New Yorker article on Paul Singer -Elliott

[writser]

https://www.newyorker.com/magazine/2018/08/27/paul-singer-doomsday-investor

 

Long but good read.

[Foreign Tuffett]

Thanks for the recommendation. IMO the article, as the opening illustration would imply, is more than a little biased against activist investors. 

 

I think many of the problems with activist investing are really derivatives of what is perhaps THE problem with investing: forecasting future business performance is hard, and very few know whether companies should zig, zag, or do otherwise.

[Guest ajc]

 

Interesting read.

 

Yeah, as an investor I guess I'm pretty biased towards the folks who focus on shareholder value.

I mean, if you want to run a private company your way that's fine.

On the other hand, if you're publicly owned you probably gotta remember who your real bosses are.

Clearly, Singer takes this to extremes and it's reasonable to argue in the Congo and door-knocking cases they went overboard.

 

All that said, I'd say Singer does more good than harm to markets. I think we're not yet at a stage where you have the greenmail-type stuff of the 80s making a comeback. For the most part, I'd say it's good the average Fortune 500 CEO has a little fear of this in their minds.

I think the idea every CEO in America is a potential Bezos if only they'd be cut some slack is kind of amusing.

 

Anyway, I'm biased. New Yorker long pieces are often great though. Stylistically almost always. Their recent one on JD.com was also good.

 

 

 

[John Hjorth]

Thank you for sharing, writser,

 

A kick in the balls from a dead man to a man still alive [from a business perspective].

 

Most likely Mr. Singer and his henchman do not give a dam about it. It's just considered necessary collateral damage [considered to die/go away, over time], based on how one do business, to get ahead.

[writser]

I kind of agree with what Matt Levine posted on Twitter:

 

i am not sure why i am supposed to sympathize with a millionaire Bush cousin/medical-billing CEO who is hurt that people criticized him for drinking too much, sailing too much, and repeatedly punching his wife in front of their baby?

 

I’d say on average activism is a good check on management. However, there are some problems associated with it (short-termism, maybe too much focus on cost cutting?). Also, it looks like Elliott is “walking the line” in terms of what is acceptable behavior.

[Spekulatius]

I kind of agree with what Matt Levine posted on Twitter:

 

i am not sure why i am supposed to sympathize with a millionaire Bush cousin/medical-billing CEO who is hurt that people criticized him for drinking too much, sailing too much, and repeatedly punching his wife in front of their baby?

 

I’d say on average activism is a good check on management. However, there are some problems associated with it (short-termism, maybe too much focus on cost cutting?). Also, it looks like Elliott is “walking the line” in terms of what is acceptable behavior.

 

The Elliot activism looks like blackmail to me. They don’t win by arguments, they win by blackmailing and discrediting people. It’s a pretty lowlife way of making a living. Also potential harmful for him and his employers, friends or family, if he ever gets into issues with the wrong people who pay back in his own currency and up it a notch.

[Gregmal]

Yea I don't think too highly of Elliot. Too many scumbag incidents. The Alcoa or whatever the spin off name situation reeked. The whole NXP is worth at least 135 on a standalone basis and then a day or two later agreeing to 127... They're scoundrels IMO.

[tol1]

Elliott is not high-quality investing IMO. Their style is self-fulfilling, from buying into a stock post-profit warning and demanding a sale process to buying a stake a la NXPI and asking for more. Annualized return has been around 13%, so it works for their LPs. However, I do not consider it investing. Their strategy only works in size (AuM) to cover the high fixed costs (in particular, lawyer fees).

[writser]

Define “high quality investing”. I’d say his track record is excellent.

[tol1]

Define “high quality investing”. I’d say his track record is excellent.

 

Returns are good. But the way he is getting there is as I laid out not what I perceive as quality fundamental investing. It is not fundamental investing.

[thowed]

Thanks for this, Writser.

 

I like the Matt Levine quote.  But just because I don't have sympathy for Bush (from one article I've read), it doesn't mean I have to agree with what Elliott does.

 

I'm attaching the 2017 Fundsmith Annual letter, which has a pretty decent, no-bullshit, opinion on Activism (pages 10-16).

 

Extract (the rest is more detailed/subtle than this):

 

On the whole we are not fans of activism. Too often it seems to follow a playbook that has the following steps:

1. The activist ‘buys’ a stake in a company. I have put ‘buys’ in inverted commas because often much or all of the stake is held through derivative products which means that the activist can announce a seemingly large position in the company’s stock whilst risking and committing relatively little actual cash. This methodology also gives some clue as to the activist’s time horizon which may not coincide with ours, as derivatives have an expiry date whereas stocks don’t.

2. Engage in a public row with the target company and seek board representation, a spin-off of part of the business, a merger with or sale to a competitor, raise debt to execute a share buyback (the activist can helpfully tender stock to

assist with this) etc.

3. If the company responds by following the activist’s demands they then sell their stake.

4. We and other long term shareholders are left with a company that has incurred fees and diverted time from running the business to respond to the activist and execute the changes, which is now potentially more fragmented, more highly

leveraged and has had to install new management.

5. Rinse and repeat with another victim/investment.

 

The whole 'shareholders are all that matters' is a subjective issue, but personally I believe it's appropriate to consider other stakeholders (e.g. treating employees right) as a) a positive contribution to our society, but also b) it makes everyone work better, which should make for better long-term profits.

annual-letter-to-shareholders-2017.pdf

[Gregmal]

https://nypost.com/2018/08/29/paul-singers-hedge-fund-values-sky-at-more-than-34b/

 

 

LOL he's at it again. And then tomorrow he'll agree to take less...This guy is so predictable.

[Guest cherzeca]

singer is brilliant and deserves his stellar investment rep. 

 

as for blackmail, if the CEO is an issue then all is fair...just like prosecutors that go after high level crimes and find that tax evasion is the most prosecutable, if a CEO is a bad manager but is most attackable based upon personal conduct, then the CEO is just showing you the way to get rid of him/her.  suddenly it is Elliot's fault?

[LongHaul]

I find certain tactics and actions very distasteful. Here is some more stunts.

 

My understanding is retail bond investors claim they lost a lot of value in the Peabody bankruptcy case when the big funds Elliott, etc did not give retail holders the option of participating in a deal at a low valuation.

 

Same thing was tried at Breitburn but the judge rejected it. 

 

https://www.reuters.com/article/us-breitburn-energy-bankruptcy/breitburn-energy-bankruptcy-plan-denied-in-blow-to-elliott-wl-ross-idUSKCN1GL27X

 

 

 

[Gregmal]

https://nypost.com/2018/09/17/paul-singers-hedge-fund-backs-away-from-athenahealth-deal/

 

He's back at it again with the antics. I feel like if you gave any half competent person $10B+ they could do what Elliot does. Basically just trash companies/board, litigate, and play poker trying to force sales.

[Spekulatius]

https://nypost.com/2018/09/17/paul-singers-hedge-fund-backs-away-from-athenahealth-deal/

 

He's back at it again with the antics. I feel like if you gave any half competent person $10B+ they could do what Elliot does. Basically just trash companies/board, litigate, and play poker trying to force sales.

 

This makes vet greatly undermines his credibility’s. Then there is Telecom Italia (which I own as well, but at lower prices than his entry I think) which is looking sickly and where his tactic seems ineffective.

[JayGatsby]

I kind of agree with what Matt Levine posted on Twitter:

 

i am not sure why i am supposed to sympathize with a millionaire Bush cousin/medical-billing CEO who is hurt that people criticized him for drinking too much, sailing too much, and repeatedly punching his wife in front of their baby?

 

I’d say on average activism is a good check on management. However, there are some problems associated with it (short-termism, maybe too much focus on cost cutting?). Also, it looks like Elliott is “walking the line” in terms of what is acceptable behavior.

 

The Elliot activism looks like blackmail to me. They don’t win by arguments, they win by blackmailing and discrediting people. It’s a pretty lowlife way of making a living. Also potential harmful for him and his employers, friends or family, if he ever gets into issues with the wrong people who pay back in his own currency and up it a notch.

I agree. The private investigator stuff is crossing the line in my opinion, particularly as it sometimes relates to people's families. It's a fine line... if you think a CEO isn't 100% engaged in the company that's fair game, but they always seem to take it too far. Using private investigators to threaten people with sensitive personal information seems borderline illegal, but I don't know the laws on such things. I'm not sure any Detroit automaker would actually be offended that someone in their circle drives an Aston Martin. That's a different breed of cars than Detroit makes.

 

Their developing economy debt antics are pretty devastating to the citizens of those countries. I agree the countries shouldn't be financing themselves off of debt, but that's how the system works.

[Cardboard]

Well, I am quite happy that "jerks" such as Paul Singer exist and wish that Canada had way more of these.

 

The amount of greed, corporate abuse, that goes on by so many executives is unbeliveable. They hide behind protective boards, have corporate funds available to hire the best lawyers. Many of them ruin people's lives who have put their hard earned savings into their firm. However, you will almost never see them take a pay cut, lose their severances, etc.

 

So yes, they deserve to be exposed or like any politician. I would tend to believe that the number of executives getting caught with their pants down and doing a great job for shareholders must be minuscule.

 

Cardboard 

[Spekulatius]

Well, I am quite happy that "jerks" such as Paul Singer exist and wish that Canada had way more of these.

 

The amount of greed, corporate abuse, that goes on by so many executives is unbeliveable. They hide behind protective boards, have corporate funds available to hire the best lawyers. Many of them ruin people's lives who have put their hard earned savings into their firm. However, you will almost never see them take a pay cut, lose their severances, etc.

 

So yes, they deserve to be exposed or like any politician. I would tend to believe that the number of executives getting caught with their pants down and doing a great job for shareholders must be minuscule.

 

Cardboard

 

The question is if the shareholders will do any better with the  hedge fund activist investors in control. companies like Sears, JCP, VRX suggest otherwise. At least Elliot has a track record so far but many people there have not.

[JayGatsby]

Poor governance will be apparent without a private investigator. Using personal dirt to achieve their objectives is a tactic fairly unique to Elliott. I'm sure others do it, but I haven't seen it. Even Ackman didn't do that. Elliott always denies it, but the same stuff pops up in each of their campaigns. I agree with activism as being overall good for shareholders, but I don't agree with some of Elliott's tactics.

[writser]

An Elliott portfolio company is trying to buy MITK (hostile takeover). Singer increased his bid from $10 to $11.50 today.

In the letter, sent to the Mitek Board of Directors two weeks ago, ASG CEO Charles Sansbury noted that the new offer price represents a 73% premium above the unaffected closing price on October 9, 2018, a significant premium above the average share price for all relevant periods, and a 90% premium above Mitek’s 5-year average. The letter also noted that the proposal would not be subject to any financing condition, as Elliott would commit to provide the necessary equity to complete the acquisition.

 

ASG released the private correspondence because despite the increased offer, Mitek has maintained its refusal to engage with ASG on reasonable terms that would allow ASG to conduct the necessary diligence and make a binding offer. The letter’s publication is intended to update the market on ASG’s continuing efforts to engage.

 

I bought a few shares on the open today. I guess I like Singers style a bit more than most of you. But regardless what you think of him, he's offering a price higher than what shareholders have seen the past few years, the deal has synergies and consider me skeptical about the chances of a random ~$300m company resisting the Singer antics (and financial power). Yet shares were trading at a ~15% discount to the improved offer. Very tiny position, just for the heck of it.

[writser]

https://www.businesswire.com/news/home/20190311005778/en/Vivendi-Elliott-Telecom-Italia

 

Friendly press release.

[John Hjorth]

writser,

 

I haven't had time to dig into this yet, but I will. It reads - ar-hmm - "juicy"! - A giant battle between Vincent Bolloré and Paul Singer?

[Cigarbutt]

Mr. Singer IMO sometimes goes too far in his aggressive activism but he is a sharp thinker.

The title of the following short video does not directly correspond to what is said.

I would not be comfortable aligning actions with the man and certainly would not bet against him head-on.

 

 

[mcliu]

Mr. Singer IMO sometimes goes too far in his aggressive activism but he is a sharp thinker.

The title of the following short video does not directly correspond to what is said.

I would not be comfortable aligning actions with the man and certainly would not bet against him head-on.

 

Here's the full video.

Imo, one of the more interesting panels from these type of conferences.

Singer and Rubenstein got into a bit of a debate.

Singer's seems concerned about the money printing and potential of currency debasement.