Here’s an excerpt from Bob Chapman’s latest 13D letter to Building Material Holdings. It’s pretty much what you’d expect of the old boy, if you expect some ire over excessive executive compensation, judgment passed on one’s ability to make the most basic legal and ethical decisions as they pertain to BLG and the unsolicited recommendation to dislodge body parts from places they wouldn’t necessarily be found in nature.
May 25, 2007
Mr. Paul S. Street
Given your extensive legal training at such a lower tier firm as Moffatt, Thomas, Barrett, Rock & Fields, I understand why it is that you consider Mr. Wilson’s E-mail address (firstname.lastname@example.org; given to me by no fewer than two other senior executives at BMHC) so proprietary. The reason is that you are poorly trained, and apparently incapable of making sound legal and ethical decisions as it relates to the advisor to the largest owner of the company paying your excessive salary (and other compensation).
My strong advice to you is the following: remove your head from the dark orifice in which it seems naturally to find itself, and thereafter find a means of distinguishing material, non-public information from a widely available E-mail address being used to communicate a public document with Mr. Wilson. If that is not a feat within your mental capability, please pack up, head east and get back to Boise at your first opportunity.
Happy Memorial Day.
Robert L. Chapman, Jr.
Chapman Capital L.L.C.
It’s been years since Bob Chapman arguably invented the 13-D letter so beloved by activist hedge funds when he discovered that investors could attach missives to the company in public filings. But the head of Chapman Capital is still innovating—this time by being the first person ever to introduce the words “fuck you” in a public company filing with the SEC.
Perhaps surprisingly to some familiar with Chapman’s acerbic style, the obscenity wasn’t Chapman speaking to a poorly performing company Chapman Capital had invested in. Chapman’s a bit too witty to resort to such crude language in a shareholder letter, anyway. He prefers more colorful and literary insults. The words came as what Chapman dryly describes as an “eloquent” response from a chief financial officer on the receiving end of Chapman’s dissatisfaction.
According to Chapman’s letter, his fund had been pressuring working to get Embarcadero Technologies to open itself up to being acquired. As things tend to go in these situations, relations between Chapman and the top executives at Embarcadero seem to have deteriorated.
Chapman’s letter tells the story of a series of telephone calls from three weeks ago in which Chapman complained about the failure of Embarcadero to get itself sold and criticized the reputation Embarcadero chief financial officer Michael Shahbazian. Unsurprisingly, this did not go over well with Shabazian.
But let’s let Chapman’s letter speak for itself, in its own understated way.
On March 7, 2007, Mr. Chapman communicated to Mr. Shahbazian that the Board’s failure to announce a definitive merger agreement no later than March 30, 2007, would result in the filing by the Reporting Persons of an amended Schedule 13D, which should be expected to include as an exhibit a letter to the Board making public the results of Chapman Capital’s recently accelerated investigation into the Board and management of the Issuer. Furthermore, in response to certain comments made by Mr. Shahbazian during a conversation later that day, Mr. Chapman conveyed to Mr. Shahbazian Chapman Capital’s concern that, according to background checks directed by Chapman Capital, Mr. Shahbazian had been viewed negatively by various shareholders of Niku Corporation, ANDA Networks, Inc. and Walker Interactive, all of which in the past had employed Mr. Shahbazian in the capacity of Chief Financial Officer. Mr. Shahbazian reacted temperamentally to Mr. Chapman with the eloquent response, “Fuck you!” Mr. Chapman then forcefully informed Mr. Shahbazian that it was inappropriate and inadvisable for the Chief Financial Officer of a public company to utter such blasphemy to the advisor of a 9.3% ownership stakeholder in the Issuer.
Brilliant. And, as far as we can tell, the first time that the words “fuck you” have been entered into a public company filing with the SEC. Derivations of “fuck” have been entered before, however, both accidentally and intentionally. But the two intentional cases have all related to the titles of pornographic films. Paul Kedrosky]
Bob Chapman is sometimes credited with inventing the 13-D letter. You know, those sometimes funny, sometimes nasty missives hedge fund managers and other large investors sometimes attach to filings with the Securities and Exchange Commission disclosing they have acquired more than 5% of a company’s stock. The story is that Bob invented them when he got tired of the management of American Community Properties Trust ignoring him. He was looking for a way to effectively get the management’s attention when he discovered that the 13-D filing allowed him to attach basically whatever he wanted to the filing as an exhibit. And here’s the letter he attached.
This week’s New Yorker spends some time reading Chapman’s letters as literature. Here’s Ben McGrath on Chapman:
As with all genres, the 13D attack letter has its tropes: macho swagger about work ethic, war metaphors, regional stereotyping. Chapman’s contributions stand out, however, with a baroque style that is reminiscent of David Foster Wallace: heavy on footnotes (there are fourteen in one paragraph of a recent filing) and on wordplay (no alliteration is too much: “expeditious exercise,” “tutelary tactics,” “insidious ink”). In early June, Chapman fired off a letter (“Dear Denny”) to the C.E.O. of the Dallas-based software company Carreker, whom he called “Long Winder of the Year.” “I have nightmares involving my choking down gourmet tuna sandwiches and uninformed, ‘long-term’ business judgments, both being served in abundant quantity by you and your Texas ‘pardners,’ ” he wrote. (At one point, he referred to the C.E.O.’s brother “Jimbo,” whose “bloodline,” in a recent press release, had evidently “pressed the surface like a varicose vein.”)
Our favorite Chapman story is actually one of the oldest—how he got his first internship at Salomon Brothers. Here’s how the story was told in an issue of Trader magazine from earlier this year.
[That story and more links to good background on Chapman after the jump]