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No, the article was calling out Carl Icahn for directing $57M last year to other companies he controls while being a minority owner of Hertz and the company obt

by yborg 6y ago

No, the article was calling out Carl Icahn for directing $57M last year to other companies he controls while being a minority owner of Hertz and the company obtaining $1.4B in new debt maturing no earlier than 2026 to service expiring debt. This is not being used to finance their working inventory except in the following sense "...it’s 500,000 cars act as collateral for $13 billion in financing — and when the collateral drops in value, the company has to make up the difference in cash." [1] The conventional model is leasing deals with the automakers that allow the rental company to sell back the cars at the end of the lease term, not try and dispose of them on the open market. [1] https://nypost.com/2020/05/03/hertz-struggles-during-coronavirus-pandemic-while-avis-stays-afloat/ https://nypost.com/2020/05/03/hertz-struggles-during-coronav...

echelon 6y ago
> Carl Icahn for directing $57M last year to other companies he controls while being a minority owner of Hertz Is that legal? Could Carl Ichan be civilly or criminally liable? Potentially go to jail? These debt sheet power moves by billionaires impact stockholders, including retirement and pension funds. When the companies they control go bankrupt, they materially harm the people who can't play at that level. I don't know if this was wrong, but the outcome was certainly not good. It's high stakes gambling with other people's livelihoods.
- itsoktocry 6y ago
  >Is that legal? Could Carl Ichan be civilly or criminally liable? Potentially go to jail? Ichan is one the world's most famous financiers, rest assured he's got an army high paid lawyers poring over the fine print of these transactions. It's legal, but not ethical, or "right".
  - tchaffee 6y ago
    Those armies of high paid lawyers are not always right. Plenty of companies get it wrong and then pay the price in court.
    - baq 6y ago
      i guess the point isn't that they are right or wrong, it's what it takes to even decide that. high paid lawyers will need more high paid lawyers against them with zero guarantee of success.
    - jmchuster 6y ago
      If the "downside" is paying fees in court, then it's a simple calculus for when it's worth it to follow the law and when not to. You're just doing business exchanges now with the legal system.
  - elliekelly 6y ago
    Unless a matter is blatantly criminal the advice from the army of lawyers is usually just one of many factors taken into account when assessing the risk/reward. It's rare for management to ignore the advice of counsel completely but it's definitely not unusual for executives to have a higher risk tolerance than the attorneys.
- zelon88 6y ago
  The shareholders that matter are all on the same team. There's no way other shareholders would have let Icahn direct $57m from their collective pocket to his own 3rd party businesses unless they were getting a cut.
- rrrrrrrrrrrryan 6y ago
  For others: it's legal, and it's basically all Icahn does - he's probably the most famous corporate raider. He obtains a minority stake in a company, gets a seat or two on the board, bullies the management into taking on tremendous amounts of debt, and uses the cash to pay himself and the other investors, calling it "unlocking value for shareholders." The once-healthy company is eventually sucked dry and he moves on to his next target.
  - oh_sigh 6y ago
    It doesn't really make sense to me who loans companies money in these circumstances. Aren't they the ones always left holding the bag?
    - echelon 6y ago
      Yes and no. They're the first parties in line to pick apart bankrupt companies. The stockholders are the ones left out in the cold.
      - oh_sigh 6y ago
        Same question then...when Icahn or others of his ilk get their claws into a board, why don't rational investors flee like the dickens?
      - simonh 6y ago
        But Icahn is a stock holder too, just sell when he does. It seems like the debt lenders will just be left with a few stripped bones to chew on.
    - Gibbon1 6y ago
      Couple of things going on. There are a lot of institutional investors where fiduciaries have no skin in the game and are being corrupted via a soft bribery. Central banks have flooded the world with cheap capital. And you have system where stockholders that end up holding the bag (AKA you and your 401k) don't have voting rights.
  - 6y ago
- snowwrestler 6y ago
  IMO, you can't really blame a minority shareholder for what a business does. By definition, a minority shareholder does not have the power to force a business to do anything; Icahn works primarily by influence. If the corporate leadership is weak, incompetent, scared, or any other pejorative you want to dredge up, then Icahn might convince them to make some bad decisions that benefit him. Apple is an example of a company that Icahn when into full speed, and didn't really change that much. In the end, Icahn sold his Apple stock for a gain, but Apple leadership obviously made their own good decisions despite him. In fact he would have made a lot more money on Apple if he had held his stock for longer. But "buy and hold" is not how he has fun, and that's what all this stuff is about. Carl Icahn does not need any more money. He likes doing what he does for the same reason Lebron James still likes playing basketball.

by yborg 6y ago

echelon 6y ago

> Carl Icahn for directing $57M last year to other companies he controls while being a minority owner of Hertz Is that legal? Could Carl Ichan be civilly or criminally liable? Potentially go to jail? These debt sheet power moves by billionaires impact stockholders, including retirement and pension funds. When the companies they control go bankrupt, they materially harm the people who can't play at that level. I don't know if this was wrong, but the outcome was certainly not good. It's high stakes gambling with other people's livelihoods.

itsoktocry 6y ago
>Is that legal? Could Carl Ichan be civilly or criminally liable? Potentially go to jail? Ichan is one the world's most famous financiers, rest assured he's got an army high paid lawyers poring over the fine print of these transactions. It's legal, but not ethical, or "right".
- tchaffee 6y ago
  Those armies of high paid lawyers are not always right. Plenty of companies get it wrong and then pay the price in court.
  - baq 6y ago
    i guess the point isn't that they are right or wrong, it's what it takes to even decide that. high paid lawyers will need more high paid lawyers against them with zero guarantee of success.
  - jmchuster 6y ago
    If the "downside" is paying fees in court, then it's a simple calculus for when it's worth it to follow the law and when not to. You're just doing business exchanges now with the legal system.
- elliekelly 6y ago
  Unless a matter is blatantly criminal the advice from the army of lawyers is usually just one of many factors taken into account when assessing the risk/reward. It's rare for management to ignore the advice of counsel completely but it's definitely not unusual for executives to have a higher risk tolerance than the attorneys.
zelon88 6y ago
The shareholders that matter are all on the same team. There's no way other shareholders would have let Icahn direct $57m from their collective pocket to his own 3rd party businesses unless they were getting a cut.
rrrrrrrrrrrryan 6y ago
For others: it's legal, and it's basically all Icahn does - he's probably the most famous corporate raider. He obtains a minority stake in a company, gets a seat or two on the board, bullies the management into taking on tremendous amounts of debt, and uses the cash to pay himself and the other investors, calling it "unlocking value for shareholders." The once-healthy company is eventually sucked dry and he moves on to his next target.
- oh_sigh 6y ago
  It doesn't really make sense to me who loans companies money in these circumstances. Aren't they the ones always left holding the bag?
  - echelon 6y ago
    Yes and no. They're the first parties in line to pick apart bankrupt companies. The stockholders are the ones left out in the cold.
    - oh_sigh 6y ago
      Same question then...when Icahn or others of his ilk get their claws into a board, why don't rational investors flee like the dickens?
    - simonh 6y ago
      But Icahn is a stock holder too, just sell when he does. It seems like the debt lenders will just be left with a few stripped bones to chew on.
  - Gibbon1 6y ago
    Couple of things going on. There are a lot of institutional investors where fiduciaries have no skin in the game and are being corrupted via a soft bribery. Central banks have flooded the world with cheap capital. And you have system where stockholders that end up holding the bag (AKA you and your 401k) don't have voting rights.
- 6y ago
snowwrestler 6y ago
IMO, you can't really blame a minority shareholder for what a business does. By definition, a minority shareholder does not have the power to force a business to do anything; Icahn works primarily by influence. If the corporate leadership is weak, incompetent, scared, or any other pejorative you want to dredge up, then Icahn might convince them to make some bad decisions that benefit him. Apple is an example of a company that Icahn when into full speed, and didn't really change that much. In the end, Icahn sold his Apple stock for a gain, but Apple leadership obviously made their own good decisions despite him. In fact he would have made a lot more money on Apple if he had held his stock for longer. But "buy and hold" is not how he has fun, and that's what all this stuff is about. Carl Icahn does not need any more money. He likes doing what he does for the same reason Lebron James still likes playing basketball.