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A couple of weeks back, Carl Icahn took to a regulatory filing to give himself a pat on the back for putting the kind of competent asses in boardroom chairs that instantaneously turn a company around. And no company got its ass more turned around than eBay, which boasted the worse corporate governance in the history of capitalism until Uncle Carl’s designee—well, not exactly designee, but someone inoffensive to both Carl and eBay—took his seat on June 17 and led the online auction site to an impressive 76% annualized return over the next 13 days, during which time eBay shares actually appreciated all of 2.2%.
That’s not bad for two weeks’ work, of course, but the crazy thing is that two months later, Icahn’s chart proving beyond any doubt that activism works or something actually understates his case. eBay shares are up 13.67% since former AT&T CEO David Dorman took his seat, and that annualizes out to something like 125%, give or take. Maybe he is a wizard. Or:
Carl Icahn is not, in fact, a wizard….
He adjusted the returns as if the gains of that short period extended across an entire year. On Mr. Icahn’s math, the Nasdaq Composite index had an annualized gain of 58% during those 13 days….
But even if annualizing returns allows comparison of different investments, it makes absolute returns on very short-term trades, such as the eBay one, look much bigger to the naked eye than they actually are.
Carl Icahn’s Spellbinding eBay Returns [WSJ MoneyBeat blog]