6 ms·

Since Masimo is a publicly traded company, can’t Apple just buy enough shares to have a controlling interest in the company and just force them to back out?

TheSoftwareGuy 3y ago
Hostile takeovers aren't usually that fast, but yes apple can probably afford to buy the company, one way or another
- rvnx 3y ago
  Even more hostile scenario (if this is even legal, probably not, though I'm not sure): Apple could borrow a large amount of shares of Masimo and short the company. They have enough cash for that, and the borrow fee might be less than the settlement costs, plus they could profit from the operation.
  - kasey_junk 3y ago
    Wait. How does that help them sell Apple Watches? Like actually do the whole trade here for me so I can understand.
  - xoranth 3y ago
    If you mean shorting Masimo purely to drive down the price, that's market manipulation and is definitely illegal. E.g. https://www.investor.gov/introduction-investing/investing-basics/glossary/market-manipulation https://www.investor.gov/introduction-investing/investing-ba...
    - ceejayoz 3y ago
      Your link doesn't support that assertion. https://en.wikipedia.org/wiki/Hindenburg_Research https://en.wikipedia.org/wiki/Hindenburg_Research would be out of business if that business model was illegal. You can short all you like; you can't be deceptive/fraudulent about it.
      - xoranth 3y ago
        Hindenburg doesn't short in order to drive down the price. Hindenburg compiles and releases information they believe to be truthful about a company, which they shorted beforehand in order to profit from the information. What I am talking about is sending orders only to cause a certain reaction (e.g. by convincing momentum traders that there is momentum in a certain direction).
        ceejayoz 3y ago
        You can short for the sake of shorting. You can’t fake volume with wash trading. Very different things.
ladberg 3y ago
It's pretty nontrivial to buy a majority interest in any public company. It's not like you can just spend 1/2 the current market cap to acquire it, the price will shoot up drastically as soon as the market is aware of someone (especially Apple) trying to do it.
- deleted 3y ago
  [deleted]
- speedylight 3y ago
  As long as the cost is less than what apple makes from the watches annually, it would still be worth it, no?
  - ornornor 3y ago
    Sometimes companies have poison pill provisions and similar that makes it veeeeery expensive to do a hostile takeover.
    - dangus 3y ago
      Expensive for Apple? This is a $17 billion annual revenue product category for them. Masimo's market cap is $6 billion.
      - prawn 3y ago
        I guess the consideration wouldn't be the value of whole product category, but related to changes to manufacture/schedule and changes to sales if they dropped that particular feature?
      - ffgjgf1 3y ago
        > $17 billion annual revenue Only a proportion of that is net income > market cap is $6 billion. Even if > 50% enough stocks are on the market how much do you think Apple would end up paying $12 billion? $16? $20? $25? How many years would it take them to earn that back? You can’t really buy companies directly on the stock market, the price will just start going up exponentially. Also they’d be rewarding patent trolls which creates incentives for other companies to behave the same way so that Apple would acquire them
a13n 3y ago
[flagged]
Osiris 3y ago
Maybe the patent lawsuit was an attempt to try to force Apple to buy the IP. They’d make money either way.
modeless 3y ago
If they wanted to spend a bunch of money they could just license the patents. It would probably be cheaper than buying the whole company.
- gnicholas 3y ago
  It might be cheaper to license the patents, but if they managed to buy a controlling interest in the company, they would also then stand to profit from Masimo's licensing arrangements with other companies. That is, they would be purchasing a revenue-generating asset. And after this lawsuit, I'm sure Masimo will have more revenue, as other smaller companies realize there is no way to win against them, since even Apple lost.
  - deleted 3y ago
    [deleted]
FireBeyond 3y ago
No. Minority shareholders still have rights, and while there may be a tipping point with respect to effort versus reward, but they absolutely can (and do) threaten majority shareholders with legal action when the action of majority shareholders violate duties of acting in the company's best interests. Source: https://warren.law/blog/protecting-minority-shareholder-rights-guide/ https://warren.law/blog/protecting-minority-shareholder-righ...
ajross 3y ago
Others are answering this with more specifics, but there's a first principles answer here too: not without facing a shareholder lawsuit for the difference. The whole idea behind owning stock in the company is that the company acts to maximize the value of that stock on your behalf. So if the ownership of the company (Apple Computer, in this case) takes a deliberate act that fails to honor the shareholder compact (taking a huge haircut on a patent license), then you sue them because they should have gotten you more.
- ffgjgf1 3y ago
  If Apple ever bought Masimo it would be either merged into Apple or operate as a subsidiary.
  - ajross 3y ago
    That doesn't obviate the rights of the other Masimo shareholders. Imagine Apple owes Masimo a $2B judgement. Then they buy the 50.1% of company for $500M and write off the debt to their subsidiary. The other 49.9% say, wait, we were owed $1B dollars in that settlement and all we got was $250M of AAPL stock! And they sue.
    - ffgjgf1 3y ago
      > That doesn't obviate the rights of the other Masimo shareholders It does if they willingly sell their shares to Apple > Then they buy the 50.1% of company for $500M and write off the debt to their subsidiary Well that would not be legal. They’d use their position as the majority shareholder to buy out everyone else and delist the company (of course they could still not sell, they’d just end up having shares in a private company)
      - ajross 3y ago
        > It does if they willingly sell their shares to Apple Why would they do that? That's literally just giving away money. I still think you're failing to understand the principle at work here. You can "control" a public company with a 50.1% share, that doesn't allow you to steal from the remaining shareholders. That's what shareholder lawsuits are about: the shareholders collectively feel that the company is not acting in the interests of its owners and sue. Now, sure, often this is abused. Often the suits are baseless and mostly just attempts by law firms to squeeze some dollars out of the process. But the actions described in this subthread are exactly why they are allowed in the first place. You can't do that.
HDThoreaun 3y ago
I think theyd have to buy the whole company, otherwise theyd be sued by the other shareholders.

TheSoftwareGuy 3y ago

Hostile takeovers aren't usually that fast, but yes apple can probably afford to buy the company, one way or another

rvnx 3y ago
Even more hostile scenario (if this is even legal, probably not, though I'm not sure): Apple could borrow a large amount of shares of Masimo and short the company. They have enough cash for that, and the borrow fee might be less than the settlement costs, plus they could profit from the operation.
- kasey_junk 3y ago
  Wait. How does that help them sell Apple Watches? Like actually do the whole trade here for me so I can understand.
- xoranth 3y ago
  If you mean shorting Masimo purely to drive down the price, that's market manipulation and is definitely illegal. E.g. https://www.investor.gov/introduction-investing/investing-basics/glossary/market-manipulation https://www.investor.gov/introduction-investing/investing-ba...
  - ceejayoz 3y ago
    Your link doesn't support that assertion. https://en.wikipedia.org/wiki/Hindenburg_Research https://en.wikipedia.org/wiki/Hindenburg_Research would be out of business if that business model was illegal. You can short all you like; you can't be deceptive/fraudulent about it.
    - xoranth 3y ago
      Hindenburg doesn't short in order to drive down the price. Hindenburg compiles and releases information they believe to be truthful about a company, which they shorted beforehand in order to profit from the information. What I am talking about is sending orders only to cause a certain reaction (e.g. by convincing momentum traders that there is momentum in a certain direction).
      - ceejayoz 3y ago
        You can short for the sake of shorting. You can’t fake volume with wash trading. Very different things.

ladberg 3y ago

It's pretty nontrivial to buy a majority interest in any public company. It's not like you can just spend 1/2 the current market cap to acquire it, the price will shoot up drastically as soon as the market is aware of someone (especially Apple) trying to do it.

deleted 3y ago
[deleted]
speedylight 3y ago
As long as the cost is less than what apple makes from the watches annually, it would still be worth it, no?
- ornornor 3y ago
  Sometimes companies have poison pill provisions and similar that makes it veeeeery expensive to do a hostile takeover.
  - dangus 3y ago
    Expensive for Apple? This is a $17 billion annual revenue product category for them. Masimo's market cap is $6 billion.
    - prawn 3y ago
      I guess the consideration wouldn't be the value of whole product category, but related to changes to manufacture/schedule and changes to sales if they dropped that particular feature?
    - ffgjgf1 3y ago
      > $17 billion annual revenue Only a proportion of that is net income > market cap is $6 billion. Even if > 50% enough stocks are on the market how much do you think Apple would end up paying $12 billion? $16? $20? $25? How many years would it take them to earn that back? You can’t really buy companies directly on the stock market, the price will just start going up exponentially. Also they’d be rewarding patent trolls which creates incentives for other companies to behave the same way so that Apple would acquire them

a13n 3y ago

[flagged]

Osiris 3y ago

Maybe the patent lawsuit was an attempt to try to force Apple to buy the IP. They’d make money either way.

modeless 3y ago

If they wanted to spend a bunch of money they could just license the patents. It would probably be cheaper than buying the whole company.

gnicholas 3y ago
It might be cheaper to license the patents, but if they managed to buy a controlling interest in the company, they would also then stand to profit from Masimo's licensing arrangements with other companies. That is, they would be purchasing a revenue-generating asset. And after this lawsuit, I'm sure Masimo will have more revenue, as other smaller companies realize there is no way to win against them, since even Apple lost.
- deleted 3y ago
  [deleted]

FireBeyond 3y ago

No. Minority shareholders still have rights, and while there may be a tipping point with respect to effort versus reward, but they absolutely can (and do) threaten majority shareholders with legal action when the action of majority shareholders violate duties of acting in the company's best interests. Source: https://warren.law/blog/protecting-minority-shareholder-rights-guide/ https://warren.law/blog/protecting-minority-shareholder-righ...

ajross 3y ago

Others are answering this with more specifics, but there's a first principles answer here too: not without facing a shareholder lawsuit for the difference. The whole idea behind owning stock in the company is that the company acts to maximize the value of that stock on your behalf. So if the ownership of the company (Apple Computer, in this case) takes a deliberate act that fails to honor the shareholder compact (taking a huge haircut on a patent license), then you sue them because they should have gotten you more.

ffgjgf1 3y ago
If Apple ever bought Masimo it would be either merged into Apple or operate as a subsidiary.
- ajross 3y ago
  That doesn't obviate the rights of the other Masimo shareholders. Imagine Apple owes Masimo a $2B judgement. Then they buy the 50.1% of company for $500M and write off the debt to their subsidiary. The other 49.9% say, wait, we were owed $1B dollars in that settlement and all we got was $250M of AAPL stock! And they sue.
  - ffgjgf1 3y ago
    > That doesn't obviate the rights of the other Masimo shareholders It does if they willingly sell their shares to Apple > Then they buy the 50.1% of company for $500M and write off the debt to their subsidiary Well that would not be legal. They’d use their position as the majority shareholder to buy out everyone else and delist the company (of course they could still not sell, they’d just end up having shares in a private company)
    - ajross 3y ago
      > It does if they willingly sell their shares to Apple Why would they do that? That's literally just giving away money. I still think you're failing to understand the principle at work here. You can "control" a public company with a 50.1% share, that doesn't allow you to steal from the remaining shareholders. That's what shareholder lawsuits are about: the shareholders collectively feel that the company is not acting in the interests of its owners and sue. Now, sure, often this is abused. Often the suits are baseless and mostly just attempts by law firms to squeeze some dollars out of the process. But the actions described in this subthread are exactly why they are allowed in the first place. You can't do that.

HDThoreaun 3y ago

I think theyd have to buy the whole company, otherwise theyd be sued by the other shareholders.