Hedge fund activists rely on their ability to guide corporate decisions in a manner that will unlock value at an underperforming company by altering management and strategic direction. Shareholder activists will make sizable investments in companies with the intention of affecting this “positive” change. There has been significant debate whether these activists are truly adding value to corporate shareholders. However, it does seem that the negative connotation associated with the term “activist” seems to be fading. Even the current Chairwoman of the Securities and Exchange Commission, Mary Jo White, remarked at a conference in December 2013 that the view of shareholder activists has progressed away from the negative association. In this paper, I will be focusing on activist investments made by billionaire activist, Carl Icahn. Icahn has been called a “corporate raider” (particularly in the 1980s) but this moniker has seemed to evolve into “activist investor” over the last several years. His track record is undoubtedly mixed, however, it appears that in the last ten years, his wins outnumber his losses (33 to 19)1 and the overall returns of his activist investments have significantly outpaced the equity markets. Shareholder activism can trace its early roots back to the 1930s, after the stock market crash of 1929. In reaction to the crash, legislators passed new laws such as the Securities Act of 1933 and the Securities and Exchange Act of 1934 in an attempt to protect prospective shareholders. However, the passage of these new laws could did not completely address the changes that shareholders desired in corporate America. As a result, shareholder activists attempted to affect change with c... ... middle of paper ... ... this cash to reduce the number of shares outstanding in conjunction with the reduction in projected cash flows. Management of the firm rejected Icahn’s proposal calling the deal “irresponsible” and saying that it would potentially jeopardize the future of the business. However, they did explore related strategic alternatives. Kerr‐McGee’s board agreed to sell or spin‐off the company’s chemical unit and also said it would sell around $2 billion of properties. Those properties represent up to 25 percent of Kerr‐McGee’s production and 15 percent of the company’s proved reserves at the time. Additionally, they agreed to buy back $4 billion of common stock, representing almost 30 percent of the shares outstanding. The investment has returned 28% since Icahn reported his holdings within the 13D filing. The S&P 500 returned 5% over the same time period.
However, he did not have enough money, so he issued 4 million shares to raise
The stock market crash of 1929 was the primary event that led to the collapse of stability in the nation and ultimately paved the road to the Great Depression. The crash was a wide range of causes that varied throughout the prosperous times of the 1920’s. There were consumers buying on margin, too much faith in businesses and government, and most felt there were large expansions in the stock market. Because of all these positive views that the people of the American society possessed, people hardly looked at the crises in front of them.... ...
Outstanding shares are all the stocks that are currently held by investors including the restricted shares that are owned by the organizations on the inside as...
The economy is always changing, and new ideas continue to be created, tested, and integrated into the financial world. Before World War II, wealthy families owned most companies and businesses. The families, or select wealthy individuals, dominated the economy and the rest of the population had little to no involvement in it. Takeovers, or buyouts of other companies were done in small scales, because the families lacked the funding to takeover larger companies. However, after the War the opportunities to participate in the economy slowly expanded. As the American communities began to recover, the economy slowly began to prosper once again. People began to invest more in companies, and buy shares in larger corporations, which allowed them to have some control over the management’s decisions. The old notion that companies were mostly family owned began to fade out; the owners were growing old and wanted to “avoid estate taxes and retain family control”. This left two options for them: either to make their family corporation in an initial public offering (IPO), or to have a larger company takeover. Neither of these options allowed the family to maintain complete control over their business. When Henry Kravis, Jerome Kohlberg, and George Roberts, began their careers in economics, they slowly began to utilize their own ideas and strategies, and eventually formed their own company. They reintroduced something called the leveraged buyout (LBO), a practice sparsely utilized by investors in the 1950’s, which later became the most popular form of takeover during the time. This buyout became the “third option” for the previously family owned companies to continue owning the business, but there were many other aspects included. These three...
The $55 value is on the lower range of the analyst eztimates, with a best guess estimate of $67.94. Since the value of the stock had been below $45 for 4 months, the offer of 55 dollars represented a 29% premium to investors. Bollenbach knew that management would be resistant of any attempt to be acquired, regardless of price, because of failed previous attempts to negotiate a friendly merger at year end 1996. The 55-dollar benchmark created an expectation for ITT management to achieve that level, or higher and the premium is enough to demonstrate to investors it is a real offer. Their support will be key as they will have a vote deciding the fate of the poison pill provisions which need to be removed to make the deal necessary.
On Tuesday, October 29th, 1929, the crash began. (1929…) Within the first few hours, the price fell so far as to wipe out all gains that had been made the entire previous year. (1929…) This day the Dow Jones Average would close at 230. (1929…) Between October 29th, and November 13 over 30 billion dollars disappeared from the American economy. (1929…) It took nearly 25 years for many of the stocks to recover. (1929…)
October 29th, 1929 marked the beginning of the Great Depression, a depression that forever changed the United States of America. The Stock Market collapse was unavoidable considering the lavish life style of the 1920’s. Some of the ominous signs leading up to the crash was that there was a high unemployment rate, automobile sales were down, and many farms were failing. Consumerism played a key role in the Stock Market Crash of 1929 because Americans speculated on the stocks hoping they would grow in their favor. They would invest in these stocks at a low rate which gave them a false sense of wealth causing them to invest in even more stocks at the same low rate. When they purchased these stocks at this low rate they never made enough money to pay it all back, therefore contributing to the crash of 1929. Also contributing to the crash was the over production of consumer goods. When companies began to mass produce goods they did not not need as many workers so they fired them. Even though there was an abundance of goods mass produced and at a cheap price because of that, so many people now had no jobs so the goods were not being purchased. Even though, from 1920 to 1929, consumerism and overproduction partially caused the Great Depression, the unequal distribution of wealth and income was the most significant catalyst.
In the 1920s, it seemed as if the stock market was the safest and easiest way of gaining money. When people heard of this, they started to purchase stocks as well, but by stock speculation. Stock speculation was the purchasing of stocks without any knowledge of the company’s financial situation, meaning people just assumed that every stock would give them a profit. To make matters worse, banks began loaning out money to investors, in order for them to purchase stocks. Soon enough, in early 1929, banks were receiving many warnings about loaning too much money. However, this did not pose a real threat to banks or investors, for they thought that the stock market was just going to keep on going up. Unfortunately, this was not the
When “Black Tuesday” struck Wall Street on October 29th, 1929 investors traded 16 million shares on the on the New York Stock Exchange in just a day which caused billions of dollars to be lost and thousands of investors who got all their money wiped out. After the fallout of “Black Tuesday” America’s industrialized country fell down into the Great Depression which was one of the longest economic downfalls in history of the Western industrialized world. On “Black Tuesday” stock prices dropped completely. After “Black Tuesday” stock prices couldn’t get any worse or so they thought but however prices continued to drop U.S fell into the Great Depression, and by 1932 stocks were only worth about 20 percent of their value. Due to this economic downfall by 1933 almost half of America’s banks had failed. This was a major economic fallout which resulted in the Great Depression because it caused the economy to lose a lot of money and there was no way to dig themselves out of the hole of
Is The Tyranny Of Shareholder Value Finally Ending? N.p., n.d. Web. The Web.
In “Venture Capital” alternative, a sum of $3.5 million will be traded in exchange for 750,000 shares and 50% of the board seats, which will result in a weighted average outstanding shares of 1,375,000. Net income will come to $514,500 and EPS will be 0.29.
In 1934 the Securities Exchange Act created the SEC (Securities and Exchange Commission) in response to the stock market crash of 1929 and the Great Depression of the 1930s. It was created to protect U.S. investors against malpractice in securities and financial markets. The purpose of the SEC was and still is to carry out the mandates of the Securities Act of 1933: To protect investors and maintain the integrity of the securities market by amending the current laws, creating new laws and seeing to it that those laws are enforced.
money as the value of the shares was not worth a lot now. So they
* The amount of capital to be raised and the number of shares to be
If the disinvestment policy is to be in wider public interests, it is necessary to examine systematically, issues such as - the correct valuation of shares, the crowding out possibility, the appropriate use of disinvestment proceeds and the institutional and other prerequisites.