Tuesday, March 11, 2014

Activist Posturing: It’s Only About the Money

Activist Posturing:  It’s Only About the Money

Early last year Carl Icahn and William Ackerman tossed insults at each other for nearly thirty minutes on CNBC.  Although they were appearing to express their widely divergent views on Herbalife, the discussion quickly became personal.  In the past two days, both investors have featured prominently in the news.  The New York Times ran a front-page story on Mr. Ackerman’s attempts to draw regulators, legislators, prosecutors, and grass roots organizations into his attempt to prove that Herbalife is some type of financial fraud or Ponzi scheme.[1] 
Initiatives (2004)
Mr. Icahn is battling for a couple of board seats on EBay and attempting to get the company to sell PayPal.  In the process, Mr. Icahn has become engaged in a nasty war of words with Marc Andreessen, a venture capitalist and EBay board member.  In Deal Book this morning, Andrew Ross Sorkin analyzes Mr. Icahn’s claim that Mr. Andreessen was engaged in a conflict of interest because his firm participated in the purchase of Skpe from EBay.  Mr. Andreessen recused himself from voting on the deal.  Within a couple of years, Silverback, along with Mr. Andreessen’s firm, made a huge gain reselling Skype.[2]

Both stories attempt to sort out the right and the wrong of Mr. Ackerman’s and Mr. Icahn’s tactics and claims.  Right and wrong are completely beside the point, just as they were when the two investors went toe-to-toe on CNBC.  These battles are only about one thing: money.  While most of us invest in a stock and hope we turn out to be right, Ackerman and Icahn are in a position to try to influence the outcome.   Despite their best efforts it doesn’t always work out, as we learned when Mr. Ackerman resigned from the JC Penney board and sold his position at a loss.  However, the goal in hiring lawyers, public relations firms, consultants, and lobbyists is to vindicate a financial position and make money.  The purpose of the innuendos, insults, and accusations has the same goal: to make money.  Both men espouse lofty principals in waging their financial battles, but in the end the only reason for these statements is because they are long or short a particular security.

While the press spends their time analyzing Mr. Ackerman and Mr. Icahn, they tend to ignore the fact that it’s the investors in Pershing Square and Icahn Enterprises that are footing the bill for these battles.  In addition to the usual management and incentive fees, these battles are probably being waged with other peoples’ money.  Granted, both men have some of their own money invested in these deals, but in the end it isn’t their hearts and souls that have been poured into these battles.

Perhaps the reason that Mr. Ackerman and Mr. Icahn dislike each other so much is that deep down they are so alike.

[1] http://www.nytimes.com/2014/03/10/business/staking-1-billion-that-herbalife-will-fail-then-ackman-lobbying-to-bring-it-down.html?_r=0
[2] http://dealbook.nytimes.com/2014/03/10/icahns-war-of-words-with-ebay/

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