Not back in the day, when Icahn was running the Southeastern Queens chapter of the Jewish Crips and not today, as the elder hedge fund manager presumably maintains ties with the organization, whose members stay current on his various investing nemeses and won’t hesitate to fuck someone up. Read more »
Carl Icahn Just Wants To Reiterate That Bill Ackman Wouldn’t Want To Find Himself In Certain Parts Of Queens After DarkBy Bess Levin
If you’re an activist investor your job is to (1) think of an idea for how to make a company’s stock go up, (2) buy stock in the company, (3) convince them to do your idea, and (4) sell high. Step 3 tends to involve lots of attention-seeking – it’s easier to wear a company down into doing your idea if they’re constantly hearing about it from other shareholders and reporters and stuff – but steps 1 and 2, importantly, don’t.1 If you tell everyone about your great idea for Apple to issue GO-UPS,2 then they’ll all realize that Apple will certainly do it and unlock tens of billions of dollars of value, so they’ll bid up the stock before you can buy it and you’ll lose the opportunity to benefit from all those gains. That may be a bad example but just work with me here.
There’s another way of putting that, which is: if you secretly conceive of an idea to make Apple a better company, and then secretly buy up a bunch of Apple stock, and then announce to the world “surprise! I have 12% of Apple’s stock, and a brilliant idea that starts with a thematically appropriate lowercase i!,” and the stock goes up, and you make a lot of money – isn’t that unfair? You got to buy stock at the low, pre-publication-of-your-idea price; the people who sold to you were bamboozled into selling out too low because they didn’t know about your great idea. It almost “smacks of insider trading.”
Or something. I may not be doing this theory justice because I think it’s silly: that great idea is your idea; why shouldn’t you be able to make money off of it? (And why should anyone else?) The money is your incentive to come up with the idea in the first place, and do the hard ego-stroking work of pitching it to CNBC and the target company; if you had to share it with free-riders why would you take on the responsibility? We talked about this a little last year when there were vague rumors that the SEC was buying into it, and that they might require investors to disclose 5% stakes within 1 day of acquiring them (instead of the current 10 days), and include synthetic share ownership in computing the 5%, in order to make it harder for activists to secretly accumulate shares. I have not heard much about that proposal since, though I hesitate to assign any causality.
Guy Who’s Short Herbalife Says Guy Who’s Long Herbalife Saying Guy Who’s Short Herbalife Saying Herbalife Is A Fraud Is A Fraud Is A FraudBy Matt Levine
One day Herbalife will either be put out of business by consumer-protection regulators or it won’t. If it is then Bill Ackman will make a lot of money and Carl Icahn will lose a lot of money, and if it isn’t Ackman will lose a lot of money and Icahn will make a lot of money, and in the meantime everyone will shout that everybody else should be investigated.
That’s proceeding apace. Ackman yesterday:
In a statement late Tuesday, Pershing Square Capital Management’s Ackman said that he was pleased that the NCL was requesting an FTC investigation and believes it will show that the company is a pyramid scheme.
We regret that the National Consumers League has permitted itself to be the mechanism by which Pershing Square continues its attack on Herbalife. If anything, it is Pershing Square that should be investigated by appropriate authorities. Its actions are motivated by a reckless $1 billion bet against the company based on knowingly false statements about Herbalife.
Now Herbalife may or may not be a pyramid scheme but I’ve always thought that demands to investigate short sellers are unfair and one-sided. People who say mean things about stocks they’re short are always accused of manipulation. People who say nice things about stocks they’re long – which happens all the time – are rarely accused of market manipulation.1
If it ever looks like I’m trying to tell you what Carl Icahn is up to with Herbalife, don’t listen to me. I have no idea. How could you? Icahn now owns ~13% of Herbalife’s stock with a ~$36 basis, and he is somewhat constrained from selling it in the next six months by short-swing profit rules. So he can’t sell. He can buy, of course. But after today he can’t buy more than 25%:
Herbalife today announced that it has reached an agreement with Carl C. Icahn …. As part of the agreement, Herbalife will increase the size of its Board of Directors from nine to eleven members immediately before the 2013 Annual General Meeting of Shareholders [and] will nominate two individuals to the Company’s Board of Directors, designated by the Icahn Parties and approved by the Company’s Nominating and Corporate Governance Committee.
Under the terms of the agreement, the Icahn Parties have agreed to, among other things, abide by certain standstill provisions and vote their shares in support of all of the Board’s director nominees. The Icahn Parties have the right to increase the size of their ownership position in Herbalife up to 25% of the outstanding common stock.
The standstill is for real; Icahn filed the agreement with his 13D/A and it’s an amusingly strong-form standstill that prohibits him from buying more than 25% of the stock, launching a tender offer, proposing a merger, ” encourag[ing] or facilitat[ing]” anyone else doing the same, or, my favorite, “request[ing] that the Company or any Representative of the Company, directly or indirectly, amend or waive any provision of this [standstill] (including this clause (g) [the one that says he can't ask]).” He can’t even ask to be allowed to ask to buy Herbalife!1 Read more »
Bloomberg: Do you think he’s made a mistake on this one? Icahn: Well, if you look at his record lately, he has made a few very big mistakes. I am not going to say just this one. I am not here to question Ackman. I do not want to get pulled into that again…I look at it as a great opportunity. Ironically, I thank him for giving it to me. Does not mean I like him…I do not respect him. I do not like him. [BloombergTV, earlier]
Bill Ackman Is Still Thinking About Filing An Appeal Against The SAT Board For Those 4 Questions He Got “Wrong” In 1984By Bess Levin
In 1984, when he was a junior at Horace Greeley High School, in affluent Chappaqua, New York, he wagered his father $2,000 that he would score a perfect 800 on the verbal section of the S.A.T. The gamble was everything Ackman had saved up from his Bar Mitzvah gift money and his allowance for doing household chores. “I was a little bit of a cocky kid,” he admits, with uncharacteristic understatement. Tall, athletic, handsome with cerulean eyes, he was the kind of hyper-ambitious kid other kids loved to hate and just the type to make a big wager with no margin for error. But on the night before the S.A.T., his father took pity on him and canceled the bet. “I would’ve lost it,” Ackman concedes. He got a 780 on the verbal and a 750 on the math. “One wrong on the verbal, three wrong on the math,” he muses. “I’m still convinced some of the questions were wrong.” [Vanity Fair]