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> Activist investor Starboard Value LP last month called on the company to halt its Alibaba spinoff and instead find a buyer for its Internet business. In a let

by colmvp 11y ago

> Activist investor Starboard Value LP last month called on the company to halt its Alibaba spinoff and instead find a buyer for its Internet business. In a letter to Yahoo, Starboard said its position changed following the federal government’s decision not to rule on whether the Alibaba spinoff would incur billions of dollars in taxes. Does anyone know anything about Starboard Value LP? What is an activist investor? The term itself screams adversarial. Do all CEO's have to deal with this? I can't imagine having to both plan how to pull a company out of the water and have to deal with people outside of the company who think they know better.

akg_67 11y ago
I am well-aware of Starboard Value LP. The hedge fund is behind combination of Office Depot and Staples, changes at Olive Garden, etc. They are activist investor typically acquire influential stake in small-to-midsize company, take board seats and try to push changes that may increase shareholder value. I personally don't hold anything against them. They seem to go after management who get too comfortable in their role. Activism seems to be the primary way now hedge funds create Alpha. A Primer on Starboard, the Activist That Pushed for a Staples-Office Depot Merger http://dealbook.nytimes.com/2015/02/04/a-primer-on-starboard-the-activist-that-pushed-for-a-staples-office-depot-merger/ http://dealbook.nytimes.com/2015/02/04/a-primer-on-starboard... Starboard’s Olive Garden Slides: Salting the Water, Custom Straws and More http://blogs.wsj.com/moneybeat/2014/09/12/starboards-olive-garden-slides-salting-the-water-custom-straws-and-more/ http://blogs.wsj.com/moneybeat/2014/09/12/starboards-olive-g...
- scottmcleod 11y ago
  Thanks for sharing
ubernostrum 11y ago
"Activist" typically refers to investors who try to either obtain enough shares, or sway the votes of enough shares, to get seats on a company's board and enact a specific agenda they want. It's often used pejoratively to refer to investors who want to gain influence just long enough to reap a profit from gutting the company, leaving other investors with now-worthless shares in the husk they leave behind.
- WalterBright 11y ago
  Sometimes a company's parts are worth more than the company, and "parting it out" like one would an old car is the right thing to do.
  - chrisbennet 11y ago
    Unfortunately for the employees, they aren't considered in the calculus of "value".
    - WalterBright 11y ago
      Are you sure? Many companies and divisions are bought by other companies to get the employees, dubbed an "aquihire". This happens when the employees are worth more than the book assets.
  - jacquesm 11y ago
    Another tactic is to split the company into a profitable and a non-profitable portion and then let the non-profitable portion preferably loaded up with a bunch of debt sink. This ought to be illegal but it's a recurring pattern.
    - harryh 11y ago
      Why should that be illegal?
      - jacquesm 11y ago
        Because it allows you to externalize corporate problems to the detriment of employees and creditors rather than to actually deal with them.
  - talmand 11y ago
    Depends on whether the company's parts are worth more than the company now versus the future of the company. Someone looking to make a quick buck probably doesn't care that a long term strategy would net much more money over time than a quick sale. Such that, why wait ten years for ten million dollars when one can have two million dollars now? Totally depends on the company, much like your car analogy, and it may not be the right thing to do. But I suppose what the right thing to do may depend on the person you ask.
apocalyptic0n3 11y ago
An Activist Investor is an investor who purchases a not-insignificant stake in a company in order to pressure the board into making a decision that will make that investor a lot of money, generally in a very short period of time. The high-profile investors tend to want to shutter the company completely or to downsize immensely. Basically gut, maximize profits for a quarter or two, and sell. Biggest example is probably Carl Icahn. He's well known in the tech world for trying to do these types of things to Apple, Netflix, and Dell. Not sure about the others, but Netflix actually has a Carl Icahn rule that prevents any one investor from gaining too much control. If I remember correctly, Icahn sold his stake almost immediately after the rule was put in place.
- sharkweek 11y ago
  Netflix adopted a poison pill (http://money.cnn.com/2012/11/05/technology/netflix-poison-pill/ http://money.cnn.com/2012/11/05/technology/netflix-poison-pi... - more professionally labeled a shareholder rights plan) to prevent Icahn from getting too crazy; he was basically threatening to make Netflix acquisition-bait. Icahn recently sold off his Netflix stake, but managed to make a ridiculous amount of money as the company saw some solid growth while he held a position.
- gaius 11y ago
  Back in the 80s, they were called by the term "corporate raiders". The movie Wall Street (a classic, unlike the dismal sequel) is all about them.
napoleond 11y ago
https://en.wikipedia.org/wiki/Activist_shareholder https://en.wikipedia.org/wiki/Activist_shareholder http://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=129369526 http://www.bloomberg.com/research/stocks/private/snapshot.as... Yes, basically all public company CEOs have to deal with this, especially if their share prices are not going up.
xbryanx 11y ago
If that sounds onerous to you, then don't become a publicly traded company.
finance-geek 11y ago
Other comments already explained what an activist investor is. It is adversarial...but that is the price to pay if you want to be a public company. If a company wants to raise capital from the public, they then need to deal with shareholders, especially large shareholders' wishes. If they dont want that type of noise, they can stay private. The activist investor wants what is best for the stock, so it is not necessarily bad. It can be bad though if they only want a short-term pop in the stock, instead of a longer term growth plan.
pjc50 11y ago
people outside of the company who think they know better They're called "owners", and despite the best efforts of managerial capitalism to transfer power entirely to the executive officers they do get a vote on what the company does.
- profeta 11y ago
  they are called late minority holders. they are the ones that bought stock yesterday, on a company that do not pay dividends, making the long term holders foot all the proverbial bill. Just because those recent minority holders are a little more vocal than all the long timers minority holders do not make them more of a owners. In fact, we should have things in place to make them less of. that would probably reduce the value of companies for later sells. but would make investing in companies what it was supposed to be about. before the banks took all the fun away.

by colmvp 11y ago

akg_67 11y ago

I am well-aware of Starboard Value LP. The hedge fund is behind combination of Office Depot and Staples, changes at Olive Garden, etc. They are activist investor typically acquire influential stake in small-to-midsize company, take board seats and try to push changes that may increase shareholder value. I personally don't hold anything against them. They seem to go after management who get too comfortable in their role. Activism seems to be the primary way now hedge funds create Alpha. A Primer on Starboard, the Activist That Pushed for a Staples-Office Depot Merger http://dealbook.nytimes.com/2015/02/04/a-primer-on-starboard-the-activist-that-pushed-for-a-staples-office-depot-merger/ http://dealbook.nytimes.com/2015/02/04/a-primer-on-starboard... Starboard’s Olive Garden Slides: Salting the Water, Custom Straws and More http://blogs.wsj.com/moneybeat/2014/09/12/starboards-olive-garden-slides-salting-the-water-custom-straws-and-more/ http://blogs.wsj.com/moneybeat/2014/09/12/starboards-olive-g...

scottmcleod 11y ago
Thanks for sharing

ubernostrum 11y ago

"Activist" typically refers to investors who try to either obtain enough shares, or sway the votes of enough shares, to get seats on a company's board and enact a specific agenda they want. It's often used pejoratively to refer to investors who want to gain influence just long enough to reap a profit from gutting the company, leaving other investors with now-worthless shares in the husk they leave behind.

WalterBright 11y ago
Sometimes a company's parts are worth more than the company, and "parting it out" like one would an old car is the right thing to do.
- chrisbennet 11y ago
  Unfortunately for the employees, they aren't considered in the calculus of "value".
  - WalterBright 11y ago
    Are you sure? Many companies and divisions are bought by other companies to get the employees, dubbed an "aquihire". This happens when the employees are worth more than the book assets.
- jacquesm 11y ago
  Another tactic is to split the company into a profitable and a non-profitable portion and then let the non-profitable portion preferably loaded up with a bunch of debt sink. This ought to be illegal but it's a recurring pattern.
  - harryh 11y ago
    Why should that be illegal?
    - jacquesm 11y ago
      Because it allows you to externalize corporate problems to the detriment of employees and creditors rather than to actually deal with them.
- talmand 11y ago
  Depends on whether the company's parts are worth more than the company now versus the future of the company. Someone looking to make a quick buck probably doesn't care that a long term strategy would net much more money over time than a quick sale. Such that, why wait ten years for ten million dollars when one can have two million dollars now? Totally depends on the company, much like your car analogy, and it may not be the right thing to do. But I suppose what the right thing to do may depend on the person you ask.

apocalyptic0n3 11y ago

An Activist Investor is an investor who purchases a not-insignificant stake in a company in order to pressure the board into making a decision that will make that investor a lot of money, generally in a very short period of time. The high-profile investors tend to want to shutter the company completely or to downsize immensely. Basically gut, maximize profits for a quarter or two, and sell. Biggest example is probably Carl Icahn. He's well known in the tech world for trying to do these types of things to Apple, Netflix, and Dell. Not sure about the others, but Netflix actually has a Carl Icahn rule that prevents any one investor from gaining too much control. If I remember correctly, Icahn sold his stake almost immediately after the rule was put in place.

sharkweek 11y ago
Netflix adopted a poison pill (http://money.cnn.com/2012/11/05/technology/netflix-poison-pill/ http://money.cnn.com/2012/11/05/technology/netflix-poison-pi... - more professionally labeled a shareholder rights plan) to prevent Icahn from getting too crazy; he was basically threatening to make Netflix acquisition-bait. Icahn recently sold off his Netflix stake, but managed to make a ridiculous amount of money as the company saw some solid growth while he held a position.
gaius 11y ago
Back in the 80s, they were called by the term "corporate raiders". The movie Wall Street (a classic, unlike the dismal sequel) is all about them.

napoleond 11y ago

https://en.wikipedia.org/wiki/Activist_shareholder https://en.wikipedia.org/wiki/Activist_shareholder http://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=129369526 http://www.bloomberg.com/research/stocks/private/snapshot.as... Yes, basically all public company CEOs have to deal with this, especially if their share prices are not going up.

xbryanx 11y ago

If that sounds onerous to you, then don't become a publicly traded company.

finance-geek 11y ago

Other comments already explained what an activist investor is. It is adversarial...but that is the price to pay if you want to be a public company. If a company wants to raise capital from the public, they then need to deal with shareholders, especially large shareholders' wishes. If they dont want that type of noise, they can stay private. The activist investor wants what is best for the stock, so it is not necessarily bad. It can be bad though if they only want a short-term pop in the stock, instead of a longer term growth plan.

pjc50 11y ago

people outside of the company who think they know better They're called "owners", and despite the best efforts of managerial capitalism to transfer power entirely to the executive officers they do get a vote on what the company does.

profeta 11y ago
they are called late minority holders. they are the ones that bought stock yesterday, on a company that do not pay dividends, making the long term holders foot all the proverbial bill. Just because those recent minority holders are a little more vocal than all the long timers minority holders do not make them more of a owners. In fact, we should have things in place to make them less of. that would probably reduce the value of companies for later sells. but would make investing in companies what it was supposed to be about. before the banks took all the fun away.