Another round in the proxy access debate coming our way?
In late 2007 I was blogging here about proxy access rules then under considerationby the Securities and Exchange Commission.
At that time, the SEC adopted the narrowest of the access rules it had under consideration, making life more difficult for shareholder activists seeking change in the election procedures.
It now appears (judging from a story Reuters carried Friday, while Congress continued its struggles with a stimulus bill) that with the new administration we might get a revival of this argument with special emphasis on "sharehlder democracy" as a tool for limiting CEO pay.
Sunday, February 8, 2009
Wednesday, February 4, 2009
Bless the Cassandras
Much that has happened in recent days has persuaded me to speak today to the conflict between stock market optimists and pessimists, pollyannas and cassandras, bulls and bears, in the broadest of terms. There is a general thesis to be uncovered here, one that has its basis deep in human psychology and has a rather intense manifestation just now in pop culture, and what passes for economic discussion, in the US. The thesis is: we need more cassandras, not fewer: correspondingly, we need to encourage those we have, not chase them about with sticks.
Ideally, I suppose, pessimists and optimists could be partners, taking on the common search for truth about the economy, about particular companies, about stock prices, etc., from distinct but complementary perspectives. Every glass that is half empty is also half full. For that matter, every glass that is three-quarters empty is one-quarter full. No glass is entirely full, no benefits in this world come without costs. So why need bull and bear compete when it is so much more important and interesting to inquire?
But we as human beings want to be optimists. Sociobiologists could trace it to the survival instincts on the Serengeti -- the pessimist who saw every source of water as contaminated and dangerous would die of thirst and pass along no genes. At least the optimists would drink -- they wouldn't die of thirst -- and although some of them would die of the contaminants others would live and pass along those optimist's selfish genes. If you accept such reasoning then, you'll suspect that optimism is by now the greater danger, and the pessimism discouraged by genes needs to be encouraged by memes.
Even if you don't accept such reasoning, you can and should look about you at American pop culture and see where the danger comes. Every incarnation of "Miracle on 34th Street" teaches that belief, even gullibility, is good and skepticism is a condition that requires magical cure. More contemporary movies, like Jim Carrey's "Yes Man" convey the same message. Saying "no" is bad. Sum up such influences, and then let your inner contrarian take over. When everyone is telling you how wonderful it is to be a bull, then perhaps the perspective of the bear is the one that needs reinforcement.
Yet again: look at the recent history of the stock analysts' vocation. When someone predicts a stock will rise, and it rises, is he roundly condemned as a huckster and hype artist? No ... he is praised for getting the call right of course. On the other hand, when someone predicts a stock will fall, and it falls, is he generally praised for getting the call right? No ... he is accused of "talking it down," defrauding those who bet the other way ... he is sued. This is not a theoretical concern. People who expressed reasonable (and as it turned out, accurate) concerns about Novastar Financial Inc., for example, were ridiculed and reviled, their points routinely dismissed. When Novastar tanked, did the dispensers of that ridicule feel, well ... ridiculous? of course not. The bias toward hype and the prejudice against skepticism is so widely shared it can survive any number of such disconfirmations.
All of this is only to say that we tend to blow ourselves bubbles, and then when the bubbles burst as they must we respond by blaming those who had warned us of the fragility of the bubble at the moment of its prime. This blame is irrational, and since what we need most from an economy is an evenness of rotation, an end to the boom-bust nonsense, we must resist our impulses. We need to celebrate the bears.
Ideally, I suppose, pessimists and optimists could be partners, taking on the common search for truth about the economy, about particular companies, about stock prices, etc., from distinct but complementary perspectives. Every glass that is half empty is also half full. For that matter, every glass that is three-quarters empty is one-quarter full. No glass is entirely full, no benefits in this world come without costs. So why need bull and bear compete when it is so much more important and interesting to inquire?
But we as human beings want to be optimists. Sociobiologists could trace it to the survival instincts on the Serengeti -- the pessimist who saw every source of water as contaminated and dangerous would die of thirst and pass along no genes. At least the optimists would drink -- they wouldn't die of thirst -- and although some of them would die of the contaminants others would live and pass along those optimist's selfish genes. If you accept such reasoning then, you'll suspect that optimism is by now the greater danger, and the pessimism discouraged by genes needs to be encouraged by memes.
Even if you don't accept such reasoning, you can and should look about you at American pop culture and see where the danger comes. Every incarnation of "Miracle on 34th Street" teaches that belief, even gullibility, is good and skepticism is a condition that requires magical cure. More contemporary movies, like Jim Carrey's "Yes Man" convey the same message. Saying "no" is bad. Sum up such influences, and then let your inner contrarian take over. When everyone is telling you how wonderful it is to be a bull, then perhaps the perspective of the bear is the one that needs reinforcement.
Yet again: look at the recent history of the stock analysts' vocation. When someone predicts a stock will rise, and it rises, is he roundly condemned as a huckster and hype artist? No ... he is praised for getting the call right of course. On the other hand, when someone predicts a stock will fall, and it falls, is he generally praised for getting the call right? No ... he is accused of "talking it down," defrauding those who bet the other way ... he is sued. This is not a theoretical concern. People who expressed reasonable (and as it turned out, accurate) concerns about Novastar Financial Inc., for example, were ridiculed and reviled, their points routinely dismissed. When Novastar tanked, did the dispensers of that ridicule feel, well ... ridiculous? of course not. The bias toward hype and the prejudice against skepticism is so widely shared it can survive any number of such disconfirmations.
All of this is only to say that we tend to blow ourselves bubbles, and then when the bubbles burst as they must we respond by blaming those who had warned us of the fragility of the bubble at the moment of its prime. This blame is irrational, and since what we need most from an economy is an evenness of rotation, an end to the boom-bust nonsense, we must resist our impulses. We need to celebrate the bears.
Tuesday, February 3, 2009
Roche and Genentech
Roche has announced what it cals a "hostile bid" (hold that thought) for Genentech: $86.50 a share.
Roche, formally F. Hoffman-La Roche Ltd., of Switzerland, is a research-heavy pharma giant.
Genentech is the US (San Francisco) based genetic-research firm (sometimes called the "founder of biotech" as an industry separate from old-line pharma), the one that caused a lot of pop-cult buzz in 1979-80. It was THE hot stock in that era. Indeed, even the buzz from that era seems innocent nowadays.
I remember a Barney Miller episode in which a high-class call girl is in the departments, and Det. Harris tries to wheedle stock tips out of her. She's onto one big stock, but she's keeping mum about it.
"You don't have a lead on the next Genentech, do you?"
"I'm dumping all my Genentech to buy this," she replies. At this his eyes bug out.
But enough for my personal trip down memory lane. Roche has initiated a hostile tender offer for 100% of Genentech. What does this mean exactly? It strikes me as odd, since Roche already owns 55.8% of Genentech. One might naively expect that 55.8% serves as a controlling share, so this is a bit like wrestling with one's own left arm.
The point, though, is that US law offers certain protections for minority owners, and those minorities can make pains in the next of themselves. A majority-owned subsidiary isn't the same thing as, say, one of the parent company's operating divisions.
So far as I understand it, Roche is buying out the nuisance value of that minority stock. It has also lowered its offering price in recent days, to convey the message that irt won't be a roll-over for holdouts. Ouch. That's playing hardball, for a bunch of neutral Swiss yodelers!
Roche, formally F. Hoffman-La Roche Ltd., of Switzerland, is a research-heavy pharma giant.
Genentech is the US (San Francisco) based genetic-research firm (sometimes called the "founder of biotech" as an industry separate from old-line pharma), the one that caused a lot of pop-cult buzz in 1979-80. It was THE hot stock in that era. Indeed, even the buzz from that era seems innocent nowadays.
I remember a Barney Miller episode in which a high-class call girl is in the departments, and Det. Harris tries to wheedle stock tips out of her. She's onto one big stock, but she's keeping mum about it.
"You don't have a lead on the next Genentech, do you?"
"I'm dumping all my Genentech to buy this," she replies. At this his eyes bug out.
But enough for my personal trip down memory lane. Roche has initiated a hostile tender offer for 100% of Genentech. What does this mean exactly? It strikes me as odd, since Roche already owns 55.8% of Genentech. One might naively expect that 55.8% serves as a controlling share, so this is a bit like wrestling with one's own left arm.
The point, though, is that US law offers certain protections for minority owners, and those minorities can make pains in the next of themselves. A majority-owned subsidiary isn't the same thing as, say, one of the parent company's operating divisions.
So far as I understand it, Roche is buying out the nuisance value of that minority stock. It has also lowered its offering price in recent days, to convey the message that irt won't be a roll-over for holdouts. Ouch. That's playing hardball, for a bunch of neutral Swiss yodelers!
Monday, February 2, 2009
Indian Film Company: Dispute Resolved
A group of dissident investors led by hedge fund Altima Partners had been demanding the removal of two of the directors of The Indian Film Company (IFC).
The IFC, by the way, is an investment vehicle itself, not a production company. It invests in Indian movies, as you might imagine -- especially those it seems designed to appeal to Indians in the rest of the world, outside of India.
The IFC's public relations firm (which is headquartered in London) put out a statement this weekend -- neither in India nor in London is Super Bowl weekend sacred -- saying that the two sides have agreed to adjourn an extraordinary general meeting which had been scheduled for this Thursday, Feb. 5.
"The board is delighted to reach an agreement in the interests of the shareholders," said the flack.
It seems that the two controversial directors -- Raghav Bahl and Alok Verma -- will stay on. The board will get two new members, one of whom is associated with Altima and the other who isn't (Atul Setia and Deepak Gupta, respectively).
This is worth mentioning chiefly because the business model is intriguing: investing in movies that might appeal especially to a particular country's diaspora, if you will.
This just reinforces my determination to see Slumdog Millionaire. I wonder if they've got a piece of that one.
The IFC, by the way, is an investment vehicle itself, not a production company. It invests in Indian movies, as you might imagine -- especially those it seems designed to appeal to Indians in the rest of the world, outside of India.
The IFC's public relations firm (which is headquartered in London) put out a statement this weekend -- neither in India nor in London is Super Bowl weekend sacred -- saying that the two sides have agreed to adjourn an extraordinary general meeting which had been scheduled for this Thursday, Feb. 5.
"The board is delighted to reach an agreement in the interests of the shareholders," said the flack.
It seems that the two controversial directors -- Raghav Bahl and Alok Verma -- will stay on. The board will get two new members, one of whom is associated with Altima and the other who isn't (Atul Setia and Deepak Gupta, respectively).
This is worth mentioning chiefly because the business model is intriguing: investing in movies that might appeal especially to a particular country's diaspora, if you will.
This just reinforces my determination to see Slumdog Millionaire. I wonder if they've got a piece of that one.
Sunday, February 1, 2009
The Buffett "cult"?
Just a quick link for today, then I'm out of here.
It seems that there is a certain Richard Davenport-Hines who takes a dim view of the Americans who treat Warren Buffett as an oracle.
His squinting isn't, by the way, directed at Buffett himself. Not particularly, he says that Buffett "spends his days in a repetitive routine which most people would find mortifyingly banal," but he also finds that Buffett has his good points -- praising Buffett's "accurate warnings in 1999 about the false dot-com boom," and so forth.
It is just the cultists to whom he objects. Make of it all what you will.
I link, you decide.
It seems that there is a certain Richard Davenport-Hines who takes a dim view of the Americans who treat Warren Buffett as an oracle.
His squinting isn't, by the way, directed at Buffett himself. Not particularly, he says that Buffett "spends his days in a repetitive routine which most people would find mortifyingly banal," but he also finds that Buffett has his good points -- praising Buffett's "accurate warnings in 1999 about the false dot-com boom," and so forth.
It is just the cultists to whom he objects. Make of it all what you will.
I link, you decide.
Wednesday, January 28, 2009
Carlos Slim
Carlos Slim has just infused some much-needed capital into the good grey New York Times - given it some "breathing room" as the saying goes.
Slim, the Mexican telecommunications billionaire, is lending the paper $250 million.
He is buying senior unsecured notes. They will be due in 2015 and will carry a 14.053% percent annual interest payment. Payments will be semi-annual.
The Times has the right to prepay the notes beginning in 2012.
Slim isn't an "activist investor." He appears uninterested in shaking up the operations of the company. Indeed, if there is a change of control during the pendency of these loans, it will trigger a “repurchase right” wherein Slim can require full repayment almost immediately. So the deal may be understood as entrenching the present control group.
The notes carry detachable warrants providing the right to buy up to 15.9 million shares of the Times Co.’s Class A stock at a strike price of $6.3572 a share. Slim, who already owns 6.4% of the company, could bring that stake up to 17% by converting these warrants, thereby making himself the third largest shareholder.
Slim doesn't get a board seat.
I don't know what to make of any of this, but I've chronicled the recent history of The New York Times in this blog and I'll continue to do so. I have a feeling that one way or another this transaction may in the fture be seen as a benchmark.
Slim, the Mexican telecommunications billionaire, is lending the paper $250 million.
He is buying senior unsecured notes. They will be due in 2015 and will carry a 14.053% percent annual interest payment. Payments will be semi-annual.
The Times has the right to prepay the notes beginning in 2012.
Slim isn't an "activist investor." He appears uninterested in shaking up the operations of the company. Indeed, if there is a change of control during the pendency of these loans, it will trigger a “repurchase right” wherein Slim can require full repayment almost immediately. So the deal may be understood as entrenching the present control group.
The notes carry detachable warrants providing the right to buy up to 15.9 million shares of the Times Co.’s Class A stock at a strike price of $6.3572 a share. Slim, who already owns 6.4% of the company, could bring that stake up to 17% by converting these warrants, thereby making himself the third largest shareholder.
Slim doesn't get a board seat.
I don't know what to make of any of this, but I've chronicled the recent history of The New York Times in this blog and I'll continue to do so. I have a feeling that one way or another this transaction may in the fture be seen as a benchmark.
Tuesday, January 27, 2009
Three brief items
1. Selectica
Last time we checked in on the Delaware courts, Selectica had doubled the number of shares of common stock held by all of its shareholders except those of its would-be acquirers, Versata and Trilogy. It had also filed a complaint in court looking for a declaratory judgment -- it wants the court to give a goodhousekeeping seal to its actions.
More recently, (January 16) the defendants, Versata and Trilogy, filed their answer, with a copy to the SEC. You can read it for yourself here, I expect I'll discuss it next week.
2. Berndt out at Telular
Telular, a wireless communications company, has settled a pending proxy contest with Simcoe Partners, which owns just over 5% of its stock.
Simcoe's founder, Jeffrey Jacobowitz, will take a seat on Telular's board of directors, and the chairman of that board, John Berndt, will not stand for re-election. A new chairman will be chosen at the first board meeting after the 2009 annual meeting, which will likely take place in March. The announcement is a buit vague about timing. It mentions a 2010 annual meeting in March of that year, and it mentions a 2009 anual meeting upcoming -- so I'm guessing March for the more proximate meeting as well.
3. Circuit City, the electronics chaim that filed for bankruptcy in November, now says it is in talks with two potential buyers in connection with re-organization.
Meanwhile, its stores are holding "liquidation sales" that look suspiciously like those of an operation not too keen on liquidating. Discounts are at 10%, no more. This would make sense if the new buyers actually want to inherit an ongoing enterprise.
Last time we checked in on the Delaware courts, Selectica had doubled the number of shares of common stock held by all of its shareholders except those of its would-be acquirers, Versata and Trilogy. It had also filed a complaint in court looking for a declaratory judgment -- it wants the court to give a goodhousekeeping seal to its actions.
More recently, (January 16) the defendants, Versata and Trilogy, filed their answer, with a copy to the SEC. You can read it for yourself here, I expect I'll discuss it next week.
2. Berndt out at Telular
Telular, a wireless communications company, has settled a pending proxy contest with Simcoe Partners, which owns just over 5% of its stock.
Simcoe's founder, Jeffrey Jacobowitz, will take a seat on Telular's board of directors, and the chairman of that board, John Berndt, will not stand for re-election. A new chairman will be chosen at the first board meeting after the 2009 annual meeting, which will likely take place in March. The announcement is a buit vague about timing. It mentions a 2010 annual meeting in March of that year, and it mentions a 2009 anual meeting upcoming -- so I'm guessing March for the more proximate meeting as well.
3. Circuit City, the electronics chaim that filed for bankruptcy in November, now says it is in talks with two potential buyers in connection with re-organization.
Meanwhile, its stores are holding "liquidation sales" that look suspiciously like those of an operation not too keen on liquidating. Discounts are at 10%, no more. This would make sense if the new buyers actually want to inherit an ongoing enterprise.
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