Marc Andreessen Reminds Us Activist Investors Will Always Have Stuff to Do

April 22nd, 2015
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Contributed by: Michael R. Levin, The Activist Investor
We sometimes just marvel at the things that executives say when they consider activist investors. We’ve remarked before on what CEOs really think about shareholders, and their candid opinions about us.

Recently, Silicon Valley luminary and venture capitalist Marc Andreessen broke new ground in disparaging investors. In an interview in Fortune Magazine, he discoursed on a wide range of subjects, including macroeconomic conditions, women in tech, and many others.

He covered activist investors in technology briefly and memorably. He laments,

I have been shocked in the last five years how little M&A there’s been as compared to what I think that there ... should have been... there are a lot of big companies that are on the wrong side of various kinds of technological shifts. And there are a lot of acquisitions that kind of everybody knows should happen.

Why don’t they?

...we’re in this environment of just extremely intense risk aversion on the part of public companies... public companies are being ... forced by ... activists ... to give back huge amounts of cash instead of investing it in their business.

That’s cool. Investors and executives can and should debate how and when portfolio companies should invest or disburseexcess cash, and how much. This may mean that they don’t have much cash available to spend on acquisitions. That mostly suits us investors, who have grown weary of wasteful deals that just stoke executive egos.

What’s really not cool is how Andreesen proposes to shut off that debate (emphasis ours):

If you go public in this environment under the single-class share structure and a board that gets reelected every 12 months, God help you. You’re chum in the water. And ... God help you if you’re a young company and you’re not actually fully financed, and if you’re going to need to raise money again, God really help you because they will come at you and they will basically short your stock and basically drive your stock price down, preventing you from being able to raise money again and give you a self-fulfilling bankruptcy...

There’s never been a more dangerous time to kind of be an unprotected public company. That said, Facebook [and] Google demonstrates ... there are protections you can wrap around these companies. You can do a “dual class stock.” You can do other kinds of voter control things.

... You can build a fortress around a company... to have it be safe as a public company. I ... advise our founders just to take [it] very seriously. It’s not “don’t go public.” It’s just “take it super-seriously.”

“God help you”? “Unprotected”? “Chum”? “Fortress”? Really?

Let’s get this straight. Andreesen equates activist investors to short-sellers, which is just plain incorrect. And, as a response, he advocates entrenching company leaders using dual class shares and other “voter control things”.

We should appreciate how he urges companies to take seriously their public shareholders. It beggars belief that doing so requires these kind of measures.

This is embarrassing. No wonder corp gov in Silicon Valley gets low marks. It’s why Carl Icahn singled out Andreesen’s escapades at eBay, and why we suggested smart investors avoid tech IPOs like Facebook.

It does, though, give activist investors more to do. Not the kind of additional work we relish, but it’s part of the job.
See Source
For Detailed Investor Profiles on these Investors, click below:
Icahn Associates (Carl Icahn)
Related People: Alexander J. Denner; Brett Icahn; Carl Icahn; Keith A. Meister*
Related Entities: High River Limited Partnership; Icahn Partners; Icahn & Co Inc; Icahn Associates; Icahn Enterprises (formerly American Real Estate Partners); Icahn Fund Ltd; Icahn Partners LP
Related Article Tags: Shareholder Activists, Corporate Raiders and Proxy Battles; Featured Reports; Hedge Fund Resources and Featured Partner News

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