hawking, Steve Ballmer, Steve Jobs, Steve Wozniak, Stewart Brand, supercomputer in your pocket, Tesla Model S, Tim Cook: Apple, Travis Kalanick, Uber and Lyft, Uber for X, uber lyft, undersea cable, Whole Earth Catalog, winner-take-all economy, working poor, young professional

The result is a freakish-looking internet company hopped up on Botox and fillers. Firms in old-economy or niche sectors seem to have an easier time coming to grips with aging and aren’t as susceptible to the kind of midlife crises that are expensive and create a great deal of misery for stakeholders. It’s difficult to find pragmatists to run these companies at the end of the alphabet, but they are out there. They can be activist shareholders or partners in private equity firms who have seen firms die and realize that there are worse things than death—specifically a slow death where shareholders are bankrupted trying to give PopPop just one more day. Pragmatists can make unemotional, even cold, decisions to move Nana home and enjoy her last days (that is, return a shitload of cash to investors). David Carey, CEO of Hearst Magazines, is one of the few CEOs I’ve seen make the transition from visionary to operator to pragmatist.


pages: 274 words: 81,008

The New Tycoons: Inside the Trillion Dollar Private Equity Industry That Owns Everything by Jason Kelly

activist fund / activist shareholder / activist investor, barriers to entry, Berlin Wall, call centre, carried interest, collective bargaining, corporate governance, corporate raider, Credit Default Swap, diversification, Fall of the Berlin Wall, family office, fixed income, Goldman Sachs: Vampire Squid, Gordon Gekko, housing crisis, income inequality, late capitalism, margin call, Menlo Park, Occupy movement, place-making, Rod Stewart played at Stephen Schwarzman birthday party, rolodex, Ronald Reagan, Rubik’s Cube, Sand Hill Road, shareholder value, side project, Silicon Valley, sovereign wealth fund

In a 2010 speech that was pre-recorded and played at corporate governance conference, he said Berkshire Hathaway had avoided buying companies outright from buyout firms in part because they “don’t love the business” in the same way long-time owners do. His preference is to keep owners after the acquisition to take advantage of their “passion” for the company.5 Part of the attraction for Wall Street about the Dollar General story is the relative outperformance of the company versus Family Dollar, which fended off its own takeover in 2011. That approach, from activist shareholder Nelson Peltz, spurred more interest from other hedge funds. Bill Ackman bought shares of Family Dollar in 2011 and told an investment conference in New York that year he believed he could make money if Family Dollar could replicate Dollar General’s success.6 I asked Dreiling whether he worried he’d given his competitors a blueprint they could use to beat him. “There are no secrets in retail,” he said.


pages: 463 words: 105,197

Radical Markets: Uprooting Capitalism and Democracy for a Just Society by Eric Posner, E. Weyl

3D printing, activist fund / activist shareholder / activist investor, Affordable Care Act / Obamacare, Airbnb, Amazon Mechanical Turk, anti-communist, augmented reality, basic income, Berlin Wall, Bernie Sanders, Branko Milanovic, business process, buy and hold, carbon footprint, Cass Sunstein, Clayton Christensen, cloud computing, collective bargaining, commoditize, Corn Laws, corporate governance, crowdsourcing, cryptocurrency, Donald Trump, Elon Musk, endowment effect, Erik Brynjolfsson, Ethereum, feminist movement, financial deregulation, Francis Fukuyama: the end of history, full employment, George Akerlof, global supply chain, guest worker program, hydraulic fracturing, Hyperloop, illegal immigration, immigration reform, income inequality, income per capita, index fund, informal economy, information asymmetry, invisible hand, Jane Jacobs, Jaron Lanier, Jean Tirole, Joseph Schumpeter, Kenneth Arrow, labor-force participation, laissez-faire capitalism, Landlord’s Game, liberal capitalism, low skilled workers, Lyft, market bubble, market design, market friction, market fundamentalism, mass immigration, negative equity, Network effects, obamacare, offshore financial centre, open borders, Pareto efficiency, passive investing, patent troll, Paul Samuelson, performance metric, plutocrats, Plutocrats, pre–internet, random walk, randomized controlled trial, Ray Kurzweil, recommendation engine, rent-seeking, Richard Thaler, ride hailing / ride sharing, risk tolerance, road to serfdom, Robert Shiller, Robert Shiller, Ronald Coase, Rory Sutherland, Second Machine Age, second-price auction, self-driving car, shareholder value, sharing economy, Silicon Valley, Skype, special economic zone, spectrum auction, speech recognition, statistical model, stem cell, telepresence, Thales and the olive presses, Thales of Miletus, The Death and Life of Great American Cities, The Future of Employment, The Market for Lemons, The Nature of the Firm, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, Thorstein Veblen, trade route, transaction costs, trickle-down economics, Uber and Lyft, uber lyft, universal basic income, urban planning, Vanguard fund, women in the workforce, Zipcar

In the former case, the CEO can do well by taking market share from a rival, for example, regardless of absolute profit levels. In the absolute performance case, taking market share from a rival is not rewarded unless it raises absolute profits, softening competition. A recent study shows a strong decline in relative compensation with common ownership: more commonly owned firms have compensation practices that systematically discourage aggressive competition.28 • The investor could block bids by activist investors interested in aggressive competition.29 • Even less directly, but perhaps most perniciously, institutional investors could promote business standards, practices, and beliefs that superficially appear to be “pro-business” or “pro-shareholder,” but also tend to reduce competition. Under the cover of promoting good corporate governance, institutional investors could promote initiatives to “cut the waste” by reducing investment and the number of workers and instead encourage firms to pay higher returns to shareholders or hoard cash.

Glen Weyl, A Proposal to Limit the Anti-Competitive Power of Institutional Investors, 81 Antitrust Law Journal 669 (2017). 37. Posner et al., A Proposal to Limit the Anti-Competitive Power of Institutional Investors. 38. Ronald J. Gilson & Jeffrey N. Gordon, Agency Capitalism: Further Implications of Equity Intermediation 7 (Columbia Law and Economics Working Paper No. 461, 2014). See also Ronald J. Gilson & Jeffrey N. Gordon, The Agency Costs of Agency Capitalism: Activist Investors and the Revaluation of Governance Rights, 113 Columbia Law Review 863 (2011). 39. We tread speculatively in this paragraph. The industry is complex, fluid, and poorly understood. 40. See Ali Hortaçsu & Chad Syverson, Product Differentiation, Search Costs, and Competition in the Mutual Fund Industry: A Case Study of S&P 500 Index Funds, 119 Quarterly Journal of Economics 403 (2004); John C.


pages: 250 words: 88,762

The Logic of Life: The Rational Economics of an Irrational World by Tim Harford

activist fund / activist shareholder / activist investor, affirmative action, Albert Einstein, Andrei Shleifer, barriers to entry, Berlin Wall, business cycle, colonial rule, Daniel Kahneman / Amos Tversky, double entry bookkeeping, Edward Glaeser, en.wikipedia.org, endowment effect, European colonialism, experimental economics, experimental subject, George Akerlof, income per capita, invention of the telephone, Jane Jacobs, John von Neumann, law of one price, Martin Wolf, mutually assured destruction, New Economic Geography, new economy, plutocrats, Plutocrats, Richard Florida, Richard Thaler, Ronald Reagan, Silicon Valley, spinning jenny, Steve Jobs, The Death and Life of Great American Cities, the market place, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Malthus, women in the workforce, zero-sum game

Collectively the CEOs are taking five hundred dollars from me, but I can’t pursue them collectively, I can only try to beat them up one at a time. And I’m only one shareholder—how much effort am I really going to put into contacting my fellow shareholders and trying to persuade them to vote down the board? Actually, the situation is worse than that: It’s a game of split the check inside a second game of split the check, because even if I and my fellow activist shareholders do manage to get together and rein in an overly generous board, the immediate result is likely to be a damaging succession crisis at the company. Shareholders of other companies will benefit because other boards will look over their shoulders at our little shareholder revolution and tighten their belts just a little. But we brave revolutionaries are likely to be out of pocket for our pains.


pages: 366 words: 94,209

Throwing Rocks at the Google Bus: How Growth Became the Enemy of Prosperity by Douglas Rushkoff

activist fund / activist shareholder / activist investor, Airbnb, algorithmic trading, Amazon Mechanical Turk, Andrew Keen, bank run, banking crisis, barriers to entry, bitcoin, blockchain, Burning Man, business process, buy and hold, buy low sell high, California gold rush, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, centralized clearinghouse, citizen journalism, clean water, cloud computing, collaborative economy, collective bargaining, colonial exploitation, Community Supported Agriculture, corporate personhood, corporate raider, creative destruction, crowdsourcing, cryptocurrency, disintermediation, diversified portfolio, Elon Musk, Erik Brynjolfsson, Ethereum, ethereum blockchain, fiat currency, Firefox, Flash crash, full employment, future of work, gig economy, Gini coefficient, global supply chain, global village, Google bus, Howard Rheingold, IBM and the Holocaust, impulse control, income inequality, index fund, iterative process, Jaron Lanier, Jeff Bezos, jimmy wales, job automation, Joseph Schumpeter, Kickstarter, loss aversion, Lyft, Marc Andreessen, Mark Zuckerberg, market bubble, market fundamentalism, Marshall McLuhan, means of production, medical bankruptcy, minimum viable product, Mitch Kapor, Naomi Klein, Network effects, new economy, Norbert Wiener, Oculus Rift, passive investing, payday loans, peer-to-peer lending, Peter Thiel, post-industrial society, profit motive, quantitative easing, race to the bottom, recommendation engine, reserve currency, RFID, Richard Stallman, ride hailing / ride sharing, Ronald Reagan, Satoshi Nakamoto, Second Machine Age, shareholder value, sharing economy, Silicon Valley, Snapchat, social graph, software patent, Steve Jobs, TaskRabbit, The Future of Employment, trade route, transportation-network company, Turing test, Uber and Lyft, Uber for X, uber lyft, unpaid internship, Y Combinator, young professional, zero-sum game, Zipcar

The investments generated jobs, goodwill, and homes, in addition to retirement fund returns for union members.75 Individuals can apply the same principles to their own investments by considering how to leverage the impact of their capital to benefit their own lives. It’s easiest to see and feel that impact by investing in regional companies and projects, big or small. A large corporation’s local activist shareholders can have a disproportionately significant influence on how the company employs, sources, pollutes, and donates. Meanwhile, as distributed technologies allow smaller, more locally connected businesses to leverage people, assets, and trends that larger conglomerates cannot, consider putting your capital right there. Do you want a local bookstore, gym, or Thai restaurant? Invest in one. Yes, business partnerships between local merchants and friends are stickier than the anonymous purchase of stocks through a laptop, but that’s also what makes them better.


pages: 324 words: 93,606

No Such Thing as a Free Gift: The Gates Foundation and the Price of Philanthropy by Linsey McGoey

activist fund / activist shareholder / activist investor, Affordable Care Act / Obamacare, agricultural Revolution, American Legislative Exchange Council, bitcoin, Bob Geldof, cashless society, clean water, cognitive dissonance, collapse of Lehman Brothers, colonial rule, corporate governance, corporate social responsibility, crony capitalism, effective altruism, Etonian, financial innovation, Food sovereignty, Ford paid five dollars a day, germ theory of disease, hiring and firing, Howard Zinn, income inequality, income per capita, invisible hand, Jane Jacobs, Joseph Schumpeter, liquidationism / Banker’s doctrine / the Treasury view, M-Pesa, Mahatma Gandhi, Mark Zuckerberg, meta analysis, meta-analysis, microcredit, Mitch Kapor, Mont Pelerin Society, Naomi Klein, obamacare, Peter Singer: altruism, Peter Thiel, plutocrats, Plutocrats, price mechanism, profit motive, Ralph Waldo Emerson, rent-seeking, road to serfdom, Ronald Reagan, school choice, selective serotonin reuptake inhibitor (SSRI), Silicon Valley, Slavoj Žižek, Steve Jobs, strikebreaker, The Wealth of Nations by Adam Smith, Thorstein Veblen, trickle-down economics, urban planning, wealth creators

Aaron Dorfman, executive director of the US National Committee for Responsive Philanthropy, suggested to me that there are three main channels a foundation can adopt in order to practise mission investing: ‘The first ‘is what we call “screens”, so they can screen into or out of their portfolio investments that are consistent or inconsistent with their mission’. The second channel, he said, is ‘shareholder activism … we’ve got a lot of demonstrated cases, especially on environmental concerns where foundations that own shares in certain companies as an activist shareholder have been able to influence the corporate practices of the companies they are invested in and improve their wage policies or their environmental policies’. The third channel is ‘proactive investments that directly relate to the foundation’s mission but also seek a [financial] return … this could be a below market-rate return in which case they would call it a “program-related investment” (PRI), or it could be seeking a regular market-rate return’.


pages: 347 words: 91,318

Netflixed: The Epic Battle for America's Eyeballs by Gina Keating

activist fund / activist shareholder / activist investor, barriers to entry, business intelligence, collaborative consumption, corporate raider, inventory management, Jeff Bezos, late fees, Mark Zuckerberg, McMansion, Menlo Park, Netflix Prize, new economy, out of africa, performance metric, Ponzi scheme, pre–internet, price stability, recommendation engine, Saturday Night Live, shareholder value, Silicon Valley, Silicon Valley startup, Steve Jobs, subscription business, Superbowl ad, telemarketer, X Prize

Fortune, Jan. 28, 2009. Ali, Rafat. “Interview: Blockbuster CEO: Skeptics Aside, Confident of Physical’s Digital Future.” paidContent, Aug. 14, 2008. Anderson, Nick. “A New Lesson Plan? Voter Initiative Proposed for Fall Ballot Could Spawn Hundreds More Charter Schools.” Los Angeles Times, Feb. 25, 1998. Antioco, John. “How I Did It: Blockbuster’s Former CEO On Sparring with an Activist Shareholder.” Harvard Business Review, April 2011. Applefield Olson, Catherine. “Online Retailers Slash DVD Prices—Competition Over New Format Heats Up in Cyberspace.” Billboard, May 16, 1998. Arango, Tim. “Time Warner View Netflix as a Fading Star.” New York Times, Dec. 12, 2010. Arnold, Thomas. “Company Town: Virtual Video Chain Builds Its Presence on PCs.” Los Angeles Times, Aug. 12, 1998.


pages: 160 words: 6,876

Shaky Ground: The Strange Saga of the U.S. Mortgage Giants by Bethany McLean

activist fund / activist shareholder / activist investor, Affordable Care Act / Obamacare, collateralized debt obligation, crony capitalism, housing crisis, mortgage debt, negative equity, obamacare, race to the bottom

Some investors say that they view the lawsuits merely as a wedge to force the door open to what they really want: a recapitalized, albeit heavily reformed, version of Fannie and Freddie, which, they argue, is the right solution for the housing market—as well as one that would increase the value of their stock. This, of course, is precisely what the administration has said it does not want. In the spring of 2014, the hedge fund manager and activist investor Bill Ackman announced that his fund, Pershing Square, had bought 13 percent of the remaining 20 percent of the GSEs’ common stock. Pershing Square also sued the government. But the purchase of common stock is essentially an all-in bet that Fannie and Freddie will be revitalized in some way. In a presentation he called “It’s Time to Get Off Our Fannie,” Ackman laid out a plan for the future of the housing finance system, essentially calling for the return of Fannie and Freddie.


pages: 309 words: 114,984

The Digital Doctor: Hope, Hype, and Harm at the Dawn of Medicine’s Computer Age by Robert Wachter

"Robert Solow", activist fund / activist shareholder / activist investor, Affordable Care Act / Obamacare, AI winter, Airbnb, Atul Gawande, Captain Sullenberger Hudson, Checklist Manifesto, Chuck Templeton: OpenTable:, Clayton Christensen, collapse of Lehman Brothers, computer age, creative destruction, crowdsourcing, deskilling, disruptive innovation, en.wikipedia.org, Erik Brynjolfsson, everywhere but in the productivity statistics, Firefox, Frank Levy and Richard Murnane: The New Division of Labor, Google Glasses, Ignaz Semmelweis: hand washing, Internet of things, job satisfaction, Joseph Schumpeter, Kickstarter, knowledge worker, lifelogging, medical malpractice, medical residency, Menlo Park, minimum viable product, natural language processing, Network effects, Nicholas Carr, obamacare, pattern recognition, peer-to-peer, personalized medicine, pets.com, Productivity paradox, Ralph Nader, RAND corporation, Second Machine Age, self-driving car, Silicon Valley, Silicon Valley startup, six sigma, Skype, Snapchat, software as a service, Steve Jobs, Steven Levy, the payments system, The Wisdom of Crowds, Thomas Bayes, Toyota Production System, Uber for X, US Airways Flight 1549, Watson beat the top human players on Jeopardy!, Yogi Berra

Being thwacked by the media for being “closed” is unpleasant, and nobody wants to be publicly excoriated at a congressional hearing. But Epic sales remain brisk, and, at least in its core market, the company continues to receive a steady stream of new customers who are dissatisfied with their current EHRs. Because he runs a publicly traded company, Jonathan Bush is subject to a different kind of pressure than Epic is. In May 2014, activist investor David Einhorn, the billionaire CEO of Greenlight Capital, went after both Bush and athena in a speech at a large investor conference. After observing that athena had an outlandish price/earnings ratio, had failed to meet several financial performance expectations, and faces a series of major business challenges in coming years (the loss of the HITECH money and the lack of a viable inpatient system, to name a couple), Einhorn predicted that athena’s stock would tumble by 80 percent in relatively short order, in a classic bursting of a Wall Street “bubble.”

Penn, “Read David Einhorn’s Brutal Presentation on Athenahealth That Had a Room Full of Investors Laughing Out Loud,” Business Insider, May 7, 2014, available at http://www.businessinsider.com/einhorn-at-sohn-investment-conference-2014-5? op=1. Adams resigned from the company two months after making these comments. 231 In February, 2015, athena and John Halamka’s S. Mace. “Athenahealth, BIDMC Ink Development Deal,” HealthLeaders Media, February 3, 2015. 232 Don Berwick, former head of Medicare Quoted in A. Gawande, “The Velluvial Matrix,” New Yorker, June 16, 2010. 232 In May 2014, activist investor David Einhorn Lopez and Penn, “Read David Einhorn’s Brutal Presentation.” Bush rebutted Einhorn in J. Wieczner, “Bush vs. Einhorn: How athenahealth’s CEO Met His Short-Seller,” Fortune, May 28, 2014. Chapter 25: Silicon Valley Meets Healthcare 235 “For thousands of years, guys like us” “Minimum Viable Product,” Silicon Valley (television series), HBO, 2014. 235 “Our investment convinced the IT world” Interview of David Blumenthal by the author, July 16, 2014. 236 “Health IT Sees First Billion Dollar Quarter” A.


pages: 281 words: 95,852

The Googlization of Everything: by Siva Vaidhyanathan

1960s counterculture, activist fund / activist shareholder / activist investor, AltaVista, barriers to entry, Berlin Wall, borderless world, Burning Man, Cass Sunstein, choice architecture, cloud computing, computer age, corporate social responsibility, correlation does not imply causation, creative destruction, data acquisition, death of newspapers, don't be evil, Firefox, Francis Fukuyama: the end of history, full text search, global pandemic, global village, Google Earth, Howard Rheingold, informal economy, information retrieval, John Markoff, Joseph Schumpeter, Kevin Kelly, knowledge worker, libertarian paternalism, market fundamentalism, Marshall McLuhan, means of production, Mikhail Gorbachev, moral panic, Naomi Klein, Network effects, new economy, Nicholas Carr, PageRank, Panopticon Jeremy Bentham, pirate software, Ray Kurzweil, Richard Thaler, Ronald Reagan, side project, Silicon Valley, Silicon Valley ideology, single-payer health, Skype, Social Responsibility of Business Is to Increase Its Profits, social web, Steven Levy, Stewart Brand, technoutopianism, The Nature of the Firm, The Structural Transformation of the Public Sphere, Thorstein Veblen, urban decay, web application, zero-sum game

So when Yahoo revealed his e-mail account information to Chinese authorities, they were able to track Shi as the source of the offending e-mail. Shi was sentenced to ten years in prison in April 2005.30 Once word reached the United States that Yahoo was complicit in the persecution of political dissidents, a furor ensued. Yahoo has faced a lawsuit filed by human rights organizations, widespread criticism among bloggers and activists, shareholder objections, and a grilling by a U.S. congressional committee examining the roles of American companies such as Yahoo, Cisco (which supplies the servers that facilitate much of the surveillance and site blocking in China), and Google. Yahoo, of course, defended its actions by saying that it cannot violate the laws of a country in which it does business, and it cannot be held responsible if its users violate laws.


pages: 376 words: 109,092

Paper Promises by Philip Coggan

accounting loophole / creative accounting, activist fund / activist shareholder / activist investor, balance sheet recession, bank run, banking crisis, barriers to entry, Berlin Wall, Bernie Madoff, Black Swan, Bretton Woods, British Empire, business cycle, call centre, capital controls, Carmen Reinhart, carried interest, Celtic Tiger, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, debt deflation, delayed gratification, diversified portfolio, eurozone crisis, Fall of the Berlin Wall, falling living standards, fear of failure, financial innovation, financial repression, fixed income, floating exchange rates, full employment, German hyperinflation, global reserve currency, hiring and firing, Hyman Minsky, income inequality, inflation targeting, Isaac Newton, John Meriwether, joint-stock company, Kenneth Rogoff, Kickstarter, labour market flexibility, light touch regulation, Long Term Capital Management, manufacturing employment, market bubble, market clearing, Martin Wolf, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, mortgage debt, Myron Scholes, negative equity, Nick Leeson, Northern Rock, oil shale / tar sands, paradox of thrift, peak oil, pension reform, plutocrats, Plutocrats, Ponzi scheme, price stability, principal–agent problem, purchasing power parity, quantitative easing, QWERTY keyboard, railway mania, regulatory arbitrage, reserve currency, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, short selling, South Sea Bubble, sovereign wealth fund, special drawing rights, The Chicago School, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Wealth of Nations by Adam Smith, time value of money, too big to fail, trade route, tulip mania, value at risk, Washington Consensus, women in the workforce, zero-sum game

The low level of short-term interest rates and of government bond yields encouraged this tendency – hedge funds needed to buy higher-yielding assets if they were going to offset their fees. For the borrowers, keeping a cash hoard was no longer in fashion. Indeed companies were criticized for holding ‘idle’ cash. Academics argued that companies should put the money to work, by making acquisitions or investing in new factories, or they should return it to shareholders who could then invest the money in a company with more attractive growth potential. Activist shareholders often demanded that executives should adopt such policies. In theory, companies could finance themselves entirely with equity (cash raised from shareholders who would never be repaid), with debt, or with some combination of the two. The academics suggested that, other things being equal, the exact mix was irrelevant to the value of a company. That value is determined by the cashflows generated.


pages: 483 words: 141,836

Red-Blooded Risk: The Secret History of Wall Street by Aaron Brown, Eric Kim

activist fund / activist shareholder / activist investor, Albert Einstein, algorithmic trading, Asian financial crisis, Atul Gawande, backtesting, Basel III, Bayesian statistics, beat the dealer, Benoit Mandelbrot, Bernie Madoff, Black Swan, business cycle, capital asset pricing model, central bank independence, Checklist Manifesto, corporate governance, creative destruction, credit crunch, Credit Default Swap, disintermediation, distributed generation, diversification, diversified portfolio, Edward Thorp, Emanuel Derman, Eugene Fama: efficient market hypothesis, experimental subject, financial innovation, illegal immigration, implied volatility, index fund, Long Term Capital Management, loss aversion, margin call, market clearing, market fundamentalism, market microstructure, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, Myron Scholes, natural language processing, open economy, Pierre-Simon Laplace, pre–internet, quantitative trading / quantitative finance, random walk, Richard Thaler, risk tolerance, risk-adjusted returns, risk/return, road to serfdom, Robert Shiller, Robert Shiller, shareholder value, Sharpe ratio, special drawing rights, statistical arbitrage, stochastic volatility, stocks for the long run, The Myth of the Rational Market, Thomas Bayes, too big to fail, transaction costs, value at risk, yield curve

Martin and I planned to get rich by investing in our fund along with other shareholders, not by charging fees to other shareholders. Unfortunately, it took four years to get the idea past the SEC, and I had to go all the way up to the commissioners themselves. I don’t blame them; this idea touched on a lot of hot-button issues. The commissioners and staff were suspicious of a concentrated portfolio, aghast at Internet stock message boards, and nervous about activist investors. But at no time did I run into bureaucratic indifference or rigidity. I had open and productive discussions with many staff members, who also did a ton of free legal work for me. Once we did open, the SEC stood by us on several important occasions, which saved us from being either regulated or sued out of existence. Despite all that help, I do have a tiny twinge of regret that the four-year delay meant the fund opened on March 10, 2000.

I concluded in the end that the Internet investor base made it harder to effect improvements, not easier. I’m not bitter about it. I had a ton of fun and could afford the loss. I met some good people and learned a lot. eRaider.com got a lot of great press, even if people were inclined to put us in stories with an astrologer, a preteen penny stock hyper, and a mutual fund that put a webcam in its trading room. Even more annoying: Every activist investor, regardless of amount of investment or seriousness, is described in every news article as a “gadfly.” Anyway, for the present purposes the eRaider.com story proves that I actually believe this small portfolio stuff. As I said at the beginning of this section, my point is not that the IGT CAPM is better than MPT CAPM, or even whether there’s any truth to it at all. For the record, I think it is a useful way to analyze absolute price levels in less liquid markets, and with some further theoretical and empirical work, it might have broader application, especially to help understand capital flows.


pages: 444 words: 127,259

Super Pumped: The Battle for Uber by Mike Isaac

"side hustle", activist fund / activist shareholder / activist investor, Airbnb, Albert Einstein, always be closing, Amazon Web Services, Andy Kessler, autonomous vehicles, Ayatollah Khomeini, barriers to entry, Bay Area Rapid Transit, Burning Man, call centre, Chris Urmson, Chuck Templeton: OpenTable:, citizen journalism, Clayton Christensen, cloud computing, corporate governance, creative destruction, don't be evil, Donald Trump, Elon Musk, family office, gig economy, Google Glasses, Google X / Alphabet X, high net worth, Jeff Bezos, John Markoff, Kickstarter, Lyft, Marc Andreessen, Mark Zuckerberg, mass immigration, Menlo Park, Mitch Kapor, money market fund, moral hazard, move fast and break things, move fast and break things, Network effects, new economy, off grid, peer-to-peer, pets.com, Richard Florida, ride hailing / ride sharing, Sand Hill Road, self-driving car, shareholder value, side project, Silicon Valley, Silicon Valley startup, skunkworks, Snapchat, software as a service, software is eating the world, South China Sea, South of Market, San Francisco, sovereign wealth fund, special economic zone, Steve Jobs, TaskRabbit, the payments system, Tim Cook: Apple, Travis Kalanick, Uber and Lyft, Uber for X, uber lyft, ubercab, union organizing, upwardly mobile, Y Combinator

., https://twitter.com/megwhitman/status/890754932990763008. 315 the firm filed a lawsuit: Mike Isaac, “Uber Investor Sues Travis Kalanick for Fraud,” New York Times, August 10, 2017, https://www.nytimes.com/2017/08/10/technology/travis-kalanick-uber-lawsuit-benchmark-capital.html. 315 “We do not feel it was either prudent”: Mike Isaac, “Kalanick Loyalists Move to Force Benchmark Off Uber’s Board,” New York Times, August 11, 2017, https://www.nytimes.com/2017/08/11/technology/uber-benchmark-pishevar.html. 317 He bankrolled his college years: Cyrus Farivar, “How Sprint’s New Boss Lost $70 Billion of His Own Cash (and Still Stayed Rich),” Ars Technica, October 16, 2012, https://arstechnica.com/information-technology/2012/10/how-sprints-new-boss-lost-70-billion-of-his-own-cash-and-still-stayed-rich/. 317 He returned to Japan: Andrew Ross Sorkin, “A Key Figure in the Future of Yahoo,” Dealbook, New York Times, December 13, 2010, https://dealbook.nytimes.com/2010/12/13/a-key-figure-in-the-future-of-yahoo/. 317 “crazy guy who bet on the future”: Walter Sim, “SoftBank’s Masayoshi Son, the ‘Crazy Guy Who Bet on the Future,’ ” Straits Times, December 12, 2016, https://www.straitstimes.com/asia/east-asia/softbanks-masayoshi-son-the-crazy-guy-who-bet-on-the-future. 317 He designed the investment vehicle for speed: Dana Olsen, “Vision Fund 101: Inside SoftBank’s $98B Vehicle,” PitchBook, August 2, 2017, https://pitchbook.com/news/articles/vision-fund-101-inside-softbanks-93b-vehicle. Chapter 31: THE GRAND BARGAIN 319 The storied corporation had lost: Steve Blank, “Why GE’s Jeff Immelt Lost His Job: Disruption and Activist Investors,” Harvard Business Review, October 30, 2017, https://hbr.org/2017/10/why-ges-jeff-immelt-lost-his-job-disruption-and-activist-investors. 320 “There’s this chip you have”: Sheelah Kolhatkar, “At Uber, A New C.E.O. Shifts Gears,” The New Yorker, April 9, 2018, https://www.newyorker.com/magazine/2018/04/09/at-uber-a-new-ceo-shifts-gears. 320 After Allen & Company: https://www.newyorker.com/magazine/2018/04/09/at-uber-a-new-ceo-shifts-gears. 324 “I have decided not to pursue”: Jeff Immelt (@JeffImmelt), “I have decided not to pursue a leadership position at Uber.


pages: 1,009 words: 329,520

The Last Tycoons: The Secret History of Lazard Frères & Co. by William D. Cohan

activist fund / activist shareholder / activist investor, bank run, carried interest, cognitive dissonance, commoditize, computer age, corporate governance, corporate raider, creative destruction, credit crunch, diversification, Donald Trump, East Village, fear of failure, fixed income, G4S, hiring and firing, interest rate swap, intermodal, Joseph Schumpeter, late fees, Long Term Capital Management, Marc Andreessen, market bubble, offshore financial centre, Ponzi scheme, Ralph Nader, Ralph Waldo Emerson, rolodex, Ronald Reagan, shareholder value, The Nature of the Firm, the new new thing, Yogi Berra

This rather straightforward warning shot from Michel came a day before the scheduled board meetings to approve the $3.2 billion merger between two of Lazard's cascade of holding companies, Eurazeo and Rue Imperiale, which had been announced in November 2003. The merger was the final step in a four-year process designed to simplify Lazard's byzantine ownership structure and came about chiefly as a result of the ongoing efforts of Jon Wood at UBS, the activist shareholder. After the merger with Rue Imperiale, Eurazeo would become, essentially, a large publicly traded private-equity fund. Together, Michel and the onetime Lazard suitor Credit Agricole would control 54 percent of the voting rights of Eurazeo. Michel had a huge influence on Patrick Sayer, the forty-seven-year-old Eurazeo CEO. He had handpicked the "hyperkinetic" Sayer to be CEO in 2001 after he presided over the withering away of Lazard's media and telecom business in New York, following the burst of the telecom bubble and Rattner's departure to form Quadrangle.

(By early December 2006, TWX was trading close to $20 per share.) Bruce's brief and embarrassing high-profile gambit on Icahn's behalf had revealed just how far the "new Lazard" had strayed from the subtle and powerful shadowy operator that had long comprised the firm's complex genome. "For reasons that remain inexplicable," Andrew Ross Sorkin wrote in the Times after the compromise had been reached, "Mr. Wasserstein assumed the role of activist investor himself." Sorkin then canvassed Wall Street opinion to see how much reputational damage Bruce and Lazard had suffered, especially since only a month before Bruce had told Sorkin he considered himself "the trustee for the future" of Lazard. "Had he won, it would have been a different story," Sorkin discovered. "Mr. Wasserstein would have again proved himself to be the smartest guy in the room and beaten the odds.


pages: 390 words: 114,538

Digital Wars: Apple, Google, Microsoft and the Battle for the Internet by Charles Arthur

activist fund / activist shareholder / activist investor, AltaVista, Build a better mousetrap, Burning Man, cloud computing, commoditize, credit crunch, crowdsourcing, disintermediation, don't be evil, en.wikipedia.org, Firefox, gravity well, Jeff Bezos, John Gruber, Mark Zuckerberg, Menlo Park, Network effects, PageRank, pre–internet, Robert X Cringely, Silicon Valley, Silicon Valley startup, skunkworks, Skype, slashdot, Snapchat, software patent, speech recognition, stealth mode startup, Steve Ballmer, Steve Jobs, the new new thing, the scientific method, Tim Cook: Apple, turn-by-turn navigation, upwardly mobile

Microsoft still made its from licensing software (and, increasingly, patents, where the tithes from Android device makers were heading towards $2 billion per year). Apple generated almost all of its revenues from hardware. Google made its money through advertising, largely linked to its search engine. In that sense, none had really changed in 15 years. There were other similarities: only Google retained the same chief executive. Jobs had been replaced by Tim Cook. Ballmer was on his way out, the victim of a board-level putsch led by activist shareholders unhappy that Microsoft’s stock value had barely risen for a decade. His replacement, Satya Nadella, 46, had a background in enterprise and cloud services – and 22 years at the company. The certainties of the past – that the horizontal model must always succeed – were less clear. Android had so far won the battle to be the most-used smartphone platform; though with global use of smartphones estimated at just 20 per cent by the end of 2013 (because there are so many in the developing world which had not yet been catered for) the possibility remained that another ‘open’ OS – such as FirefoxOS, from the Mozilla foundation – could rise up and serve the next few billion buyers.


pages: 457 words: 125,329

Value of Everything: An Antidote to Chaos The by Mariana Mazzucato

"Robert Solow", activist fund / activist shareholder / activist investor, Affordable Care Act / Obamacare, Airbnb, bank run, banks create money, Basel III, Berlin Wall, Big bang: deregulation of the City of London, bonus culture, Bretton Woods, business cycle, butterfly effect, buy and hold, Buy land – they’re not making it any more, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, carried interest, cleantech, Corn Laws, corporate governance, corporate social responsibility, creative destruction, Credit Default Swap, David Ricardo: comparative advantage, debt deflation, European colonialism, fear of failure, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, financial repression, full employment, G4S, George Akerlof, Google Hangouts, Growth in a Time of Debt, high net worth, Hyman Minsky, income inequality, index fund, informal economy, interest rate derivative, Internet of things, invisible hand, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, knowledge economy, labour market flexibility, laissez-faire capitalism, light touch regulation, liquidity trap, London Interbank Offered Rate, margin call, Mark Zuckerberg, market bubble, means of production, money market fund, negative equity, Network effects, new economy, Northern Rock, obamacare, offshore financial centre, Pareto efficiency, patent troll, Paul Samuelson, peer-to-peer lending, Peter Thiel, profit maximization, quantitative easing, quantitative trading / quantitative finance, QWERTY keyboard, rent control, rent-seeking, Sand Hill Road, shareholder value, sharing economy, short selling, Silicon Valley, Simon Kuznets, smart meter, Social Responsibility of Business Is to Increase Its Profits, software patent, stem cell, Steve Jobs, The Great Moderation, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas Malthus, Tobin tax, too big to fail, trade route, transaction costs, two-sided market, very high income, Vilfredo Pareto, wealth creators, Works Progress Administration, zero-sum game

The main way they do this is by using cash reserves to buy back shares from investors, arguing that this is to maximize shareholder ‘value' (the income earned by shareholders in the company, based on the valuation of the company's stock price). But it is no accident that among the primary beneficiaries of share buy-backs are managers with generous share option schemes as part of their remuneration packages - the same managers who implement the share buy-back programmes. In 2012, for example, Apple announced a share buy-back programme of up to a staggering $100 billion, partly to ward off ‘activist' shareholders demanding that the company return cash to them to ‘unlock shareholder value'.7 Rather than reinvest in the business, Apple preferred to transfer cash to shareholders. The alchemy of the takers versus the makers that Big Bill Haywood referred to back in the 1920s continues today. COMMON CRITIQUES OF VALUE EXTRACTION The vital but often muddled distinction between value extraction and value creation has consequences far beyond the fate of companies and their workers, or even of whole societies.


pages: 453 words: 114,250

The Great Firewall of China by James Griffiths;

A Declaration of the Independence of Cyberspace, activist fund / activist shareholder / activist investor, Albert Einstein, anti-communist, bitcoin, borderless world, call centre, Chelsea Manning, Deng Xiaoping, don't be evil, Donald Trump, Edward Snowden, gig economy, jimmy wales, Mark Zuckerberg, megacity, Mikhail Gorbachev, Mitch Kapor, mobile money, Occupy movement, pets.com, profit motive, QR code, race to the bottom, RAND corporation, ride hailing / ride sharing, Ronald Reagan, Silicon Valley, Silicon Valley startup, Skype, Snapchat, South China Sea, Steve Jobs, Stewart Brand, Stuxnet, technoutopianism, undersea cable, WikiLeaks, zero day

Lee had borne the brunt of the fights with the government, often dragged into meetings to be berated by high-ranking officials and subjected to a highly publicised and intrusive personal tax audit.10 At the same time, he felt a lack of support from company headquarters in Mountain View, where executives, especially co-founder Sergey Brin, were growing sceptical of the many compromises Google was making to stay in China. In 2008, activist shareholders put forward two proposals critical of censorship and Google’s collaboration with repressive regimes. These were easily defeated, but Brin abstained from the votes, and said afterwards that he agreed “with the spirit of both of these, particularly in human rights, freedom of expression, and freedom to receive information”.11 During a personal trip to Asia in mid-2009, just as the Google China team needed the most support, Brin and fellow co-founder Larry Page dropped in on the company’s Tokyo offices, but stayed well clear of Beijing.


pages: 177 words: 54,421

Ego Is the Enemy by Ryan Holiday

activist fund / activist shareholder / activist investor, Airbnb, Ben Horowitz, Berlin Wall, Bernie Madoff, Burning Man, delayed gratification, Google Glasses, Jeff Bezos, Joan Didion, Lao Tzu, Paul Graham, Ponzi scheme, Ralph Waldo Emerson, Richard Feynman, side project, South Sea Bubble, Stanford marshmallow experiment, Steve Jobs, Upton Sinclair

At four o’clock one morning came a a frantic call: the union had sabotaged company machinery, beaten up an innocent staffer, and then set one of the printing presses on fire. Typically, during printing strikes competitors will help fellow papers out with their printing but Graham’s competitors refused, costing the Post $300,000 a day in advertising revenue. Then, a suite of major investors began to sell their stock positions in the Washington Post Company, ostensibly having lost their faith in its prospects. Graham, pushed by the activist investor she’d met with earlier, decided her best option was to spend an enormous amount of the company’s money to buy back its own shares on the public markets—a dangerous move that almost no one was doing at the time. That’s a list of problems exhausting to read about let alone live through. Yet because of Graham’s perseverance, it shook out better than anyone could have possibly predicted. The leaked documents Katharine Graham published became known as the Pentagon Papers and were one of the most important stories in the history of journalism.


Hedgehogging by Barton Biggs

activist fund / activist shareholder / activist investor, asset allocation, backtesting, barriers to entry, Bretton Woods, British Empire, business cycle, buy and hold, diversification, diversified portfolio, Elliott wave, family office, financial independence, fixed income, full employment, hiring and firing, index fund, Isaac Newton, job satisfaction, margin call, market bubble, Mikhail Gorbachev, new economy, oil shale / tar sands, paradox of thrift, Paul Samuelson, Ponzi scheme, random walk, Ronald Reagan, secular stagnation, Sharpe ratio, short selling, Silicon Valley, transaction costs, upwardly mobile, value at risk, Vanguard fund, zero-sum game, éminence grise

It’s their money, not corporate money that they give, and they’re not in it for publicity and self importance like so many corporate CEOs seem to be. Greg is the consummate stock picker. No one has a keener mind for identifying companies whose stocks are incorrectly priced. He has four or five analysts who do the legwork, but Greg himself visits every company he has a position in, talks with—no, interrogates, grills—every CEO, and puts each company under his personal analytical microscope. If he buys the stock, he is an activist shareholder, and his letters to management, when they fail to deliver, are constructive but severe. If management doesn’t respond, the letters become threatening. God forbid that management lies to Greg about a material event. One company did, and he reported it to Spitzer and testified against them. Conversely, if he is short a stock, he is not silent about telling one and all the flaws and foibles.


pages: 394 words: 124,743

Overhaul: An Insider's Account of the Obama Administration's Emergency Rescue of the Auto Industry by Steven Rattner

activist fund / activist shareholder / activist investor, affirmative action, bank run, banking crisis, business cycle, centre right, collapse of Lehman Brothers, collective bargaining, corporate governance, corporate raider, creative destruction, credit crunch, David Brooks, David Ricardo: comparative advantage, declining real wages, friendly fire, hiring and firing, income inequality, Joseph Schumpeter, low skilled workers, McMansion, Mikhail Gorbachev, moral hazard, Ronald Reagan, Saturday Night Live, shareholder value, supply-chain management, too big to fail

In the fourteen years before Westinghouse sold its industrial businesses, its stock rose 126 percent (mostly in the year of the divestitures) and GE's rose 931 percent. What was the difference? GE had Welch, and Westinghouse had a series of mediocre CEOs. In years of occasionally interacting with GE, I never failed to be amazed by the difference that one man made. Disney's is a similar story. In 1984, it looked much like GM two decades later: foundering with an inadequate CEO and under attack from activist shareholders. To achieve peace, Disney brought in the Bass brothers as investors, who recruited Michael Eisner and Frank Wells to the top jobs. I had just joined Morgan Stanley, which was representing the company, and none of us would have bought Disney stock on a bet. We saw no way that it could be rejuvenated. Boy, were we wrong. Over the following ten years, Disney stock rose by nearly 30 percent per annum.


pages: 202 words: 58,823

Willful: How We Choose What We Do by Richard Robb

activist fund / activist shareholder / activist investor, Alvin Roth, Asian financial crisis, asset-backed security, Bernie Madoff, capital asset pricing model, cognitive bias, collapse of Lehman Brothers, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, delayed gratification, diversification, diversified portfolio, effective altruism, endowment effect, Eratosthenes, experimental subject, family office, George Akerlof, index fund, information asymmetry, job satisfaction, John Maynard Keynes: Economic Possibilities for our Grandchildren, lake wobegon effect, loss aversion, market bubble, market clearing, money market fund, Pareto efficiency, Paul Samuelson, Peter Singer: altruism, principal–agent problem, profit maximization, profit motive, Richard Thaler, Silicon Valley, sovereign wealth fund, survivorship bias, the scientific method, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, transaction costs, ultimatum game

My wife, Ianthe Jeanne Dugan, to whom this book is dedicated, has helped me over many years with both ideas and words. She somehow managed to encourage me while delivering the message: it’s still not good enough. I would jump in the river to save her any day. Index Abraham (biblical figure), 117–118 abstraction, 12, 140–143, 196–197, 206–207 acting in character, 49–66, 94–95, 203 acting out of character, 19, 26, 68–69, 72–74, 97, 114, 122 activist investors, 66 actuarial tables, 163 Akerlof, George A., 210–211n2 Alexander the Great, 140, 180–181 alienation, 205, 207 alpha, 75 altruism, 4 apparently irrational, 28–29, 206 care altruism, 38, 104, 108–114, 115, 120, 135, 201 effective, 110–112, 126, 130, 135–136 in for-itself model, 19, 104, 123, 129 love altruism, 104, 116, 123–125, 203 manners and ethics in, 104, 106–108, 135 observed care altruism, 108–112 purposeful choice compatible with, 104, 113–114, 115–116 selfish, 104, 105–106, 109, 123, 125, 135 types of, 104, 123, 130 utility maximized by, 5–6 vaccination as, 59.


pages: 1,042 words: 266,547

Security Analysis by Benjamin Graham, David Dodd

activist fund / activist shareholder / activist investor, asset-backed security, backtesting, barriers to entry, business cycle, buy and hold, capital asset pricing model, carried interest, collateralized debt obligation, collective bargaining, corporate governance, corporate raider, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, diversification, diversified portfolio, fear of failure, financial innovation, fixed income, full employment, index fund, intangible asset, invisible hand, Joseph Schumpeter, locking in a profit, Long Term Capital Management, low cost airline, low cost carrier, moral hazard, mortgage debt, Myron Scholes, Right to Buy, risk-adjusted returns, risk/return, secular stagnation, shareholder value, The Chicago School, the market place, the scientific method, The Wealth of Nations by Adam Smith, transaction costs, zero-coupon bond

In the present era of aggressive corporate financial engineering, managers have many levers at their disposal to positively impact returns, including share repurchases, prudent use of leverage, and a valuation-based approach to acquisitions. Managers who are unwilling to make shareholder-friendly decisions risk their companies becoming perceived as “value traps”: inexpensively valued, but ultimately poor investments, because the assets are underutilized. Such companies often attract activist investors seeking to unlock this trapped value. Even more difficult, investors must decide whether to take the risk of investing—at any price—with management teams that have not always done right by shareholders. Shares of such companies may sell at steeply discounted levels, but perhaps the discount is warranted; value that today belongs to the equity holders may tomorrow have been spirited away or squandered.

Identifying a company with a big cash stash and the ability to generate more is a great start. But the cash doesn’t do the shareholder any good unless management makes smart investments with it, or returns it to its owners via dividends or share buybacks. Management talent and intentions are crucial. Sometimes there is just too much cash to ignore, even if it is under the control of folks who won’t invest it or distribute it. In those cases activist investors often take large stakes and pressure managers to “unlock the value” in the company; failing that, they try to replace those managers. One way or another, if there’s enough money in the cash register, somebody will find a way to get it out. Chapter 27 THE THEORY OF COMMON- STOCK INVESTMENT Copyright © 2009 by The McGraw-Hill Companies, Inc. Click here for terms of use. IN OUR INTRODUCTORY discussion we set forth the difficulties inherent in efforts to apply the analytical technique to speculative situations.

The first is one in which the asset value of a company exceeds the value of its foreseeable earnings. That tells you the assets are not being used to full advantage by management. Here, the critical factor for value investors is the prospect of some catalyst that will alter either the behavior or identity of current management. Graham and Dodd were aware of this although they were not cognizant of the range of interventions available to activist investors today. A second possibility is that earnings power may exceed the asset value of a company. To maintain those superior profits, there needs to be some economic factors to protect the firm from competition. Today, these factors are referred to as “moats,” franchises, barriers to entry, or competitive advantages. What they look like and how they can be assessed is an essential part of modern income statement analysis.


pages: 552 words: 163,292

Boom: Mad Money, Mega Dealers, and the Rise of Contemporary Art by Michael Shnayerson

activist fund / activist shareholder / activist investor, banking crisis, Bonfire of the Vanities, corporate raider, diversified portfolio, Donald Trump, East Village, estate planning, Etonian, high net worth, index card, Jane Jacobs, mass immigration, NetJets, Peter Thiel, plutocrats, Plutocrats, rent control, rolodex, Silicon Valley, tulip mania, unbiased observer, upwardly mobile, Works Progress Administration

I’m a runner, I would have to get up at five-thirty or six a.m. to go running. I didn’t have gray hair in 2010, when I arrived,” Deitch added. Within a year, he did. All Deitch could do was tell his side of the museum’s story to important collectors and hope they came on board. Later, he would tick off the names of donors he had cultivated: Maurice Marciano of Guess Jeans, collector Eugenio López, hedge funder Steve Cohen, activist investor Dan Loeb, collector Peter Brant, and international jeweler Laurence Graff, among others. On Deitch’s watch, MOCA’s endowment grew to $12 million in 2012 and to $95 million in 2013. In June 2012, the board backed Deitch in voting to fire Paul Schimmel. In the resulting uproar, pro-Schimmel board members resigned, including Pictures Generation artist Barbara Kruger, photographer Catherine Opie, painter Ed Ruscha, and Conceptual artist John Baldessari.

Dealers were integral players for the auction houses, coaxing their collectors to buy and sell. So they were at major museums, where curators needed the art that dealers and collectors could loan to produce crowd-pleasing shows. In both realms—auction houses and museums—a woman was playing a dominant role at the start of 2016, pushing contemporary art. At Sotheby’s, a bitter proxy battle had put the 270-year-old auction house at the mercy of activist investor Dan Loeb in 2014. Out went a number of old-timers. In, as president and CEO, came Tad Smith, directly from Madison Square Garden, a capable manager but with no art world experience. The art world had barely recovered from this broadside when Smith brought in a boutique advisory firm called Art Agency, Partners. He had agreed to pay AAP $50 million for its consulting services, with a possible extra $35 million if performance standards were met.


pages: 237 words: 67,154

Ours to Hack and to Own: The Rise of Platform Cooperativism, a New Vision for the Future of Work and a Fairer Internet by Trebor Scholz, Nathan Schneider

1960s counterculture, activist fund / activist shareholder / activist investor, Airbnb, Amazon Mechanical Turk, barriers to entry, basic income, bitcoin, blockchain, Build a better mousetrap, Burning Man, capital controls, citizen journalism, collaborative economy, collaborative editing, collective bargaining, commoditize, conceptual framework, crowdsourcing, cryptocurrency, Debian, deskilling, disintermediation, distributed ledger, Ethereum, ethereum blockchain, future of work, gig economy, Google bus, hiring and firing, income inequality, information asymmetry, Internet of things, Jacob Appelbaum, Jeff Bezos, job automation, Julian Assange, Kickstarter, lake wobegon effect, low skilled workers, Lyft, Mark Zuckerberg, means of production, minimum viable product, moral hazard, Network effects, new economy, offshore financial centre, openstreetmap, peer-to-peer, post-work, profit maximization, race to the bottom, ride hailing / ride sharing, SETI@home, shareholder value, sharing economy, Shoshana Zuboff, Silicon Valley, smart cities, smart contracts, Snapchat, TaskRabbit, technoutopianism, transaction costs, Travis Kalanick, Uber for X, uber lyft, union organizing, universal basic income, Whole Earth Catalog, WikiLeaks, women in the workforce, Zipcar

In late 2015 we released Loomio 1.0, a mobile-first interface with a focus on interoperability and an automated subscription system designed for growth. Loomio is a robust social enterprise with an ethical business model that was started four years ago. As a worker-owned cooperative, Loomio is owned collectively by the people building it. The current board of directors is made up of four members and one former member. As an open source tool and global social enterprise, we actively engage developers, contractors, activists, investors, customers, advisors, and other stakeholders to work with us to make a better product and company. We’ve attracted talented people to work well below market rates without issuing traditional equity. We bootstrapped for four years through consulting revenue, loans, crowdfunding, grants, and donations. Also, we’ve attracted extremely valuable advisors by being genuinely mission-driven. In November 2015 we raised $450,000, using redeemable preference shares as an investment instrument that aligns with our social mission and cooperative structure while providing a fair return to investors.


pages: 239 words: 69,496

The Wisdom of Finance: Discovering Humanity in the World of Risk and Return by Mihir Desai

activist fund / activist shareholder / activist investor, Albert Einstein, Andrei Shleifer, assortative mating, Benoit Mandelbrot, Brownian motion, capital asset pricing model, carried interest, Charles Lindbergh, collective bargaining, corporate governance, corporate raider, discounted cash flows, diversified portfolio, Eugene Fama: efficient market hypothesis, financial innovation, follow your passion, George Akerlof, Gordon Gekko, greed is good, housing crisis, income inequality, information asymmetry, Isaac Newton, Jony Ive, Kenneth Rogoff, longitudinal study, Louis Bachelier, moral hazard, Myron Scholes, new economy, out of africa, Paul Samuelson, Pierre-Simon Laplace, principal–agent problem, Ralph Waldo Emerson, random walk, risk/return, Robert Shiller, Robert Shiller, Ronald Coase, Silicon Valley, Steve Jobs, Thales and the olive presses, Thales of Miletus, The Market for Lemons, The Nature of the Firm, The Wealth of Nations by Adam Smith, Tim Cook: Apple, transaction costs, zero-sum game

Venture capitalists, who fund early stage companies, are particularly preoccupied with this problem and, as a result, stage their investments in bite-size portions with curious instruments like “convertible preferred stock.” The peculiarities of these financial practices are designed to facilitate the monitoring of entrepreneurs and to make sure they are pursuing an agenda that is coincident with their investors’ agenda. Alas, these “solutions,” too, have yielded their own problems. Activist investors and short sellers are paid in ways, including contracts that allow them to reap gains over short horizons, that can lead them to place short-term gains over long-term value. Private equity might seem better, but these investors are also paid with similar contracts that provide incentives to harvest investments at particular horizons. And private equity investors often ultimately take their companies public, leading to a set of games they can play because of their informational advantages prior to a public offering.


pages: 293 words: 78,439

Dual Transformation: How to Reposition Today's Business While Creating the Future by Scott D. Anthony, Mark W. Johnson

activist fund / activist shareholder / activist investor, additive manufacturing, Affordable Care Act / Obamacare, Airbnb, Amazon Web Services, autonomous vehicles, barriers to entry, Ben Horowitz, blockchain, business process, business process outsourcing, call centre, Clayton Christensen, cloud computing, commoditize, corporate governance, creative destruction, crowdsourcing, death of newspapers, disintermediation, disruptive innovation, distributed ledger, diversified portfolio, Internet of things, invention of hypertext, inventory management, Jeff Bezos, job automation, job satisfaction, Joseph Schumpeter, Kickstarter, late fees, Lean Startup, Lyft, M-Pesa, Marc Andreessen, Mark Zuckerberg, Minecraft, obamacare, Parag Khanna, Paul Graham, peer-to-peer lending, pez dispenser, recommendation engine, self-driving car, shareholder value, side project, Silicon Valley, Skype, software as a service, software is eating the world, Steve Jobs, the market place, the scientific method, Thomas Kuhn: the structure of scientific revolutions, transfer pricing, uber lyft, Watson beat the top human players on Jeopardy!, Y Combinator, Zipcar

Xerox grew to become the world’s second-largest pensions and benefits administrator. Total employment rose to almost 150,000, and its stock price increased fourfold between 2000 and 2015. But the forces of industry change are relentless. Revenues dipped from $21 billion in 2012 to $18 billion in 2015, and Xerox’s stock fell by almost 50 percent from January 2015 to January 2016. Later that year, influenced undoubtedly by pressure from activist investor Carl Icahn, Xerox announced plans to split into two companies: a business process-outsourcing company called Conduent, with 96,000 employees and $7 billion in revenue; and a copier and printer business, with 39,000 employees and $7 billion in revenue. The two offshoot businesses are individually more vibrant than either would have been a decade ago but no doubt will again confront the challenge of disruptive change in their respective markets.


pages: 263 words: 75,455

Quantitative Value: A Practitioner's Guide to Automating Intelligent Investment and Eliminating Behavioral Errors by Wesley R. Gray, Tobias E. Carlisle

activist fund / activist shareholder / activist investor, Albert Einstein, Andrei Shleifer, asset allocation, Atul Gawande, backtesting, beat the dealer, Black Swan, business cycle, butter production in bangladesh, buy and hold, capital asset pricing model, Checklist Manifesto, cognitive bias, compound rate of return, corporate governance, correlation coefficient, credit crunch, Daniel Kahneman / Amos Tversky, discounted cash flows, Edward Thorp, Eugene Fama: efficient market hypothesis, forensic accounting, hindsight bias, intangible asset, Louis Bachelier, p-value, passive investing, performance metric, quantitative hedge fund, random walk, Richard Thaler, risk-adjusted returns, Robert Shiller, Robert Shiller, shareholder value, Sharpe ratio, short selling, statistical model, survivorship bias, systematic trading, The Myth of the Rational Market, time value of money, transaction costs

These findings suggest that, on average, the market believes activism creates shareholder value. Most interesting, the market-beating returns do not dissipate in the one-year period following the initialSchedule 13D. Instead, target stocks earn an additional 11.4 percent to 17.8 percent above-market return during the year following the activists' interventions. The market-beating returns may be due to changes in stock operations implemented at the behest of the activist investors (see Table 9.1). TABLE 9.1 One-Year Abnormal Returns and Profitability Changes Following Activism In a 2008 paper, Jerry Martin and John Puthenpurackal16 examine the performance of a hypothetical portfolio that mimics Berkshire Hathaway's investments after they are disclosed to the market. Martin and Puthenpurackal write that Buffett's investment record suggests he is one of the most successful investors of all time, with a stock portfolio in 2007 worth over $50 billion in publicly traded companies whose value would equate to the ninth-largest equity mutual fund.


pages: 519 words: 155,332

Tailspin: The People and Forces Behind America's Fifty-Year Fall--And Those Fighting to Reverse It by Steven Brill

2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, activist fund / activist shareholder / activist investor, affirmative action, Affordable Care Act / Obamacare, airport security, American Society of Civil Engineers: Report Card, asset allocation, Bernie Madoff, Bernie Sanders, Blythe Masters, Bretton Woods, business process, call centre, Capital in the Twenty-First Century by Thomas Piketty, carried interest, clean water, collapse of Lehman Brothers, collective bargaining, computerized trading, corporate governance, corporate raider, corporate social responsibility, Credit Default Swap, currency manipulation / currency intervention, Donald Trump, ending welfare as we know it, failed state, financial deregulation, financial innovation, future of work, ghettoisation, Gordon Gekko, hiring and firing, Home mortgage interest deduction, immigration reform, income inequality, invention of radio, job automation, knowledge economy, knowledge worker, labor-force participation, laissez-faire capitalism, Mahatma Gandhi, Mark Zuckerberg, mortgage tax deduction, new economy, obamacare, old-boy network, paper trading, performance metric, post-work, Potemkin village, Powell Memorandum, quantitative hedge fund, Ralph Nader, ride hailing / ride sharing, Robert Bork, Robert Gordon, Robert Mercer, Ronald Reagan, shareholder value, Silicon Valley, Social Responsibility of Business Is to Increase Its Profits, telemarketer, too big to fail, trade liberalization, union organizing, Unsafe at Any Speed, War on Poverty, women in the workforce, working poor

In addition to that immediate trigger, buybacks have become a favorite tool for appeasing and enriching a new breed of raiders. In the last decade, raiders have taken on a new gloss, one that is even more consistent with the notion of shareholder democracy and that borrows the rhetoric of other democracy movements. Armed with cash from huge hedge funds that they control, the raiders now style themselves as “activist shareholders” engaged in campaigns to get even some of the largest and most successful companies to do better for their shareholders by “unlocking” the value they are hoarding. After they insert themselves by paying a few hundred million dollars for 2 or 3 percent of a company’s stock, they engage in high-profile, proxy-like campaigns. However, unlike the original Flom proxy raids, these assaults usually come with a specific set of demands for unlocking that value.


The New Map: Energy, Climate, and the Clash of Nations by Daniel Yergin

3D printing, 9 dash line, activist fund / activist shareholder / activist investor, addicted to oil, Admiral Zheng, Albert Einstein, American energy revolution, Asian financial crisis, autonomous vehicles, Ayatollah Khomeini, Bakken shale, Bernie Sanders, BRICs, British Empire, coronavirus, COVID-19, Covid-19, decarbonisation, Deng Xiaoping, disruptive innovation, distributed generation, Donald Trump, Edward Snowden, Elon Musk, energy security, energy transition, failed state, gig economy, global pandemic, global supply chain, hydraulic fracturing, Indoor air pollution, Intergovernmental Panel on Climate Change (IPCC), inventory management, James Watt: steam engine, Kickstarter, LNG terminal, Lyft, Malacca Straits, Malcom McLean invented shipping containers, Masdar, mass incarceration, megacity, Mikhail Gorbachev, mutually assured destruction, new economy, off grid, oil rush, oil shale / tar sands, oil shock, open economy, paypal mafia, peak oil, pension reform, price mechanism, purchasing power parity, RAND corporation, rent-seeking, ride hailing / ride sharing, Ronald Reagan, self-driving car, Silicon Valley, smart cities, South China Sea, sovereign wealth fund, supply-chain management, trade route, Travis Kalanick, Uber and Lyft, uber lyft, ubercab, UNCLOS, UNCLOS, uranium enrichment, women in the workforce

Power and renewable projects—“lower-carbon generation and distribution”—generally operate in highly-regulated markets and deliver lower rates of return than those traditionally of oil and gas projects. How will they square the circle with demands for returns from investors—which have to meet the retirement and pension needs of their fund-holders—and yet deliver an increasingly “green” portfolio for activist shareholders and millennial investors interested in “impact”? At the same time, the electricity business enables companies to participate more broadly in the changing energy value chain, provides more predictability in revenues, and offsets volatility in oil and gas markets, especially in light of what happened in 2020. With all these pressures around climate, companies will have to concentrate on being technology- and innovation-focused and, at the same time, relentlessly competitive, which means constant focus on costs and efficiency.


pages: 309 words: 81,975

Brave New Work: Are You Ready to Reinvent Your Organization? by Aaron Dignan

"side hustle", activist fund / activist shareholder / activist investor, Airbnb, Albert Einstein, autonomous vehicles, basic income, Bertrand Russell: In Praise of Idleness, bitcoin, Black Swan, blockchain, Buckminster Fuller, Burning Man, butterfly effect, cashless society, Clayton Christensen, clean water, cognitive bias, cognitive dissonance, corporate governance, corporate social responsibility, correlation does not imply causation, creative destruction, crony capitalism, crowdsourcing, cryptocurrency, David Heinemeier Hansson, deliberate practice, DevOps, disruptive innovation, don't be evil, Elon Musk, endowment effect, Ethereum, ethereum blockchain, Frederick Winslow Taylor, future of work, gender pay gap, Geoffrey West, Santa Fe Institute, gig economy, Google X / Alphabet X, hiring and firing, hive mind, income inequality, information asymmetry, Internet of things, Jeff Bezos, job satisfaction, Kevin Kelly, Kickstarter, Lean Startup, loose coupling, loss aversion, Lyft, Marc Andreessen, Mark Zuckerberg, minimum viable product, new economy, Paul Graham, race to the bottom, remote working, Richard Thaler, shareholder value, Silicon Valley, six sigma, smart contracts, Social Responsibility of Business Is to Increase Its Profits, software is eating the world, source of truth, Stanford marshmallow experiment, Steve Jobs, TaskRabbit, the High Line, too big to fail, Toyota Production System, uber lyft, universal basic income, Y Combinator, zero-sum game

By comparison, when Amazon went public it had a market value of just $438 million. When companies don’t go public, only elite investors get to enjoy the climb. Yet all that’s waiting for leadership on the other side of the IPO rainbow is the constant scrutiny and pressure of a bunch of spectators. The CEO who seeks to invest in long-term success (or, gasp, purpose and impact) is met with outcries from activist investors, while algorithmic high-frequency traders create and profit from short-term volatility. Eric Ries, the best-selling author of The Lean Startup and The Startup Way, has a better idea. A much better idea. Over the last five years he’s been quietly developing an alternative called the Long-Term Stock Exchange (LTSE). There are several key differences between the LTSE and a traditional stock exchange.


pages: 302 words: 84,428

Mastering the Market Cycle: Getting the Odds on Your Side by Howard Marks

activist fund / activist shareholder / activist investor, Albert Einstein, business cycle, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, financial innovation, fixed income, if you build it, they will come, income inequality, Isaac Newton, job automation, Long Term Capital Management, margin call, money market fund, moral hazard, new economy, profit motive, quantitative easing, race to the bottom, Richard Feynman, Richard Thaler, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, Robert Shiller, secular stagnation, short selling, South Sea Bubble, stocks for the long run, superstar cities, The Chicago School, The Great Moderation, transaction costs, VA Linux, Y2K, yield curve

The instruments were untested and potentially defective, but no one was willing to pass up his share. That’s the kind of crowd behavior that typifies . . . creates . . . and exacerbates cycles. In theory a bank CEO could have declined to join in this folly. But under the realities of the times, anyone who sat out the dance, lost market share and failed to rake in the “easy money” that his competitors were reaping could be forced out of his job by activist investors. Thus banks bid aggressively for the opportunity to provide capital as if the music would never stop. But cognizance of cycles makes it clear that eventually it will. This kind of risk tolerance and risk obliviousness plays an essential part in the up-phase that precedes—and sets the scene for—every dramatic down-phase. As the period 2005–07 was rolling along, it presented a great opportunity to observe events that made manifest market participants’ attitudes toward risk, and to reach helpful conclusions.


pages: 286 words: 87,401

Blitzscaling: The Lightning-Fast Path to Building Massively Valuable Companies by Reid Hoffman, Chris Yeh

activist fund / activist shareholder / activist investor, Airbnb, Amazon Web Services, autonomous vehicles, bitcoin, blockchain, Bob Noyce, business intelligence, Chuck Templeton: OpenTable:, cloud computing, crowdsourcing, cryptocurrency, Daniel Kahneman / Amos Tversky, database schema, discounted cash flows, Elon Musk, Firefox, forensic accounting, George Gilder, global pandemic, Google Hangouts, Google X / Alphabet X, hydraulic fracturing, Hyperloop, inventory management, Isaac Newton, Jeff Bezos, Joi Ito, Khan Academy, late fees, Lean Startup, Lyft, M-Pesa, Marc Andreessen, margin call, Mark Zuckerberg, minimum viable product, move fast and break things, move fast and break things, Network effects, Oculus Rift, oil shale / tar sands, Paul Buchheit, Paul Graham, Peter Thiel, pre–internet, recommendation engine, ride hailing / ride sharing, Sam Altman, Sand Hill Road, Saturday Night Live, self-driving car, shareholder value, sharing economy, Silicon Valley, Silicon Valley startup, Skype, smart grid, social graph, software as a service, software is eating the world, speech recognition, stem cell, Steve Jobs, subscription business, Tesla Model S, thinkpad, transaction costs, transport as a service, Travis Kalanick, Uber for X, uber lyft, web application, winner-take-all economy, Y Combinator, yellow journalism

Blitzscaling generally requires sacrificing short-term efficiency (and thus financial results) to achieve long-term value creation. Privately held companies are usually closely held; this can make it easier to get the major shareholders to agree on a risky, long-term investment—if you have shareholders who are willing to incur risk for a chance at a much greater reward. But a widely held public company may face activist investors and other such shareholder rebellions if it attempts to carry out a blitzscaling strategy. This could even lead to the worst of possibilities—incurring the initial expense of blitzscaling without the necessary commitment and follow-through to reap the long-term rewards. Many publicly traded blitzscalers like Google and Facebook have tried to avoid public market pressure by issuing two classes of stock so that decision-making authority is vested in a small number of people (i.e., Larry, Sergey, and Mark).


pages: 269 words: 83,307

Young Money: Inside the Hidden World of Wall Street's Post-Crash Recruits by Kevin Roose

activist fund / activist shareholder / activist investor, Basel III, cognitive dissonance, collateralized debt obligation, Credit Default Swap, credit default swaps / collateralized debt obligations, discounted cash flows, Donald Trump, East Village, eurozone crisis, fixed income, forward guidance, glass ceiling, Goldman Sachs: Vampire Squid, hedonic treadmill, jitney, knowledge worker, new economy, Occupy movement, plutocrats, Plutocrats, Robert Shiller, Robert Shiller, selection bias, shareholder value, side project, Silicon Valley, Skype, Steve Jobs, The Predators' Ball, too big to fail, urban planning, We are the 99%, young professional

The jokes ranged from unfunny and sexist (Q: “What’s the biggest difference between Hillary Clinton and a catfish?” A: “One has whiskers and stinks, and the other is a fish”) to unfunny and homophobic (Q: “What’s the biggest difference between Barney Frank and a Fenway Frank?” A: “Barney Frank comes in different size buns”). David Moore, Marc Lasry, and Keith Meister—respectively, a holding company CEO, a billionaire hedge fund manager, and an activist investor—sang a few seconds of a finance-themed parody of “YMCA” before getting the hook. Bill Mulrow, a top executive at the Blackstone Group, and Emil Henry, a hedge fund manager with Tiger Infrastructure Partners, performed a bizarre two-man comedy skit. Mulrow was dressed in raggedy, tie-dye clothes to play the part of a liberal radical, and Henry was playing the part of a wealthy baron. (Presumably, not a huge stretch.)


pages: 892 words: 91,000

Valuation: Measuring and Managing the Value of Companies by Tim Koller, McKinsey, Company Inc., Marc Goedhart, David Wessels, Barbara Schwimmer, Franziska Manoury

activist fund / activist shareholder / activist investor, air freight, barriers to entry, Basel III, BRICs, business climate, business cycle, business process, capital asset pricing model, capital controls, Chuck Templeton: OpenTable:, cloud computing, commoditize, compound rate of return, conceptual framework, corporate governance, corporate social responsibility, creative destruction, credit crunch, Credit Default Swap, discounted cash flows, distributed generation, diversified portfolio, energy security, equity premium, fixed income, index fund, intangible asset, iterative process, Long Term Capital Management, market bubble, market friction, Myron Scholes, negative equity, new economy, p-value, performance metric, Ponzi scheme, price anchoring, purchasing power parity, quantitative easing, risk/return, Robert Shiller, Robert Shiller, shareholder value, six sigma, sovereign wealth fund, speech recognition, stocks for the long run, survivorship bias, technology bubble, time value of money, too big to fail, transaction costs, transfer pricing, value at risk, yield curve, zero-coupon bond

For example, VALUE CREATION FROM DIVESTITURES 631 EXHIBIT 28.2 Market-Adjusted Announcement Returns of Divestitures Cumulative abnormal returns measured from 1 day before to 1 day after announcement. All Spin-offs Carve-outs Asset sales Mean, % Median, % 3.0 1.8 4.5 3.6 2.3 0.9 2.6 1.6 Number of transactions 370 106 125 139 Source: J. Mulherin and A. Boone, “Comparing Acquisitions and Divestitures,” Journal of Corporate Finance 6 (2000): 117–139. in September 2013, Timken announced the spin-off of its steel business after an activist-investor campaign. Similarly, in 2014, PepsiCo faced pressure from an activist investor to separate its beverages and food businesses. This chapter first presents the evidence that divestitures create value and the factors that go into creating that value. Then it discusses why executives often shy away from proactively pursuing divestitures, in spite of this evidence. The next section shows how to assess a divestiture’s value-creation potential.

Some executives argue that investors won’t let them focus on the long term; others fault the rise of shareholder activists in particular. Yet our research shows that even if short-term investors cause day-today fluctuations in a company’s share price and dominate quarterly earnings calls, longer-term investors are the ones who align market prices with intrinsic value.15 Moreover, the evidence shows that, on average, activist investors strengthen the long-term health of the companies they pursue—for example, often challenging existing compensation structures that encourage shorttermism.16 Instead, we often find that executives themselves or their boards are usually the source of short-termism. In a 2013 survey of more than 1,000 executives and board members, most cited their own executive teams and boards 12 R. N. Palter, W.


pages: 801 words: 209,348

Americana: A 400-Year History of American Capitalism by Bhu Srinivasan

activist fund / activist shareholder / activist investor, American ideology, Apple II, Apple's 1984 Super Bowl advert, bank run, barriers to entry, Berlin Wall, blue-collar work, Bob Noyce, Bonfire of the Vanities, British Empire, business cycle, buy and hold, California gold rush, Charles Lindbergh, collective bargaining, commoditize, corporate raider, cuban missile crisis, Deng Xiaoping, diversification, diversified portfolio, Douglas Engelbart, financial innovation, fixed income, Ford paid five dollars a day, global supply chain, Gordon Gekko, Haight Ashbury, hypertext link, income inequality, invisible hand, James Watt: steam engine, Jane Jacobs, Jeff Bezos, John Markoff, joint-stock company, joint-stock limited liability company, Kickstarter, laissez-faire capitalism, Louis Pasteur, Marc Andreessen, Menlo Park, mortgage debt, mutually assured destruction, Norman Mailer, oil rush, peer-to-peer, pets.com, popular electronics, profit motive, race to the bottom, refrigerator car, risk/return, Ronald Reagan, Sand Hill Road, self-driving car, shareholder value, side project, Silicon Valley, Silicon Valley startup, Steve Ballmer, Steve Jobs, Steve Wozniak, strikebreaker, Ted Nelson, The Death and Life of Great American Cities, the new new thing, The Predators' Ball, The Wealth of Nations by Adam Smith, trade route, transcontinental railway, traveling salesman, Upton Sinclair, Vannevar Bush, Works Progress Administration, zero-sum game

By the end of the 1980s, KKR would successfully complete the largest leveraged buyout in American corporate history. Using junk bonds, it would buy the tobacco and snack maker RJR Nabisco for nearly $25 billion. In most ways the KKR purchase marked the end of an era. But the end didn’t mean death. Over the years, the leveraged buyout would be rebranded as private equity—the private equity firm provided the down payment and borrowed the rest—and men like Icahn would be rebranded as activist investors, with specialized hedge funds in a later era becoming practiced in the art of publicly excoriating company CEOs. The labels changed, but the game remained the same. But in the heady atmosphere of the 1980s, Milken slipped in his activities as the junk bond king. He was accused of passing along inside information of pending deals, holding stock for favored clients to mask the identities of the true owners, and engaging in myriad technical securities violations—all to ensure the smooth functioning of his market.

Zanuck: The Golden Years at Twentieth Century-Fox. Edited by Rudy Behlmer. New York: Grove, 1993. Index The page numbers in this index refer to the printed version of this book. The link provided will take you to the beginning of that print page. You may need to scroll forward from that location to find the corresponding reference on your e-reader. Abdul-Jabbar, Kareem, 454 abolitionists, 118, 119, 122 activist investors, 445–49 Adams, Bud, 393 Adams, John, 39, 43, 45 Adams, Samuel, 39 Adams, Samuel Hopkins, 265–66 advertising of Budweiser, 180 of cereals, 261–62 of Coca-Cola, 264 by department stores, 203–4 by discounters, 404 early television and, 386 of early automobiles, 280 by Hearst in New York Times, 233 I Love Lucy and, 383 of Levittown, 374, 382 Nike and, 453–57 of patent medicines, 262–63 of slave auctions, 123 Super Bowl and, 394 of Vanderbilt’s steamboats, 68 African-Americans.


I Love Capitalism!: An American Story by Ken Langone

activist fund / activist shareholder / activist investor, Berlin Wall, Bernie Madoff, Bernie Sanders, business climate, corporate governance, East Village, fixed income, glass ceiling, income inequality, Paul Samuelson, Ronald Reagan, short selling, Silicon Valley, single-payer health, six sigma, VA Linux, Y2K, zero-sum game

Around this time, early in the summer of 2006, two of Home Depot’s directors, Greg Brenneman and Labe Jackson, called me and said they felt Nardelli’s leadership was not helping the company. I held back on voicing an opinion. That fall of 2006—it was five and a half years into Bob’s tenure—an activist investment fund out in San Diego called Relational Investors began to take an interest in Home Depot. Activist funds critique companies they’re invested in and suggest improvements. In theory, this is all to the good for a company and its stockholders. But it can get coercive, and counterproductive. If the company doesn’t follow the fund’s suggestions, the fund may mount a proxy fight to gain control, or at the very least get active in a very public way, much as Nelson Peltz had done with GE and Paul Singer with Arconic (formerly Alcoa) before he actually did launch a proxy fight.

On Friday night at ten, all twelve members of the Home Depot board, including Bob and Marty Lipton, got on a conference call to discuss how we would respond to Relational Investors. We all agreed that Nardelli should cancel the meetings he’d set up. We confirmed that Wachtell, Lipton would represent us legally, but we decided that we didn’t want a PR firm or an investment-banking firm yet. We were a wounded company: publicity in a battle with an activist fund would be a delicate matter. And as for which banker we should choose, as Marty Lipton later told me, “Look, you should pick somebody you really trust, because many bankers, when they find out this is going on, will run ahead of you and try to encourage another firm to come after you.” To try to take us over, in other words. Business can be brutal, as I’ve said time and again. Just how brutal, I would find out very soon.

Walker, 92, 95–96 Garden City, Michigan, 257–58 garment business, 64–67 Gault, Stanley, 183 General Electric (GE), 223, 256–57 board of, 181–82, 190, 205–10 CEO of, 181–82, 190, 205–10, 220–22 and Frank Blake, 226, 230, 232 imaging equipment of, 181–82 pension fund of, 67–69 Power Systems division of, 209, 213, 226 Six Sigma method of, 214 stock of, 208, 210, 255 General Motors, 56, 143, 147, 183–84 Georgia-Pacific, 82–83 Gillespie, Bob, 166–67 Giuliani, Rudy, 201 Glaspie, April, 172 Glassman, Jerry, 148 Glenn, Duke, 91–92 Glickman, Bob, 177–78, 182, 196 Goldman Sachs, 32, 41, 65, 71, 91–92, 97, 172–73, 187–88 Goodes, Mel, 116 Gould, Gordon, 164–66 Grace, Peter, 150 Grasso, Dick, 182–92, 195, 198–99, 201–3, 217, 261 Great Depression, 4, 52–53, 56, 244 Green, Roger, 91–92 Greenberg, Hank, 198 Greenville, South Carolina, 208 Grossman, Bob, 181–82, 196–97, 203, 265 Grossman, Maura, 194 Gruenstein, David, 193–94 Guggenheim Partners, 115 Handy Dan, 130–42, 145–56, 158 Harbison-Walker Refractories, 67–69, 89 Harlem Children’s Zone, 243 Hart, Maurice, 32 Hart, Mitch, 155–56 on Home Depot board, 211, 223, 227 works for Perot, 94, 96, 104, 107, 123 Hausman, Jack, 116 Headley, Russell, 13–15, 265 health-care field, 121–22, 124, 130, 135, 178. See also medical business; New York University Medical Center hedge funds, 169 Heidrick & Struggles, 207, 211 Henderson, Martha, 27–28 Herlihy, Ed, 193–95, 201–2, 244, 265 Hermann, Ray, 46 Hevesi, Alan, 188 Hight, Jack, 91–92, 167–68 Hill, Bonnie, 211, 218, 223, 227 Holzman, Steve, 245–48 Home Depot, 250, 255, 258 and activist fund, 222–25 under Blake, 226–35 board of, 207–13, 216, 218–19, 222–30 culture of, 181, 214–15, 221–22, 228–29, 233 employees of, 235, 259–63, 265 founding of, 116, 158–61, 230–31, 250–51, 262 IPO of, 160–61, 240 leadership of, 206–13 morale problems at, 211, 216–17, 221–23, 228, 233 under Nardelli, 190, 210–35 stock of, 169, 184, 216–17, 219–20, 223, 233, 235, 254 success of, 174, 176, 204, 213–16, 241 home-improvement business, 123, 129–42, 145–61, 163–64.


pages: 692 words: 167,950

The Ripple Effect: The Fate of Fresh Water in the Twenty-First Century by Alex Prud'Homme

2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, activist fund / activist shareholder / activist investor, American Society of Civil Engineers: Report Card, big-box store, bilateral investment treaty, carbon footprint, clean water, commoditize, corporate raider, Deep Water Horizon, en.wikipedia.org, Exxon Valdez, hydraulic fracturing, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Joan Didion, John Snow's cholera map, Louis Pasteur, mass immigration, megacity, oil shale / tar sands, peak oil, renewable energy credits, Report Card for America’s Infrastructure, Ronald Reagan, Silicon Valley, The Wealth of Nations by Adam Smith, urban sprawl, William Langewiesche

In 2002, the EPA issued a Record of Decision, which defined 197 miles of the Hudson a Superfund site (the largest in the nation), and required GE to undertake a massive restoration effort. Although the Superfund law holds polluters retroactively responsible for any cleanup, GE maintained that the PCBs in the Hudson were better left undisturbed, and delayed the case for years. Between 1990 and 2005, activist shareholders discovered that GE had spent $122 million on political donations, lobbyists, scientific experts, and lawyers—such as Harvard Law School’s constitutional expert Laurence Tribe—to avoid dredging the Hudson. In 2001 Jack Welch retired and was replaced as GE chairman by Jeffrey Immelt, who agreed to work with the EPA to dredge the Hudson clear of PCBs. In May 2009, a dredge lowered a blue clamshell bucket into the river near the town of Moreau, New York, and brought up the first scoop of toxic mud, which it deposited in a hopper barge.


pages: 596 words: 163,682

The Third Pillar: How Markets and the State Leave the Community Behind by Raghuram Rajan

activist fund / activist shareholder / activist investor, affirmative action, Affordable Care Act / Obamacare, airline deregulation, Albert Einstein, Andrei Shleifer, banking crisis, barriers to entry, basic income, battle of ideas, Bernie Sanders, blockchain, borderless world, Bretton Woods, British Empire, Build a better mousetrap, business cycle, business process, capital controls, Capital in the Twenty-First Century by Thomas Piketty, central bank independence, computer vision, conceptual framework, corporate governance, corporate raider, corporate social responsibility, creative destruction, crony capitalism, crowdsourcing, cryptocurrency, currency manipulation / currency intervention, data acquisition, David Brooks, Deng Xiaoping, desegregation, deskilling, disruptive innovation, Donald Trump, Edward Glaeser, facts on the ground, financial innovation, financial repression, full employment, future of work, global supply chain, high net worth, housing crisis, illegal immigration, income inequality, industrial cluster, intangible asset, invention of the steam engine, invisible hand, Jaron Lanier, job automation, John Maynard Keynes: technological unemployment, joint-stock company, Joseph Schumpeter, labor-force participation, low skilled workers, manufacturing employment, market fundamentalism, Martin Wolf, means of production, moral hazard, Network effects, new economy, Nicholas Carr, obamacare, Productivity paradox, profit maximization, race to the bottom, Richard Thaler, Robert Bork, Robert Gordon, Ronald Reagan, Sam Peltzman, shareholder value, Silicon Valley, Social Responsibility of Business Is to Increase Its Profits, South China Sea, South Sea Bubble, Stanford marshmallow experiment, Steve Jobs, superstar cities, The Future of Employment, The Wealth of Nations by Adam Smith, trade liberalization, trade route, transaction costs, transfer pricing, Travis Kalanick, Tyler Cowen: Great Stagnation, universal basic income, Upton Sinclair, Walter Mischel, War on Poverty, women in the workforce, working-age population, World Values Survey, Yom Kippur War, zero-sum game

First, management’s incentives should be aligned more with shareholder interests by paying management for performance, preferably in stock. This view became particularly influential when a study by Michael Jensen and Kevin Murphy in 1990 found that for every $1,000 change in shareholder wealth in the United States, the wealth of top management went up by only $3.25.41 The authors suggested it should be much more. Corporate chieftains obviously loved this message. Second, large activist shareholders ought to monitor firm management and push it to do the right thing for shareholders—a recent example was when the influential shareholders of the vehicle hire company Uber came together to depose the CEO, Travis Kalanick, whose aggressive management style and actions were apparently eroding Uber’s business prospects. Finally, there should be an active market for corporate control, where raiders could take over the management of underperforming corporations, even if existing management resisted.


pages: 346 words: 89,180

Capitalism Without Capital: The Rise of the Intangible Economy by Jonathan Haskel, Stian Westlake

"Robert Solow", 23andMe, activist fund / activist shareholder / activist investor, Airbnb, Albert Einstein, Andrei Shleifer, bank run, banking crisis, Bernie Sanders, business climate, business process, buy and hold, Capital in the Twenty-First Century by Thomas Piketty, cloud computing, cognitive bias, computer age, corporate governance, corporate raider, correlation does not imply causation, creative destruction, dark matter, Diane Coyle, Donald Trump, Douglas Engelbart, Douglas Engelbart, Edward Glaeser, Elon Musk, endogenous growth, Erik Brynjolfsson, everywhere but in the productivity statistics, Fellow of the Royal Society, financial innovation, full employment, fundamental attribution error, future of work, Gini coefficient, Hernando de Soto, hiring and firing, income inequality, index card, indoor plumbing, intangible asset, Internet of things, Jane Jacobs, Jaron Lanier, job automation, Kenneth Arrow, Kickstarter, knowledge economy, knowledge worker, laissez-faire capitalism, liquidity trap, low skilled workers, Marc Andreessen, Mother of all demos, Network effects, new economy, open economy, patent troll, paypal mafia, Peter Thiel, pets.com, place-making, post-industrial society, Productivity paradox, quantitative hedge fund, rent-seeking, revision control, Richard Florida, ride hailing / ride sharing, Robert Gordon, Ronald Coase, Sand Hill Road, Second Machine Age, secular stagnation, self-driving car, shareholder value, sharing economy, Silicon Valley, six sigma, Skype, software patent, sovereign wealth fund, spinning jenny, Steve Jobs, survivorship bias, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, Tim Cook: Apple, total factor productivity, Tyler Cowen: Great Stagnation, urban planning, Vanguard fund, walkable city, X Prize, zero-sum game

ICI’s plants in Billingham, Runcorn, and Blackley were industrial landmarks of the north of England, and its shares were a mainstay of the London Stock Exchange. For decades it invested in research and bringing to market a wide variety of innovative products, from Crimplene to tamoxifen to Perspex. It pioneered new ways of doing business that other firms profitably adopted, and ICI-trained chemists, engineers, and managers filled the ranks of British industry. But things began to change in the 1990s: frightened by a takeover threat from an activist investor, ICI began to focus on the pursuit of short-term shareholder value. To this end, it plunged enthusiastically into the M&A market, divesting or selling billions of dollars’ worth of divisions, and acquiring several others. The pursuit of focus and efficiency proved tough, and the company faced a growing debt burden and problems integrating its acquisitions. By the 2000s ICI’s decline was obvious, and few were surprised when what remained of the company was bought by Akzo Nobel in 2008 for a mere (relative to its past value) £8 billion.


pages: 284 words: 92,688

Disrupted: My Misadventure in the Start-Up Bubble by Dan Lyons

activist fund / activist shareholder / activist investor, Airbnb, Ben Horowitz, Bernie Madoff, bitcoin, call centre, cleantech, cloud computing, corporate governance, disruptive innovation, dumpster diving, fear of failure, Filter Bubble, Golden Gate Park, Google Glasses, Googley, Gordon Gekko, hiring and firing, Jeff Bezos, Lean Startup, Lyft, Marc Andreessen, Mark Zuckerberg, Menlo Park, minimum viable product, new economy, Paul Graham, pre–internet, quantitative easing, ride hailing / ride sharing, Rosa Parks, Sand Hill Road, sharing economy, Silicon Valley, Silicon Valley ideology, Silicon Valley startup, Skype, Snapchat, software as a service, South of Market, San Francisco, Stanford prison experiment, Steve Ballmer, Steve Jobs, Steve Wozniak, telemarketer, tulip mania, uber lyft, Y Combinator, éminence grise

Eighteen months after buying Skype, Andreessen and his partners sold the company to Microsoft for $8.5 billion—three times what they paid. To some, Andreessen’s role as both an eBay director and an investor acquiring an asset from eBay seemed like a problem. “Andreessen, he’s screwed more people than Casanova, for Christ’s sake, and yet he goes and takes this attitude that he’s on the high moral ground,” activist investor Carl Icahn said on CNBC. Icahn complained that eBay had sold Skype for less than what it was worth and that eBay’s investors had been shortchanged. Andreessen said Icahn was “making up a fake conspiracy theory out of thin air.” The tech press sided with Andreessen. The story went nowhere. Andreessen is relentlessly optimistic and pounds away on the same message, which is that no matter how high the valuations of start-ups might go, this all makes sense.


Concentrated Investing by Allen C. Benello

activist fund / activist shareholder / activist investor, asset allocation, barriers to entry, beat the dealer, Benoit Mandelbrot, Bob Noyce, business cycle, buy and hold, carried interest, Claude Shannon: information theory, corporate governance, corporate raider, delta neutral, discounted cash flows, diversification, diversified portfolio, Edward Thorp, family office, fixed income, high net worth, index fund, John von Neumann, Louis Bachelier, margin call, merger arbitrage, Paul Samuelson, performance metric, random walk, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, Robert Shiller, shareholder value, Sharpe ratio, short selling, survivorship bias, technology bubble, transaction costs, zero-sum game

Michael is the author of numerous publications, including an article in the Harvard Business Review titled “Managing Productivity in the Service Sector” (Summer 1998), and coauthor of the book Value Investing from Graham to Buffett and Beyond (John Wiley & Sons, June 2001), and continues to lecture internationally on value investing. Tobias E. Carlisle is a founder and managing partner of Carbon Beach Asset Management LLC, and serves as chief investment officer. He is best known as the author of the websites greenbackd.com, and the acquirersmultiple. com, and the books Deep Value: Why Activist Investors and Other Contrarians Battle for Control of Losing Corporations (2014, Wiley Finance), 221 222 About the Authors and Quantitative Value: A Practitioner’s Guide to Automating Intelligent Investment and Eliminating Behavioral Errors (2012, Wiley Finance). He has extensive experience in investment management, business valuation, public company corporate governance, and corporate law. Prior to founding the forerunner to Carbon Beach in 2010, Tobias was an analyst at an activist hedge fund, general counsel of a company listed on the Australian Stock Exchange, and a corporate advisory lawyer.


pages: 297 words: 93,882

Winning Now, Winning Later by David M. Cote

activist fund / activist shareholder / activist investor, Asian financial crisis, business cycle, business process, hiring and firing, Internet of things, Parkinson's law, Paul Samuelson, Silicon Valley, six sigma, Steve Jobs, Toyota Production System, trickle-down economics

Consider how many of these problems you might be able to solve before you leave. If you find yourself shrinking back from this work, unhappy with how it might make you look as a leader, then you need to check yourself and your priorities. A great leader puts the organization first. A VALENTINE’S DAY SURPRISE On February 14, 2017, about six weeks before I was set to retire as CEO, an activist investor, the hedge fund Third Point Management, sent Darius a letter advising him to spin off our entire Aerospace business. At many companies, such a move would set off alarm bells, triggering fears of conflict to come and perhaps an impending takeover. We saw it differently: if this investor had a good idea for increasing value, we were eager to hear it. After all, we had the same goal as Third Point: to increase Honeywell’s stock price.


pages: 279 words: 87,875

Underwater: How Our American Dream of Homeownership Became a Nightmare by Ryan Dezember

activist fund / activist shareholder / activist investor, Airbnb, business cycle, call centre, Cesare Marchetti: Marchetti’s constant, cloud computing, collateralized debt obligation, coronavirus, corporate raider, COVID-19, Credit Default Swap, credit default swaps / collateralized debt obligations, Donald Trump, Home mortgage interest deduction, housing crisis, interest rate swap, margin call, McMansion, mortgage debt, mortgage tax deduction, negative equity, rent control, rolodex, sharing economy, sovereign wealth fund, transaction costs

They went looking for an investor to pair with, someone with deeper pockets than the doctors and dentists who had so far been funding their splurge. Treehouse had bought a few houses in Atlanta and California but needed many more properties in each market to make managing them cost-effective. Treehouse enlisted a young investment banker named Rich Ford to find a match on Wall Street. Ford approached Carl Icahn, the corporate raider and activist investor, and pitched the Carlyle Group, a $200 billion Washington, D.C., firm that had gained prominence privatizing government businesses and carving out unloved divisions from big corporations. Blackstone took a meeting. Jonathan Gray, the New York firm’s real estate chief, was mulling a move into single-family real estate, and his team was vetting rental operators for potential partnerships. Gray began his career on Wall Street with Blackstone in the early 1990s straight out of college.


pages: 340 words: 100,151

Secrets of Sand Hill Road: Venture Capital and How to Get It by Scott Kupor

activist fund / activist shareholder / activist investor, Airbnb, Amazon Web Services, asset allocation, barriers to entry, Ben Horowitz, carried interest, cloud computing, corporate governance, cryptocurrency, discounted cash flows, diversification, diversified portfolio, estate planning, family office, fixed income, high net worth, index fund, information asymmetry, Lean Startup, low cost airline, Lyft, Marc Andreessen, Myron Scholes, Network effects, Paul Graham, pets.com, price stability, ride hailing / ride sharing, rolodex, Sand Hill Road, shareholder value, Silicon Valley, software as a service, sovereign wealth fund, Startup school, Travis Kalanick, uber lyft, VA Linux, Y Combinator, zero-sum game

While it seems to be a bit of a chicken-and-egg question, the data point toward the former, as the average age of companies from founding to IPO started increasing (from six and a half to ten and a half years) and the annual number of IPOs started decreasing years before robust late-stage private financing became available. 5. There’s Too Much Pressure on Public Companies These Days The lack of IPOs has also been partly blamed on the rise of activist investors. These are investors who purchase stock in a public company and try to agitate for change designed to increase the value of the stock. Such changes often include introducing new board members, who in turn can make changes to the leadership of the company. So why navigate these public company pressures if there’s enough capital available in the private markets to stay private longer? Staying Private and Staying Motivated Regardless of how we got here, the critical thing for you as a founder to think about is that it’s likely that you will be a private company for substantially longer than you might anticipate.


pages: 831 words: 98,409

SUPERHUBS: How the Financial Elite and Their Networks Rule Our World by Sandra Navidi

activist fund / activist shareholder / activist investor, assortative mating, bank run, barriers to entry, Bernie Sanders, Black Swan, Blythe Masters, Bretton Woods, butterfly effect, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, cognitive bias, collapse of Lehman Brothers, collateralized debt obligation, commoditize, conceptual framework, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, diversification, East Village, Elon Musk, eurozone crisis, family office, financial repression, Gini coefficient, glass ceiling, Goldman Sachs: Vampire Squid, Google bus, Gordon Gekko, haute cuisine, high net worth, hindsight bias, income inequality, index fund, intangible asset, Jaron Lanier, John Meriwether, Kenneth Arrow, Kenneth Rogoff, knowledge economy, London Whale, Long Term Capital Management, longitudinal study, Mark Zuckerberg, mass immigration, McMansion, mittelstand, money market fund, Myron Scholes, NetJets, Network effects, offshore financial centre, old-boy network, Parag Khanna, Paul Samuelson, peer-to-peer, performance metric, Peter Thiel, plutocrats, Plutocrats, Ponzi scheme, quantitative easing, Renaissance Technologies, rent-seeking, reserve currency, risk tolerance, Robert Gordon, Robert Shiller, Robert Shiller, rolodex, Satyajit Das, shareholder value, Silicon Valley, social intelligence, sovereign wealth fund, Stephen Hawking, Steve Jobs, The Future of Employment, The Predators' Ball, The Rise and Fall of American Growth, too big to fail, women in the workforce, young professional

Andrew Clark, “Lehman Brothers’ Golden Girl, Erin Callan: Through the Glass Ceiling—and Off the Glass Cliff,” Guardian, March 19, 2010, http://www.theguardian.com/business/2010/mar/19/lehmans-erin-callan-glass-cliff. 28. Gillian Tett, “Lunch with the FT: Christine Lagarde,” Financial Times, September 12, 2014, http://www.ft.com/intl/cms/s/0/4c506aec-3938-11e4-9526-00144feabdc0.xhtml. 29. Andrew Ross Sorkin, “Do Activist Investors Target Female C.E.O.s?” New York Times, February 9, 2015, http://dealbook.nytimes.com/2015/02/09/the-women-of-the-s-p-500-and-investor-activism. 30. Debora L. Spar, Wonder Women: Sex, Power, and the Quest for Perfection (New York: Farrar, Straus and Giroux, 2013), Kindle locations 3222-25, Kindle edition. 31. Sandberg, Lean In, 71. 32. Ibid., 72. 33. Madison Marriage, “FTfm Survey: Fund Market Rocked by Sexism Claims,” Financial Times, September 8, 2013, http://www.ft.com/intl/cms/s/0/4e57770e-1639-11e3-a57d-00144feabdc0.xhtml. 34.


pages: 411 words: 98,128

Bezonomics: How Amazon Is Changing Our Lives and What the World's Best Companies Are Learning From It by Brian Dumaine

activist fund / activist shareholder / activist investor, AI winter, Airbnb, Amazon Web Services, Atul Gawande, autonomous vehicles, basic income, Bernie Sanders, Black Swan, call centre, Chris Urmson, cloud computing, corporate raider, creative destruction, Danny Hillis, Donald Trump, Elon Musk, Erik Brynjolfsson, future of work, gig economy, Google Glasses, Google X / Alphabet X, income inequality, industrial robot, Internet of things, Jeff Bezos, job automation, Joseph Schumpeter, Kevin Kelly, Lyft, Marc Andreessen, Mark Zuckerberg, money market fund, natural language processing, pets.com, plutocrats, Plutocrats, race to the bottom, ride hailing / ride sharing, Sand Hill Road, self-driving car, shareholder value, Silicon Valley, Silicon Valley startup, Snapchat, speech recognition, Steve Jobs, Stewart Brand, supply-chain management, Tim Cook: Apple, too big to fail, Travis Kalanick, Uber and Lyft, uber lyft, universal basic income, wealth creators, web application, Whole Earth Catalog

The 1980s saw the advent of corporate raiders such as Carl Icahn, Victor Posner, and T. Boone Pickens, who put pressure on boards and management to run their corporations solely for shareholders. Since then, running a business to maximize returns for shareholders has become the modus operandi. Commonly, CEOs today will do whatever it takes—cutting R&D, firing employees, slicing benefits—to make the latest quarterly earnings, because if they don’t deliver, activist investors will find someone who will. Unfortunately, the focus on shareholder value will only get worse as the next generation of powerful corporations, fueled by big data and AI, becomes even more dominant. Yes, shareholders’ interests certainly need to be taken into account, but so must those of the employees and the communities in which corporations operate. The solution offered by many on the left is simple to state but hard to execute: corporations need to pay their employees more, and governments need to pick up the slack when a business can’t economically pay a living wage or create enough jobs to meet the needs of society.


pages: 372 words: 101,678

Lessons from the Titans: What Companies in the New Economy Can Learn from the Great Industrial Giants to Drive Sustainable Success by Scott Davis, Carter Copeland, Rob Wertheimer

3D printing, activist fund / activist shareholder / activist investor, additive manufacturing, Airbnb, airport security, barriers to entry, business cycle, business process, clean water, commoditize, coronavirus, corporate governance, COVID-19, Covid-19, disruptive innovation, Elon Musk, factory automation, global pandemic, hydraulic fracturing, Internet of things, iterative process, low cost airline, low cost carrier, Marc Andreessen, megacity, Network effects, new economy, Ponzi scheme, profit maximization, random walk, RFID, ride hailing / ride sharing, risk tolerance, shareholder value, Silicon Valley, six sigma, skunkworks, software is eating the world, strikebreaker, Toyota Production System, Uber for X, winner-take-all economy

Future CEOs struggled to re-create the margin magic that defined David’s tenure, and a once powerful incentive compensation scheme with margin improvement at its center proved too rigid. It drove suboptimal decisions around investment that weakened the company’s competitive positioning. As a result, 10 percent growth targets became 6 percent, and 6 percent targets later became 4.5 percent. Years of underperformance culminated in the entrance of activist investors and the breakup of the once mighty conglomerate. Incentives drive outcomes in an organization. At UTC, corporate incentives and a focus on improving margins led to many years of success, followed by several years of failure. The rise and fall of United Technologies highlights that the best incentive systems are not static or myopically focused; they should exhibit the same dynamism as an organization’s ever-evolving set of opportunities and risks.


pages: 406 words: 105,602

The Startup Way: Making Entrepreneurship a Fundamental Discipline of Every Enterprise by Eric Ries

activist fund / activist shareholder / activist investor, Affordable Care Act / Obamacare, Airbnb, autonomous vehicles, barriers to entry, basic income, Ben Horowitz, Black-Scholes formula, call centre, centralized clearinghouse, Clayton Christensen, cognitive dissonance, connected car, corporate governance, DevOps, Elon Musk, en.wikipedia.org, fault tolerance, Frederick Winslow Taylor, global supply chain, index card, Jeff Bezos, Kickstarter, Lean Startup, loss aversion, Marc Andreessen, Mark Zuckerberg, means of production, minimum viable product, moral hazard, move fast and break things, move fast and break things, obamacare, peer-to-peer, place-making, rent-seeking, Richard Florida, Sam Altman, Sand Hill Road, secular stagnation, shareholder value, Silicon Valley, Silicon Valley startup, six sigma, skunkworks, Steve Jobs, the scientific method, time value of money, Toyota Production System, Uber for X, universal basic income, web of trust, Y Combinator

You simply cut down all the trees. Of course, this is the ultimate short-term solution since once you’ve done it, the forest will have almost no remaining value. Yet this is what too many of our public companies are doing: cannibalizing their long-term value by destroying their own brand, squeezing vendors, shortchanging customers, failing to invest in employees, and using the company’s resources to enrich insiders and activist investors via financial engineering. All of these activities share the same problem: They work only in the short term. In companies that have grown a sufficiently large and productive “forest” over years or decades, there’s an awful lot of firewood to be cut down before the damage becomes evident. This is the inevitable result of treating companies as if their obligation to maximize shareholder value means maximizing quarterly returns.


pages: 561 words: 114,843

Startup CEO: A Field Guide to Scaling Up Your Business, + Website by Matt Blumberg

activist fund / activist shareholder / activist investor, airport security, Albert Einstein, bank run, Ben Horowitz, Broken windows theory, crowdsourcing, deskilling, fear of failure, high batting average, high net worth, hiring and firing, Inbox Zero, James Hargreaves, Jeff Bezos, job satisfaction, Kickstarter, knowledge economy, knowledge worker, Lean Startup, Mark Zuckerberg, minimum viable product, pattern recognition, performance metric, pets.com, rolodex, Rubik’s Cube, shareholder value, Silicon Valley, Skype

Three-year and four-year terms are most common. It is possible for the shareholders to put up an alternative slate. In theory, this approach could be used in both private and public companies but in reality it is almost entirely limited to public companies. This will be perceived as a hostile move by most companies and they will fight the alternative slate of directors. This “alternative slate” approach is most commonly taken by “activist investors” who take a meaningful minority stake in a public company and agitate for changes in the board, management and strategic direction of the company. It can also be used in a hostile takeover effort. It is rare for an alternative slate to take control of a company but it is fairly common for a new director or two to get elected in this way. Boards should evolve. Boards should recruit new members on a regular basis.


A People’s History of Computing in the United States by Joy Lisi Rankin

activist fund / activist shareholder / activist investor, Albert Einstein, Apple II, Bill Gates: Altair 8800, computer age, corporate social responsibility, Douglas Engelbart, Douglas Engelbart, Grace Hopper, Hacker Ethic, Howard Rheingold, Howard Zinn, Jeff Bezos, John Markoff, John von Neumann, Mark Zuckerberg, Menlo Park, Mother of all demos, Network effects, Norbert Wiener, pink-collar, profit motive, RAND corporation, Silicon Valley, Steve Jobs, Steve Wozniak, Steven Levy, Stewart Brand, Ted Nelson, the market place, urban planning, Whole Earth Catalog, wikimedia commons

Controversy cropped up around CDC and PLATO during the late 1970s and early 1980s. In 1980, church groups castigated CDC for its sales of PLATO to South Africa ­u nder apartheid. In 1982, the Minneapolis Tribune challenged the veracity of CDC’s advertising claims. In fact, in her article on PLATO, Elisabeth Van Meer argues that Norris attempted to market PLATO as a solution to social prob­lems, but that veneer of corporate social responsibility was criticized by activists, investors, and journalists through controversies about truth in advertising and supporting South African apartheid. Van Meer, “PLATO.” 15. ­People’s Computer Com­pany 1, no. 1 (October 1972), 1; all ellipses in original. 16. Circulation number from Fred Turner, From Counterculture to Cyberculture: Stewart Brand, the Whole Earth Network, and the Rise of Digital Utopianism (Chicago: University of Chicago Press, 2006), 113. 17.


pages: 481 words: 120,693

Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else by Chrystia Freeland

activist fund / activist shareholder / activist investor, Albert Einstein, algorithmic trading, assortative mating, banking crisis, barriers to entry, Basel III, battle of ideas, Bernie Madoff, Big bang: deregulation of the City of London, Black Swan, Boris Johnson, Branko Milanovic, Bretton Woods, BRICs, business climate, call centre, carried interest, Cass Sunstein, Clayton Christensen, collapse of Lehman Brothers, commoditize, conceptual framework, corporate governance, creative destruction, credit crunch, Credit Default Swap, crony capitalism, Deng Xiaoping, disruptive innovation, don't be evil, double helix, energy security, estate planning, experimental subject, financial deregulation, financial innovation, Flash crash, Frank Gehry, Gini coefficient, global village, Goldman Sachs: Vampire Squid, Gordon Gekko, Guggenheim Bilbao, haute couture, high net worth, income inequality, invention of the steam engine, job automation, John Markoff, joint-stock company, Joseph Schumpeter, knowledge economy, knowledge worker, liberation theology, light touch regulation, linear programming, London Whale, low skilled workers, manufacturing employment, Mark Zuckerberg, Martin Wolf, Mikhail Gorbachev, Moneyball by Michael Lewis explains big data, NetJets, new economy, Occupy movement, open economy, Peter Thiel, place-making, plutocrats, Plutocrats, Plutonomy: Buying Luxury, Explaining Global Imbalances, postindustrial economy, Potemkin village, profit motive, purchasing power parity, race to the bottom, rent-seeking, Rod Stewart played at Stephen Schwarzman birthday party, Ronald Reagan, self-driving car, short selling, Silicon Valley, Silicon Valley startup, Simon Kuznets, Solar eclipse in 1919, sovereign wealth fund, starchitect, stem cell, Steve Jobs, the new new thing, The Spirit Level, The Wealth of Nations by Adam Smith, Tony Hsieh, too big to fail, trade route, trickle-down economics, Tyler Cowen: Great Stagnation, wage slave, Washington Consensus, winner-take-all economy, zero-sum game

Many of today’s plutocrats stumbled a decade or two into their careers, but by then they had already accomplished so much that they were poised to seize even larger opportunities. The premium on early success means that the alpha geeks of the super-elite have been driven from a young age. The dorm room incubation of our most important technology companies is common knowledge. That’s where hedge funds are starting, too. Bill Ackman, the most influential activist investor in America today, whose targets have included J.C. Penney and Target, founded his first hedge fund with a classmate right after graduating with an MBA from Harvard. Ken Griffin, the billionaire founder of Citadel, the Chicago-based hedge fund, started trading bonds out of his college dorm room. The pattern holds for many of the emerging markets plutocrats, too. Carlos Slim, who bought his first share when he was twelve, started to make serious money straight out of college, when he was one of Los Casabolseros, or Stock Market Boys, a group of aggressive young men who traded shares on the Mexican stock market and played dominoes together after the market closed.


pages: 464 words: 121,983

Disaster Capitalism: Making a Killing Out of Catastrophe by Antony Loewenstein

activist fund / activist shareholder / activist investor, Affordable Care Act / Obamacare, American Legislative Exchange Council, anti-communist, Asian financial crisis, British Empire, Capital in the Twenty-First Century by Thomas Piketty, Chelsea Manning, clean water, collective bargaining, colonial rule, corporate social responsibility, Corrections Corporation of America, Edward Snowden, facts on the ground, failed state, falling living standards, Ferguson, Missouri, financial independence, full employment, G4S, Goldman Sachs: Vampire Squid, housing crisis, illegal immigration, immigration reform, income inequality, Julian Assange, Kickstarter, mandatory minimum, market fundamentalism, mass incarceration, Naomi Klein, neoliberal agenda, obamacare, Occupy movement, offshore financial centre, open borders, private military company, profit motive, Ralph Nader, Ronald Reagan, Satyajit Das, Scramble for Africa, Slavoj Žižek, stem cell, the medium is the message, trade liberalization, WikiLeaks

But the management contract for Dilley was problematic, with Obama officials rushing to seal the deal and establishing the facility under conditions set for a CCA prison in Eloy, one thousand miles from Dilley. Eloy officials stated that they had no intention of visiting or monitoring Dilley.46 During Obama’s two terms in office, his administration continued to outsource more facilities to CCA and other corporations that ignored federal laws and abused human rights. Alex Friedmann, an activist investor and former prisoner who held CCA shares, told CNN: “Investors see this as an opportunity [the government imprisoning migrants]. This is a potentially untapped market that will have strong demand.”47 Disaster capitalism was the winner. Silky Shah, co-director of the Detention Watch Network, slammed the Obama administration’s decision to expand privatized facilities, arguing that “family detention is an abusive and inhumane practice that erodes family bonds and undermines children’s wellbeing.”48 Out in Lumpkin, the roads were empty.


pages: 413 words: 117,782

What Happened to Goldman Sachs: An Insider's Story of Organizational Drift and Its Unintended Consequences by Steven G. Mandis

activist fund / activist shareholder / activist investor, algorithmic trading, Berlin Wall, bonus culture, BRICs, business process, buy and hold, collapse of Lehman Brothers, collateralized debt obligation, commoditize, complexity theory, corporate governance, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, disintermediation, diversification, Emanuel Derman, financial innovation, fixed income, friendly fire, Goldman Sachs: Vampire Squid, high net worth, housing crisis, London Whale, Long Term Capital Management, merger arbitrage, Myron Scholes, new economy, passive investing, performance metric, risk tolerance, Ronald Reagan, Saturday Night Live, Satyajit Das, shareholder value, short selling, sovereign wealth fund, The Nature of the Firm, too big to fail, value at risk

As a member of the M&A department, I worked on a team to advise board members and CEOs of leading multinational companies on large, technically complex transactions. For example, I worked on a team that advised AT&T on combining its broadband business with Comcast in a transaction that valued AT&T broadband at $72 billion. I also helped sell a private company to Warren Buffett’s Berkshire Hathaway. As the head of Goldman’s unsolicited take-over and hostile raid defense practice, I worked on a team advising a client involved in a proxy fight with activist investor Carl Icahn. When I joined Goldman, partnership election at the firm was considered one of the most prestigious achievements on Wall Street, in part because the process was highly selective and a Goldman partnership was among the most lucrative. The M&A department had a remarkably good track record of its bankers being elected—probably one of the highest percentages of success in the firm at the time.


pages: 91 words: 26,009

Capitalism: A Ghost Story by Arundhati Roy

activist fund / activist shareholder / activist investor, Bretton Woods, corporate governance, feminist movement, Frank Gehry, ghettoisation, Howard Zinn, informal economy, land reform, Mahatma Gandhi, means of production, megacity, microcredit, Nelson Mandela, neoliberal agenda, Occupy movement, RAND corporation, reserve currency, special economic zone, spectrum auction, stem cell, The Chicago School, Washington Consensus, WikiLeaks

Mischievously, when India’s government or sections of its corporate press want to run a smear campaign against a genuine people’s movement, like the Narmada Bachao Andolan, or the protest against the Koodankulam nuclear reactor, they accuse these movements of being NGOs receiving “foreign funding.” They know very well that the mandate of most NGOs, in particular the well-funded ones, is to further the project of corporate globalization, not thwart it. Armed with their billions, these NGOs have waded into the world, turning potential revolutionaries into salaried activists, funding artists, intellectuals, and filmmakers, gently luring them away from radical confrontation, ushering them in the direction of multiculturalism, gender equity, community development—the discourse couched in the language of identity politics and human rights. The transformation of the idea of justice into the industry of human rights has been a conceptual coup in which NGOs and foundations have played a crucial part.


All About Asset Allocation, Second Edition by Richard Ferri

activist fund / activist shareholder / activist investor, asset allocation, asset-backed security, barriers to entry, Bernie Madoff, buy and hold, capital controls, commoditize, commodity trading advisor, correlation coefficient, Daniel Kahneman / Amos Tversky, diversification, diversified portfolio, equity premium, estate planning, financial independence, fixed income, full employment, high net worth, Home mortgage interest deduction, implied volatility, index fund, intangible asset, Long Term Capital Management, Mason jar, money market fund, mortgage tax deduction, passive income, pattern recognition, random walk, Richard Thaler, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, Robert Shiller, selection bias, Sharpe ratio, stocks for the long run, survivorship bias, too big to fail, transaction costs, Vanguard fund, yield curve

There are hundreds of arbitrage opportunities that present themselves on a daily basis if CHAPTER 10 208 ● ● you have access to the information and can trade very inexpensively. Event-driven strategies. Event-driven strategies take advantage of corporate transaction announcements and other one-time events. An example would be “distressed securities,” which involve investing in companies that are in or near bankruptcy. Another type of event-driven strategy is an activist fund, which is predatory in nature. The managers of an activist fund take sizable positions in small, flawed companies and then use their influence to force management changes and restructuring. A third type of event-driven fund is venture capital. Venture funds invest in start-up companies. Directional or tactical strategies. The largest group of hedge funds uses directional or tactical strategies. An example of a directional fund is a commodities trading advisor (CTA).


pages: 767 words: 208,933

Liberalism at Large: The World According to the Economist by Alex Zevin

activist fund / activist shareholder / activist investor, affirmative action, anti-communist, Asian financial crisis, bank run, Berlin Wall, Big bang: deregulation of the City of London, Bretton Woods, British Empire, business climate, business cycle, capital controls, centre right, Chelsea Manning, collective bargaining, Columbine, Corn Laws, corporate governance, corporate social responsibility, creative destruction, credit crunch, David Ricardo: comparative advantage, debt deflation, desegregation, disruptive innovation, Donald Trump, Edward Snowden, failed state, Fall of the Berlin Wall, financial deregulation, financial innovation, Francis Fukuyama: the end of history, full employment, Gini coefficient, global supply chain, hiring and firing, imperial preference, income inequality, interest rate derivative, invisible hand, John von Neumann, Joseph Schumpeter, Julian Assange, Khartoum Gordon, land reform, liberal capitalism, liberal world order, light touch regulation, Long Term Capital Management, market bubble, Martin Wolf, means of production, Mikhail Gorbachev, Monroe Doctrine, Mont Pelerin Society, moral hazard, Naomi Klein, new economy, New Journalism, Norman Macrae, Northern Rock, Occupy movement, Philip Mirowski, plutocrats, Plutocrats, price stability, quantitative easing, race to the bottom, railway mania, rent control, rent-seeking, road to serfdom, Ronald Reagan, Rosa Parks, Snapchat, Socratic dialogue, The Wealth of Nations by Adam Smith, Thomas Malthus, too big to fail, trade liberalization, trade route, unbanked and underbanked, underbanked, unorthodox policies, upwardly mobile, War on Poverty, WikiLeaks, Winter of Discontent, Yom Kippur War, young professional

A ‘broadening class of people who have benefited from globalization’, cosmocrats might just be ‘the most meritocratic ruling class the world has ever seen’.79 The cosmocrats were everywhere, if you knew how to look. There were relative unknowns like Patrick Wang in Hong Kong, scion of an industrial family, ‘his suit exquisitely tailored, his thick black hair neatly combed, and he speaks impeccable Harvard Business School English’. Or Jang Ha-sung, economist and activist shareholder in Seoul, ‘preppie-looking in a blue blazer, club tie and button-down shirt, a former student of finance at the Wharton school’, feet up at home, as ‘opera burbles in the background’. Western countries also had some: in Bolton, England, Marcus de Ferranti, Eton graduate, electronics heir, fighter pilot, who emerged from aristocratic torpor to found a virtual telephone exchange; in Johannesburg, Lyn Van Haght, ‘tall, blond Californian’, who ran a heavily-fortified testing centre for private education company Sylvain, ‘creating the black middle class that the continent needs so desperately’.80 Some looked strange: Steven Hirsch, an LA pornography studio chief, ‘tanned and aerobicized’ but oddly ‘sounds as if he has graduated from a high-powered business school’ or Jackson Thubela in Soweto, a ‘gold toothed twenty year old who often wears an Adidas tracksuit’ and ran a phone stand.


pages: 421 words: 128,094

King of Capital: The Remarkable Rise, Fall, and Rise Again of Steve Schwarzman and Blackstone by David Carey

activist fund / activist shareholder / activist investor, asset allocation, banking crisis, Bonfire of the Vanities, business cycle, carried interest, collateralized debt obligation, corporate governance, corporate raider, credit crunch, diversification, diversified portfolio, fixed income, Gordon Gekko, margin call, Menlo Park, mortgage debt, new economy, Northern Rock, risk tolerance, Rod Stewart played at Stephen Schwarzman birthday party, Sand Hill Road, sealed-bid auction, Silicon Valley, sovereign wealth fund, The Predators' Ball, éminence grise

The mere prospect of becoming a buyout target could lift the price of a stock that was otherwise languishing, and corporations began to rethink their own capital structures. If a buyout firm could put more debt on the company so that any gain in the company’s value was magnified in the value of its stock, companies began to ask themselves, why couldn’t we do the same to give our public shareholders a higher return on their shares? In some cases, hedge funds and other activist investors urged companies to perform their own dividend recaps, borrowing more money to pay a dividend or to buy in some of their shares. The sheer magnitude of the funds and the deals had another side effect on the business, one that troubled some investors. The fixed 1.5 percent to 2 percent management fees the firms charged their investors, and the transaction fees they tacked on when they bought or sold a company, had grown so large in absolute dollar terms that they had become a wellhead of income at large private equity houses, rather than just a way of ensuring that some money was coming in the door in tough times.


pages: 483 words: 143,123

The Frackers: The Outrageous Inside Story of the New Billionaire Wildcatters by Gregory Zuckerman

activist fund / activist shareholder / activist investor, addicted to oil, American energy revolution, Asian financial crisis, Bakken shale, Bernie Sanders, Buckminster Fuller, corporate governance, corporate raider, credit crunch, energy security, Exxon Valdez, housing crisis, hydraulic fracturing, Kickstarter, LNG terminal, margin call, Maui Hawaii, North Sea oil, oil rush, oil shale / tar sands, oil shock, peak oil, Peter Thiel, reshoring, self-driving car, Silicon Valley, sovereign wealth fund, Steve Jobs, urban decay

“Mark Ruffalo got an Academy Award nomination and was in the Avengers movie after” becoming involved in the antifracking movement. Either way, the publicity helped pressure New York State officials to maintain the moratorium on fracking in the state and it helped focus national attention on the drilling, dealing a public relations blow to those in the business. • • • In late 2010, billionaire investor Carl Icahn disclosed that he had purchased nearly 6 percent of Chesapeake’s shares. Icahn is a so-called activist investor, or someone who buys big chunks of a company and then levies pressure on its management to enact changes aimed at getting shares higher. Weeks later, Icahn reached out to McClendon to let him know the company had piled on too much debt. McClendon got the message. Chesapeake quickly announced plans to sell $5 billion in assets, including a deal to sell a one-third interest in its acreage in Wyoming to China National Offshore Oil Corporation, China’s largest offshore oil producer, helping Chesapeake reduce its debt.


pages: 457 words: 143,967

The Bank That Lived a Little: Barclays in the Age of the Very Free Market by Philip Augar

activist fund / activist shareholder / activist investor, Asian financial crisis, asset-backed security, bank run, banking crisis, Big bang: deregulation of the City of London, Bonfire of the Vanities, bonus culture, break the buck, call centre, collateralized debt obligation, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, family office, financial deregulation, financial innovation, fixed income, high net worth, hiring and firing, index card, index fund, interest rate derivative, light touch regulation, loadsamoney, Long Term Capital Management, Martin Wolf, money market fund, moral hazard, Nick Leeson, Northern Rock, offshore financial centre, old-boy network, out of africa, prediction markets, quantitative easing, Ronald Reagan, shareholder value, short selling, Sloane Ranger, Social Responsibility of Business Is to Increase Its Profits, sovereign wealth fund, too big to fail, wikimedia commons, yield curve

Amanda Staveley remains an active deal maker; her civil action against Barclays is on hold until after the conclusion of the SFO case. Her 2008 adversary Roger Jenkins was one of the four men charged by the SFO. William, the Thinker, remained a fund manager, and early in 2018 noted with interest reports of another hedge fund’s $1 billion investment in Barclays and the subsequent acquisition of a 5 per cent stake in the bank by Edward Bramson, an activist investor.2 Karl Edwards founded a new business, October House Wines. He no longer banks with Barclays. Illustrations 1. Where it all began: the Bar Don Quijote, San Antonio, Ibiza. 2. Tom Camoys, a modern English aristocrat – though one with neither the inclination nor the means to live a life of idleness – in the Barclays boardroom. 3. 4. 5. At the sign of the Spread Eagle: the site where Barclays’ Quaker ancestors traded from 1728 was later numbered 54 Lombard Street and, as Barclays’ head office, regularly rebuilt: early twentieth century – 1969; 1969–90; 1994–2005. 6.


pages: 829 words: 229,566

This Changes Everything: Capitalism vs. The Climate by Naomi Klein

1960s counterculture, activist fund / activist shareholder / activist investor, battle of ideas, Berlin Wall, big-box store, bilateral investment treaty, British Empire, business climate, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, clean water, Climategate, cognitive dissonance, coherent worldview, colonial rule, Community Supported Agriculture, complexity theory, crony capitalism, decarbonisation, deindustrialization, dematerialisation, different worldview, Donald Trump, Downton Abbey, energy security, energy transition, equal pay for equal work, Exxon Valdez, failed state, Fall of the Berlin Wall, feminist movement, financial deregulation, food miles, Food sovereignty, global supply chain, hydraulic fracturing, ice-free Arctic, immigration reform, income per capita, Intergovernmental Panel on Climate Change (IPCC), Internet Archive, invention of the steam engine, invisible hand, Isaac Newton, James Watt: steam engine, Jones Act, Kickstarter, light touch regulation, market fundamentalism, moral hazard, Naomi Klein, new economy, Nixon shock, Occupy movement, offshore financial centre, oil shale / tar sands, open borders, patent troll, Pearl River Delta, planetary scale, post-oil, profit motive, quantitative easing, race to the bottom, Ralph Waldo Emerson, Rana Plaza, renewable energy transition, Ronald Reagan, smart grid, special economic zone, Stephen Hawking, Stewart Brand, structural adjustment programs, Ted Kaczynski, the scientific method, The Wealth of Nations by Adam Smith, trade route, transatlantic slave trade, trickle-down economics, Upton Sinclair, uranium enrichment, urban planning, urban sprawl, wages for housework, walkable city, Washington Consensus, Whole Earth Catalog, WikiLeaks

Indeed the day the Copenhagen summit concluded—when the target was made official—the share prices of some of the largest fossil fuel companies hardly reacted at all.61 Clearly, intelligent investors had determined that the promises governments made in that forum were nothing to worry about—that they were not nearly as important as the actions of their powerful energy departments back home that grant mining and drilling permits. Indeed in March 2014, ExxonMobil confirmed as much when the company came under pressure from activist shareholders to respond to reports that much of its reserves would become stranded assets if governments kept promises to keep warming below 2 degrees by passing aggressive climate legislation. The company explained that it had determined that restrictive climate policies were “highly unlikely” and, “based on this analysis, we are confident that none of our hydrocarbon reserves are now or will become ‘stranded.’ ”62 Those working inside government understand these dynamics all too well.


Investment: A History by Norton Reamer, Jesse Downing

activist fund / activist shareholder / activist investor, Albert Einstein, algorithmic trading, asset allocation, backtesting, banking crisis, Berlin Wall, Bernie Madoff, break the buck, Brownian motion, business cycle, buttonwood tree, buy and hold, California gold rush, capital asset pricing model, Carmen Reinhart, carried interest, colonial rule, credit crunch, Credit Default Swap, Daniel Kahneman / Amos Tversky, debt deflation, discounted cash flows, diversified portfolio, dogs of the Dow, equity premium, estate planning, Eugene Fama: efficient market hypothesis, Fall of the Berlin Wall, family office, Fellow of the Royal Society, financial innovation, fixed income, Gordon Gekko, Henri Poincaré, high net worth, index fund, information asymmetry, interest rate swap, invention of the telegraph, James Hargreaves, James Watt: steam engine, joint-stock company, Kenneth Rogoff, labor-force participation, land tenure, London Interbank Offered Rate, Long Term Capital Management, loss aversion, Louis Bachelier, margin call, means of production, Menlo Park, merger arbitrage, money market fund, moral hazard, mortgage debt, Myron Scholes, negative equity, Network effects, new economy, Nick Leeson, Own Your Own Home, Paul Samuelson, pension reform, Ponzi scheme, price mechanism, principal–agent problem, profit maximization, quantitative easing, RAND corporation, random walk, Renaissance Technologies, Richard Thaler, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, Robert Shiller, Sand Hill Road, Sharpe ratio, short selling, Silicon Valley, South Sea Bubble, sovereign wealth fund, spinning jenny, statistical arbitrage, survivorship bias, technology bubble, The Wealth of Nations by Adam Smith, time value of money, too big to fail, transaction costs, underbanked, Vanguard fund, working poor, yield curve

However, the future of investment must contemplate how some of these arrangements can distort behavior. Might the carried-interest feature cause certain stewards to treat it like a call option and invest in circumstances that are “heads I win, tails you lose”? Might there be opportunities for making corporate boards more shareholder friendly and reducing some cases of corporate abuses? Certainly, activist investors to some degree are pursuing such enhanced governance structures, but there is work that remains to be done. Small investors, too, must increasingly have access to mechanisms that ensure that their interests are aligned with either the managers they hire or the corporate heads who oversee the operations of the companies they purchase. Liquidity A second area needing greater focus is understanding liquidity.


pages: 650 words: 204,878

Reminiscences of a Stock Operator by Edwin Lefèvre, William J. O'Neil

activist fund / activist shareholder / activist investor, bank run, British Empire, business process, buttonwood tree, buy and hold, clean water, Credit Default Swap, Donald Trump, fiat currency, Hernando de Soto, margin call, Monroe Doctrine, new economy, pattern recognition, Ponzi scheme, price stability, refrigerator car, reserve currency, short selling, technology bubble, trade route, transcontinental railway, traveling salesman, Upton Sinclair, yellow journalism

During this time, he preferred to keep dividends low and reinvest earnings to improve and expand his railroads—much to the chagrin of speculators looking for a quick rise. Keene did not give up as his pool continued to accumulate shares. In 1902, after Harriman reiterated his position, Keene countered by leaking stories to the press and threatening to remove the Southern Pacific’s management unless a 4% dividend was declared.8 Harriman was irritated, just as today’s executives are by activist investors, and “went gunning for Keene,” according to Lefevre.9 The battle was settled by a court ruling in 1903, resulting in heavy losses for Keene and his associates.10 Lefevre accounted for Keene’s defeat this way: “Harriman was many things besides a stock operator, while Keene was only the greatest stock speculator that ever lived in the United States. Therefore, the man who was more than a stock speculator won.”11 In the end, as we will see in Chapter 6, the dividend was raised. 5.2 It is not clear exactly who the “Frenchman” is, but a number of different chart styles were beginning to appear in financial publications around this time.


pages: 772 words: 203,182

What Went Wrong: How the 1% Hijacked the American Middle Class . . . And What Other Countries Got Right by George R. Tyler

8-hour work day, active measures, activist fund / activist shareholder / activist investor, affirmative action, Affordable Care Act / Obamacare, bank run, banking crisis, Basel III, Black Swan, blood diamonds, blue-collar work, Bolshevik threat, bonus culture, British Empire, business cycle, business process, buy and hold, capital controls, Carmen Reinhart, carried interest, cognitive dissonance, collateralized debt obligation, collective bargaining, commoditize, corporate governance, corporate personhood, corporate raider, corporate social responsibility, creative destruction, credit crunch, crony capitalism, crowdsourcing, currency manipulation / currency intervention, David Brooks, David Graeber, David Ricardo: comparative advantage, declining real wages, deindustrialization, Diane Coyle, disruptive innovation, Double Irish / Dutch Sandwich, eurozone crisis, financial deregulation, financial innovation, fixed income, Francis Fukuyama: the end of history, full employment, George Akerlof, George Gilder, Gini coefficient, Gordon Gekko, hiring and firing, income inequality, invisible hand, job satisfaction, John Markoff, joint-stock company, Joseph Schumpeter, Kenneth Rogoff, labor-force participation, laissez-faire capitalism, lake wobegon effect, light touch regulation, Long Term Capital Management, manufacturing employment, market clearing, market fundamentalism, Martin Wolf, minimum wage unemployment, mittelstand, moral hazard, Myron Scholes, Naomi Klein, Northern Rock, obamacare, offshore financial centre, Paul Samuelson, pension reform, performance metric, pirate software, plutocrats, Plutocrats, Ponzi scheme, precariat, price stability, profit maximization, profit motive, purchasing power parity, race to the bottom, Ralph Nader, rent-seeking, reshoring, Richard Thaler, rising living standards, road to serfdom, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, Sand Hill Road, shareholder value, Silicon Valley, Social Responsibility of Business Is to Increase Its Profits, South Sea Bubble, sovereign wealth fund, Steve Ballmer, Steve Jobs, The Chicago School, The Spirit Level, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, transcontinental railway, transfer pricing, trickle-down economics, tulip mania, Tyler Cowen: Great Stagnation, union organizing, Upton Sinclair, upwardly mobile, women in the workforce, working poor, zero-sum game

Stancata, Stephane Cote, Rodolfo Mendoza-Denton, and Dacher Keltner, “Higher Social Class Predicts Increased Unethical Behavior,” Proceeds of the National Academy of Sciences, February 27, 2012. 15 For example, see: Randall Morck, Andrie Shleifer, and Robert Vishny, “Alternative Mechanisms for Corporate Control,” American Economic Review, 1989, 79:842–852. 16 Ian Austen, “Shake-Up at Canadian Pacific Railway As Activist Investor Takes Control,” New York Times, May 18, 2012. 17 Peter Whoriskey, “The Lake Wobegon Effect Lifts CEO’s Pay,” Washington Post, Oct. 4, 2011, and Ryan Chittum, “Cronyism and Executive Compensation,” The Audit, Columbia Journalism Review, Oct. 4, 2011. 18 Whoriskey, Ibid. 19 Heather Landy, “Executives Took, But the Directors Gave,” New York Times, April 5, 2009. 20 David Cay Johnston, Perfectly Legal, 2003, 250. 21 David Carr, “Why Not Occupy Newsrooms?


pages: 318 words: 93,502

The Two-Income Trap: Why Middle-Class Parents Are Going Broke by Elizabeth Warren, Amelia Warren Tyagi

activist fund / activist shareholder / activist investor, business climate, Columbine, declining real wages, equal pay for equal work, feminist movement, financial independence, labor-force participation, late fees, McMansion, mortgage debt, new economy, New Journalism, payday loans, school choice, school vouchers, telemarketer, urban sprawl, women in the workforce

New York Times, November 2, 1997; Tim Whitmire, “Tapes Don’t Stick in Court: Ex-Texaco Executives Walk,” Chicago Sun-Times, May 13, 1998. 108 See chapter 1, note 10, and chapter 5, notes 17 and 21, for more information on these calculations. 109 Letter from American Association of University Women, Children NOW, Children’s Defense Fund, Center for Law and Social Policy (CLASP), Feminist Majority Foundation, National Association of Commissions for Women (NACW), National Center for Youth Law, National Organization for Women, National Partnership for Women and Families, National Women’s Conference, National Women’s Law Center, National Youth Law Center, NOW Legal Defense and Education Fund, OWL, The Women Activist Fund, Inc., Wider Opportunities for Women, Women Employed, Women Work!, Women’s Law Center of Maryland, Inc., YWCA of the USA, March 2, 2000 (on file with the authors). The leading organizations are the National Women’s Law Center, the NOW Legal Defense and Education Fund, and the National Partnership for Women and Families. 110 There was a glossy photograph of Senator Biden in the NOW Legal Defense annual report, which is sent to thousands of politically active women.


pages: 355 words: 92,571

Capitalism: Money, Morals and Markets by John Plender

activist fund / activist shareholder / activist investor, Andrei Shleifer, asset-backed security, bank run, Berlin Wall, Big bang: deregulation of the City of London, Black Swan, bonus culture, Bretton Woods, business climate, business cycle, Capital in the Twenty-First Century by Thomas Piketty, central bank independence, collapse of Lehman Brothers, collective bargaining, computer age, Corn Laws, corporate governance, creative destruction, credit crunch, Credit Default Swap, David Ricardo: comparative advantage, deindustrialization, Deng Xiaoping, discovery of the americas, diversification, Eugene Fama: efficient market hypothesis, eurozone crisis, failed state, Fall of the Berlin Wall, fiat currency, financial innovation, financial intermediation, Fractional reserve banking, full employment, God and Mammon, Gordon Gekko, greed is good, Hyman Minsky, income inequality, inflation targeting, information asymmetry, invention of the wheel, invisible hand, Isaac Newton, James Watt: steam engine, Johann Wolfgang von Goethe, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Meriwether, joint-stock company, Joseph Schumpeter, labour market flexibility, liberal capitalism, light touch regulation, London Interbank Offered Rate, London Whale, Long Term Capital Management, manufacturing employment, Mark Zuckerberg, market bubble, market fundamentalism, mass immigration, means of production, Menlo Park, money market fund, moral hazard, moveable type in China, Myron Scholes, Nick Leeson, Northern Rock, Occupy movement, offshore financial centre, paradox of thrift, Paul Samuelson, plutocrats, Plutocrats, price stability, principal–agent problem, profit motive, quantitative easing, railway mania, regulatory arbitrage, Richard Thaler, rising living standards, risk-adjusted returns, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, shareholder value, short selling, Silicon Valley, South Sea Bubble, spice trade, Steve Jobs, technology bubble, The Chicago School, The Great Moderation, the map is not the territory, The Wealth of Nations by Adam Smith, Thorstein Veblen, time value of money, too big to fail, tulip mania, Upton Sinclair, Veblen good, We are the 99%, Wolfgang Streeck, zero-sum game

Haldane, while executive director, financial stability, and member of the Financial Policy Committee of the Bank of England, at Queen’s University, Belfast, 2012. 40 Figures from ‘Small lessons from a big crisis’, a speech by Andrew G. Haldane at the 45th annual conference of the Federal Reserve Bank of Chicago. 41 Figures from ‘A Leaf Being Turned’, a speech by Andrew G. Haldane given to Occupy Economics at Friends House, Euston, London, 2012. 42 Address at Trinity Church in Lower Manhattan on the first anniversary of the 2001 attacks on the Twin Towers. 43 A notable exception was Eric Knight of the activist fund management group Knight Vinke. He pointed out, in his campaign to improve performance at HSBC, that the underlying return on HSBC’s assets was stagnant and that return on equity was a misleading indicator of performance. With hindsight, it has to be said that his choice of target was less than inspired, given that HSBC survived the financial crisis better than most. But his analysis was acute. 44 Jean-Claude Trichet, president of the European Central Bank during the credit bubble, was an honourable exception.


pages: 825 words: 228,141

MONEY Master the Game: 7 Simple Steps to Financial Freedom by Tony Robbins

3D printing, active measures, activist fund / activist shareholder / activist investor, addicted to oil, affirmative action, Affordable Care Act / Obamacare, Albert Einstein, asset allocation, backtesting, bitcoin, buy and hold, clean water, cloud computing, corporate governance, corporate raider, correlation does not imply causation, Credit Default Swap, Dean Kamen, declining real wages, diversification, diversified portfolio, Donald Trump, estate planning, fear of failure, fiat currency, financial independence, fixed income, forensic accounting, high net worth, index fund, Internet of things, invention of the wheel, Jeff Bezos, Kenneth Rogoff, lake wobegon effect, Lao Tzu, London Interbank Offered Rate, market bubble, money market fund, mortgage debt, new economy, obamacare, offshore financial centre, oil shock, optical character recognition, Own Your Own Home, passive investing, profit motive, Ralph Waldo Emerson, random walk, Ray Kurzweil, Richard Thaler, risk tolerance, riskless arbitrage, Robert Shiller, Robert Shiller, self-driving car, shareholder value, Silicon Valley, Skype, Snapchat, sovereign wealth fund, stem cell, Steve Jobs, survivorship bias, telerobotics, the rule of 72, thinkpad, transaction costs, Upton Sinclair, Vanguard fund, World Values Survey, X Prize, Yogi Berra, young professional, zero-sum game

In contrast, Carl Icahn is always ready for war. He’s been in the trenches many times before, making runs on companies as diverse as US Steel, Clorox, eBay, Dell, and Yahoo. But this time was different: instead of Icahn, a younger fund manager named David Winters was buying stock and leading the charge against Coke’s management. To the dismay of overpaid CEOs everywhere, a new generation of “activist investors” is taking up the fight Icahn started decades ago. Naturally, Carl Icahn has ticked off a lot of corporate dynamos, enemies with big clout in the media. So you’ll often hear his critics saying that he’s only in it for the money, or that he “pumps and dumps” stocks, sacrificing long-term corporate goals for short-term profits. But Icahn points out that this is ridiculous, in that he often holds his positions for much longer than people realize—sometimes 10, 15, even 30 years.


pages: 976 words: 235,576

The Meritocracy Trap: How America's Foundational Myth Feeds Inequality, Dismantles the Middle Class, and Devours the Elite by Daniel Markovits

"Robert Solow", 8-hour work day, activist fund / activist shareholder / activist investor, affirmative action, Anton Chekhov, asset-backed security, assortative mating, basic income, Bernie Sanders, big-box store, business cycle, capital asset pricing model, Capital in the Twenty-First Century by Thomas Piketty, carried interest, collateralized debt obligation, collective bargaining, computer age, corporate governance, corporate raider, crony capitalism, David Brooks, deskilling, Detroit bankruptcy, disruptive innovation, Donald Trump, Edward Glaeser, Emanuel Derman, equity premium, European colonialism, everywhere but in the productivity statistics, fear of failure, financial innovation, financial intermediation, fixed income, Ford paid five dollars a day, Frederick Winslow Taylor, full employment, future of work, gender pay gap, George Akerlof, Gini coefficient, glass ceiling, helicopter parent, high net worth, hiring and firing, income inequality, industrial robot, interchangeable parts, invention of agriculture, Jaron Lanier, Jeff Bezos, job automation, job satisfaction, John Maynard Keynes: Economic Possibilities for our Grandchildren, knowledge economy, knowledge worker, Kodak vs Instagram, labor-force participation, longitudinal study, low skilled workers, manufacturing employment, Mark Zuckerberg, Martin Wolf, mass incarceration, medical residency, minimum wage unemployment, Myron Scholes, Nate Silver, New Economic Geography, new economy, offshore financial centre, Paul Samuelson, payday loans, plutocrats, Plutocrats, Plutonomy: Buying Luxury, Explaining Global Imbalances, precariat, purchasing power parity, rent-seeking, Richard Florida, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, school choice, shareholder value, Silicon Valley, Simon Kuznets, six sigma, Skype, stakhanovite, stem cell, Steve Jobs, supply-chain management, telemarketer, The Bell Curve by Richard Herrnstein and Charles Murray, Thomas Davenport, Thorstein Veblen, too big to fail, total factor productivity, transaction costs, traveling salesman, universal basic income, unpaid internship, Vanguard fund, War on Poverty, Winter of Discontent, women in the workforce, working poor, young professional, zero-sum game

Top managers lost the discretion that a large stock and steady flow of retained earnings supports and faced new pressures to promote their firms’ bottom lines, including in particular by squeezing payrolls for everyone below them. Where the midcentury firm’s insulation from the capital markets had been so effective that “separation of ownership and control” became the organizing ideal of midcentury management, the contemporary firm’s capital structure makes management intensely accountable to activist investors. Second, new legal technologies created the market for corporate control that takeover artists might deploy—routinely rather than just in exceptional cases—to discipline management that failed to maximize shareholder value. The discipline came through many mechanisms, including perhaps most importantly the leveraged buyout—an arrangement whereby an acquirer seeking to take over a firm uses the target firm’s own assets to secure a loan to buy the target’s shares.


pages: 341 words: 104,493

City of Exiles by Alec Nevala-Lee

activist fund / activist shareholder / activist investor, glass ceiling, side project, Transnistria

It was clearly just a silk-screened photograph, daubed with bloody reds and oranges, and she recognized it at once as the work of a celebrated artist of the sixties who had cheerfully embraced Thatcherite materialism. At the far end of the room sat James Morley, the man in the portrait, stationed before an array of trading terminals. Rising from his desk, he approached Renata. “Pleased you could make it,” Morley said, extending a hand. “I’ve been looking forward to seeing you again.” “Glad to be here,” Renata said, setting down her bag for the handshake. The manager of the Cheshire Group’s activist fund was trim and tan, wearing a wool suit and worsted tie, and would have been quite handsome were it not for his eyes, which were startlingly like those of a vulture. Renata wondered how much he knew about her situation. She was convinced that her creditors had sources everywhere, and although she had recently taken precautions to ensure that her staff remained loyal, it was impossible to silence the rumors entirely.


pages: 827 words: 239,762

The Golden Passport: Harvard Business School, the Limits of Capitalism, and the Moral Failure of the MBA Elite by Duff McDonald

activist fund / activist shareholder / activist investor, Affordable Care Act / Obamacare, Albert Einstein, barriers to entry, Bayesian statistics, Bernie Madoff, Bob Noyce, Bonfire of the Vanities, business cycle, business process, butterfly effect, capital asset pricing model, Capital in the Twenty-First Century by Thomas Piketty, Clayton Christensen, cloud computing, collateralized debt obligation, collective bargaining, commoditize, corporate governance, corporate raider, corporate social responsibility, creative destruction, deskilling, discounted cash flows, disintermediation, disruptive innovation, Donald Trump, family office, financial innovation, Frederick Winslow Taylor, full employment, George Gilder, glass ceiling, global pandemic, Gordon Gekko, hiring and firing, income inequality, invisible hand, Jeff Bezos, job-hopping, John von Neumann, Joseph Schumpeter, Kenneth Arrow, Kickstarter, London Whale, Long Term Capital Management, market fundamentalism, Menlo Park, new economy, obamacare, oil shock, pattern recognition, performance metric, Peter Thiel, plutocrats, Plutocrats, profit maximization, profit motive, pushing on a string, Ralph Nader, Ralph Waldo Emerson, RAND corporation, random walk, rent-seeking, Ronald Coase, Ronald Reagan, Sam Altman, Sand Hill Road, Saturday Night Live, shareholder value, Silicon Valley, Skype, Social Responsibility of Business Is to Increase Its Profits, Steve Jobs, survivorship bias, The Nature of the Firm, the scientific method, Thorstein Veblen, union organizing, urban renewal, Vilfredo Pareto, War on Poverty, William Shockley: the traitorous eight, women in the workforce, Y Combinator

The two had some wins, including a $1 billion return from a bet against bond insurer MBIA, but a number of bad calls led to the winding down of the fund in 2002. The “risks” one takes in hedge fund land only extend so far. When too many bets go against you, you move on—an experience not too distant from pretending one is a CEO in a case study. Not long after that, Ackman founded Pershing Square with a $50 million investment from Leucadia National Corporation. He also refashioned himself into an activist investor. Fights against the managements of Target and JCPenney followed. When betting against the nutritional supplement maker Herbalife, Ackman referred to it as a “moral obligation” and has otherwise insisted that his investments are guided by a strict moral code.29 And, incidentally, defended through schoolyard taunts. When Berkshire Hathaway vice chairman Charlie Munger questioned the morality of one of Ackman’s holdings, Valeant Pharmaceuticals, in late 2015 after it had been accused of jacking up the prices of drugs to unaffordable levels, Ackman fired back that the soda made by Coca-Cola, a longtime Berkshire holding, was bad for children.


pages: 461 words: 128,421

The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street by Justin Fox

activist fund / activist shareholder / activist investor, Albert Einstein, Andrei Shleifer, asset allocation, asset-backed security, bank run, beat the dealer, Benoit Mandelbrot, Black-Scholes formula, Bretton Woods, Brownian motion, business cycle, buy and hold, capital asset pricing model, card file, Cass Sunstein, collateralized debt obligation, complexity theory, corporate governance, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, discovery of the americas, diversification, diversified portfolio, Edward Glaeser, Edward Thorp, endowment effect, Eugene Fama: efficient market hypothesis, experimental economics, financial innovation, Financial Instability Hypothesis, fixed income, floating exchange rates, George Akerlof, Henri Poincaré, Hyman Minsky, implied volatility, impulse control, index arbitrage, index card, index fund, information asymmetry, invisible hand, Isaac Newton, John Meriwether, John Nash: game theory, John von Neumann, joint-stock company, Joseph Schumpeter, Kenneth Arrow, libertarian paternalism, linear programming, Long Term Capital Management, Louis Bachelier, mandelbrot fractal, market bubble, market design, Myron Scholes, New Journalism, Nikolai Kondratiev, Paul Lévy, Paul Samuelson, pension reform, performance metric, Ponzi scheme, prediction markets, pushing on a string, quantitative trading / quantitative finance, Ralph Nader, RAND corporation, random walk, Richard Thaler, risk/return, road to serfdom, Robert Bork, Robert Shiller, Robert Shiller, rolodex, Ronald Reagan, shareholder value, Sharpe ratio, short selling, side project, Silicon Valley, Social Responsibility of Business Is to Increase Its Profits, South Sea Bubble, statistical model, stocks for the long run, The Chicago School, The Myth of the Rational Market, The Predators' Ball, the scientific method, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, Thomas L Friedman, Thorstein Veblen, Tobin tax, transaction costs, tulip mania, value at risk, Vanguard fund, Vilfredo Pareto, volatility smile, Yogi Berra

If Hanson wanted to raise a little hell, they weren’t averse to quietly supporting him. It all came to a head during the economic downturn of the early 1990s. Many big American corporations struggled, as they had during previous recessions in the 1970s and early 1980s. This time around, institutional shareholders showed little patience with CEOs who couldn’t deliver a quick turnaround. Monks, who had sold ISS and started an activist fund called Lens, tried to get himself elected to the board of Sears to express his frustration with the retailer’s direction. He failed, but Sears soon made many of the changes he had recommended. At Calpers, Hanson began pressuring boards to remove underperforming CEOs. In 1991 and 1992, CEOs targeted by Calpers and other institutions were thrown out at Westinghouse, American Express, and General Motors.


pages: 474 words: 130,575

Surveillance Valley: The Rise of the Military-Digital Complex by Yasha Levine

23andMe, activist fund / activist shareholder / activist investor, Airbnb, AltaVista, Amazon Web Services, Anne Wojcicki, anti-communist, Apple's 1984 Super Bowl advert, bitcoin, borderless world, British Empire, call centre, Chelsea Manning, cloud computing, collaborative editing, colonial rule, computer age, computerized markets, corporate governance, crowdsourcing, cryptocurrency, digital map, don't be evil, Donald Trump, Douglas Engelbart, Douglas Engelbart, drone strike, Edward Snowden, El Camino Real, Electric Kool-Aid Acid Test, Elon Musk, fault tolerance, George Gilder, ghettoisation, global village, Google Chrome, Google Earth, Google Hangouts, Howard Zinn, hypertext link, IBM and the Holocaust, index card, Jacob Appelbaum, Jeff Bezos, jimmy wales, John Markoff, John von Neumann, Julian Assange, Kevin Kelly, Kickstarter, life extension, Lyft, Mark Zuckerberg, market bubble, Menlo Park, Mitch Kapor, natural language processing, Network effects, new economy, Norbert Wiener, packet switching, PageRank, Paul Buchheit, peer-to-peer, Peter Thiel, Philip Mirowski, plutocrats, Plutocrats, private military company, RAND corporation, Ronald Reagan, Ross Ulbricht, Satoshi Nakamoto, self-driving car, sentiment analysis, shareholder value, side project, Silicon Valley, Silicon Valley startup, Skype, slashdot, Snapchat, speech recognition, Steve Jobs, Steve Wozniak, Steven Levy, Stewart Brand, Telecommunications Act of 1996, telepresence, telepresence robot, The Bell Curve by Richard Herrnstein and Charles Murray, The Hackers Conference, uber lyft, Whole Earth Catalog, Whole Earth Review, WikiLeaks

“We are in final discussions about the Tor network and legal aspects of running a funded relay under US laws,” he wrote his handlers at the BBG in 2012. “The main concern here is not falling under the definition of Internet Service Provider or telecommunications carrier which would subject Tor to CALEA compliance regulations.” CALEA was the legally mandated FBI surveillance tap that every network provider had to install. Ibid. 105. Burma was a curious place for American antisurveillance activists funded by a CIA spinoff to travel to, considering that it has long been a target of US regime change campaigns. In fact, the guru of pro-Western “color revolutions” (Sheryl Gay Stolberg, “Shy U.S. Intellectual Created Playbook Used in a Revolution,” New York Times, February 16, 2011), Gene Sharp, wrote his famous guide to nonviolent revolutions, From Dictatorship to Democracy, initially as an insurgency guide for Burma’s opposition movement to help the US overthrow the military junta in the late 1980s.


pages: 710 words: 164,527

The Battle of Bretton Woods: John Maynard Keynes, Harry Dexter White, and the Making of a New World Order by Benn Steil

activist fund / activist shareholder / activist investor, Albert Einstein, Asian financial crisis, banks create money, Bretton Woods, British Empire, business cycle, capital controls, Charles Lindbergh, currency manipulation / currency intervention, currency peg, deindustrialization, European colonialism, facts on the ground, fiat currency, financial independence, floating exchange rates, full employment, global reserve currency, imperial preference, invisible hand, Isaac Newton, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Kenneth Rogoff, lateral thinking, margin call, means of production, money: store of value / unit of account / medium of exchange, Monroe Doctrine, New Journalism, open economy, Paul Samuelson, Potemkin village, price mechanism, price stability, psychological pricing, reserve currency, road to serfdom, seigniorage, South China Sea, special drawing rights, The Great Moderation, the market place, trade liberalization, Works Progress Administration

Vinson, Keynes wrote to Dalton, “rail-road[ed] this decision through the Conference, vocally supported (as became usual) by a pathetic procession of stooges, of which Ethiopia (represented by an American banker), Salvador, Guatemala, Mexico and China were prominent, with most of the rest discreetly silent.”20 As important as the symbolism of location was, the more substantive issue to be resolved was the role of the directors, particularly those of the fund. Given their vision of an activist fund, working to correct national policies that were creating dangerous international financial imbalances, the Americans insisted that the directors be full-time and well remunerated, with a large battalion of specialist technical staff behind them. The British, who wanted a fund that was more like an automatic credit mechanism than a nosy new American-dominated bureaucracy with a mind of its own, countered that its directors should already have important day jobs in their own governments or central banks; their role in the fund should be only part-time, mainly ensuring that their respective countries’ national interests were protected.