To say that Paul Singer’s reputation precedes him would be rather the understatement. After all, there are not many other hedge fund managers who’ve literally declared war on a sovereign nation and brought Warren Buffett to his knees. Arguably no one strikes as much fear in corporate executives with little more than a raised eyebrow and strongly-worded letter. So fearsome is his mien that it is known to literally warp the minds of his targets, so much so that they forget their fiduciary duties, at least according to a Florida pension fund.
At issue in said pension’s lawsuit is the $1 billion convertible bond Twitter sold to Silver Lake Partners as part of a deal in which Elliott agreed to take three seats on the social media platform’s board but not seek to professionally disembowel Twitter founder Jack Dorsey for one year. Now, most companies selling convertible bonds at such friendly terms really need the money. Twitter, however, did not.
When Elliott and Silver Lake made their peace offering, the financing component when it was announced immediately seemed odd. Twitter was profitable and had $6.6bn in cash already. Later, in December 2020, Twitter’s chief financial officer admitted publicly that his company, “didn’t have an immediate use for [the Silver Lake cash] in terms of running the business”.
So why did Twitter capitulate so quickly and completely? Why pay what amounts to a $1 billion bribe to save Dorsey’s skin? Abject and incoherent but totally explicable fear, that’s why, sayeth the aggrieved pension.
“[T]here was a loud and clear message to that presentation that this activist in your stock, this is a — these guys are as aggressive as can be. Their MO is essentially to play dirty, hire private investigators . . . to dig into the most sensitive aspects of your lives to drum up personal attacks,” explained Thomas Curry, the plaintiff’s lawyer in the Delaware court hearing 10 days ago…. “[A proxy fight] . . . is going to engulf your life for at least the next couple months, and it’s going to be very intense. And your adviser is telling you, if it happens, you’re going to lose,” Curry, the plaintiff’s lawyer, explained in court.
“This is like, you know, if you don’t play your cards right here, you’re going to end up the losing character in like a Jim Stewart book in every airport bookstore in the world”, Curry added, referring to acclaimed business journalist who chronicles boardroom showdowns.
In legal terms, apparently, the man himself has become the sort of weapon of mass financial destruction the he loves so well.
Delaware judge Travis Laster said on September 10, that theory, however sensational, is “a story that hangs together”.
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