Today I was involved in a cage fight with well-known Fox Business Network Senior Correspondent Charles Gasparino. We were debating on the show Money with Melissa Francis. The topic was Carl Icahn’s open letter to EBay. My take was simple: Uncle Carl is still a pirate and corporate raider. Sure, you can hire PR touts to encourage the use of the term “shareholder activist” but a rose by any other name is still a mercenary. Even Icahn’s twitter profile picture presents his image as a wise old grandpa ready to help Main Street investors. Actually, he looks like The Most Interesting Man in the World. That is a compliment! The truth is something different. You may ask why I am concerned about this subject. Investors are at risk of misinterpreting the headlines as actionable advice for their retirement portfolios. When we shine a light on a group that is less than accurate, the risk increases that the general public will start betting their future income stream along side pirates on the high seas of Wall Street.
Long before shareholder activists you had corporate raiders. They buy up shares in a company, make a big public announcement of the wrongs of management, and use the media to promote their plan to increase the value of their holdings. How is that wrong? It’s not. Suggesting that this open letter is a public service announcement is. There is no public service here. Icahn is using his image as activist to convince the public that his way is truly in the best interests for all parties. However, there are many different groups involved and not all of them are in harmony. Stockholders, management, employees, and customers are not always in alignment. They don’t have to be for capitalism to work.
If this game is less than credible as a public service, is it wrong? No. Our country has strong shareholder rights that protect those that invest in public companies. The question I want to ask what the shareholder is looking for? Are they interested in the long-term growth and profitability of a firm or simply a short-term profit? Shareholders can be both investors and speculators. This is the not so subtle difference the media can overlook. If shareholders have different goals, we should not assume one loud mercenary speaks for us all.
Those that see Icahn as a shinning example of what I don’t know will point out that he tells it like it is. Not so. He tells you his thesis on what he wants to make a profit. Someone today suggested that the public wouldn’t know things like Apple sitting on half a trillion in cash if it wasn’t for people like Icahn. Really? Every analyst on the street can see the cash. Perhaps it is Icahn’s talent to speak to the populist masses in a language that they relate to, and at the cost of seeing only one point of view.
The bottom line is that we lack any sense of history. Come on people, Carl Icahn was the inspiration for Gordon Gecko! I say let the man speak, present his ideas, and allow the animal spirits of the market do what it will. But don’t think his intent is any different than when I was a kid. I love pirates and admire the skill of Carl Icahn. It’s also my job to protect my clients from mistaking great speculators with a strong investment plan for retirement.