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The article features attorney Martin Lipton, who wants to reel in the antics of powerful activist investors such as Carl Icahn:
They can drive up the price of a stock just by taking a position in a company, he said, but in the longer term drive companies to sell off assets and pay out cash to investors, leaving them weaker and more vulnerable.
"There is quality empirical evidence that short-termism and activism have an adverse impact on the long-term prospects of companies generally, and not just those who have been attacked but those who have adjusted to forestall attacks," he said.
I still need to get my hands on the "quality empirical evidence" Lipton refers to, but, unscientifically speaking, it rings loud, clear and convincing.
Consider what has happened at
Apple(AAPL - Get Report).
In consecutive blows, David Einhorn and Carl Icahn have seized on a relatively vulnerable company. Steve Jobs is out. Tim Cook tends toward the weaker side in that he'll actually give hedge fund managers the time of day. The stock's down. Suddenly, it has become cool to question Apple's ability to innovate and question why it was holding/holds onto billions in cash.
Einhorn wins even when he loses (He didn't get his iPrefs, but he's still receiving a windfall). And, based on
his most egotistical comments to CNBC, Icahn will either win (convince Apple to not only buy back more stock, but take out debt to do it) or go down fighting like the bully he appears to be.
This is clearly a sideshow. One that's not in the best interests of long-term AAPL shareholders. We're either afraid to call Icahn out or investors just get on his long or short side and take the ride.
Whatever the case, something must be done.
Apple has gotten along fine without the advice of hit men looking to prop up underperforming positions or pour icing on their already geeked-out cakes. Tim Cook should focus solely on products and building a company that's iron clad for the long run. Contrary to what he might think, that money Apple holds isn't Carl Icahn's money. It's not yours either, whether you own one share of AAPL or one million.
I'm unclear as to what the SEC does all day. It makes a show of insider trading busts, yet allows large investors to clearly manipulate stocks. It doesn't matter what their intention is (how will we ever really know anyway?) or which way the manipulated stock moves.
Bottom line -- when Carl Icahn Tweets, has dinner with Tim Cook or goes on
CNBC, he is creating a situation that absolutely defines the not-so-level playing field so many people like to bitch about. Yet we do nothing. And, worse yet, the regulation arm of the U.S. Government certainly could do a better job living up to
its righteous mission.
Written by Rocco Pendola in New York City