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Wow. That is a really complicated way of thinking about it. Icahn had nothing to do with "loading the company with debt"...again, he didn't have a controlling

Wow. That is a really complicated way of thinking about it. Icahn had nothing to do with "loading the company with debt"...again, he didn't have a controlling stake, he didn't have a majority on the Board (iirc)...the reason they used a lot of debt is because they own a lot of vehicles (the majority of their debt is secured). The reason he came to the company wasn't financial structure (that does occur but very rarely...again, most investors don't want to lose all their money...this isn't a hard point requiring maths) but chronic mismanagement and huge market share loss. He didn't increase volatility (every other company in the sector uses the same kind of debt). No activist investor acquires a company so that they can do related-party transactions. Again, they often don't have a controlling stake. Icahn owns about $50bn worth of businesses, it would not surprise me if one of his companies does business with Hertz...but there is no way that he can control this. Btw, if you are an activist and you acquire a reputation for doing things that hurt other shareholders (related-party transactions would be an example) then you will lose your ability to run these campaigns overnight. Activist investing is based on appealing to other shareholders and being able to make changes that produce results. Again, all of these errors seem to arise out of not really understanding how companies work (unsurprising given your confused take). I don't understand your point about: it is in the company's interest to go for "guaranteed growth"...no growth is guaranteed, you aren't buying a washing machine...and if a VC goes for growth that isn't profitable, they lose everything. Again, this isn't confusing. The point that you appear to be referring to, but didn't quite get, is that VCs often aren't aligned with companies because they often don't care whether they succeed or fail. Investors have everything at stake. VCs just have an option on that stake. That doesn't really apply here. Icahn has all of his own money invested.

btilly 6y ago
Icahn has multiple investments. If he loses everything from Hertz, he is still remains one of the 25 richest people in the country. Secondly the VC issue isn't because VCs are not investors - they are. It is because VCs spread their money around and know very well that their investment returns depend on getting a home run or two. Gambling on high risk, high return strategies is therefore in the VCs interest, but not in the interest of people whose net worth is almost entirely in the company. This dynamic is widely understood and is a common source of conflict between VCs and founders. Thirdly related-party transactions are not necessarily a bad thing. I listed it as half in the company's interest. It is very good that when the company needs to do business they have someone to call who can make deals happen. But the activist investor isn't always acting in the company's best interests. That said, you are correct that Icahn was not the one who loaded Hertz with debt. (That restructuring happened in 2005 when Ford sold it to investment bankers.) But he has his own history of loading companies down with debt ever since he bought TWA back in the mid-80s. So the fact that he didn't do it to Hertz doesn't change the fact that he has proven willing to do so in the past.
perl4ever 6y ago
I have no idea what Icahn is or isn't responsible for, but when you say "every other company in the sector uses the same kind of debt" it's obviously failing to address the topic at hand being Hertz failing unlike other companies in the sector. People I think are reasonably sensible and not particularly out to blame Icahn seem to think something was different about their debt. Something was obviously different about something.

btilly 6y ago

Icahn has multiple investments. If he loses everything from Hertz, he is still remains one of the 25 richest people in the country. Secondly the VC issue isn't because VCs are not investors - they are. It is because VCs spread their money around and know very well that their investment returns depend on getting a home run or two. Gambling on high risk, high return strategies is therefore in the VCs interest, but not in the interest of people whose net worth is almost entirely in the company. This dynamic is widely understood and is a common source of conflict between VCs and founders. Thirdly related-party transactions are not necessarily a bad thing. I listed it as half in the company's interest. It is very good that when the company needs to do business they have someone to call who can make deals happen. But the activist investor isn't always acting in the company's best interests. That said, you are correct that Icahn was not the one who loaded Hertz with debt. (That restructuring happened in 2005 when Ford sold it to investment bankers.) But he has his own history of loading companies down with debt ever since he bought TWA back in the mid-80s. So the fact that he didn't do it to Hertz doesn't change the fact that he has proven willing to do so in the past.

perl4ever 6y ago

I have no idea what Icahn is or isn't responsible for, but when you say "every other company in the sector uses the same kind of debt" it's obviously failing to address the topic at hand being Hertz failing unlike other companies in the sector. People I think are reasonably sensible and not particularly out to blame Icahn seem to think something was different about their debt. Something was obviously different about something.