In recent weeks, Intercontinental Bank has received intense attention from Dayo Coker on his blog, The Insider. He has campaigned for full disclosure of the bank's exposure to toxic assets, notably margin loans to stockbrokers and petroleum products marketers. Coker, who aspires to model his campaign on that of David Einhorn of Greenlight Capital against Allied Capital and Lehman Brothers has raised grave doubts about the bank's leadership and its future on his blog. In this post, we examine if indeed his analytical process compares with those of Einhorn. Second, we demonstrate how Dayo Coker's tactics raise serious questions about the possibility for constructive exchange with management and the mobilization of shareholder support for his position, if that indeed is his goal. Third, we assess the definition of success of Dayo Coker's campaign to see if it includes the interests of investors, customers, and employees. We conclude by arguing that beyond the nuisance, distraction and irritation of de-marketing, Dayo Coker and The Insider blog represent a trend of costless publishing and distribution for guerrilla narratives that offer counter-theses to those traditionally pushed out by companies. In our view, at its core, the furore about The Insider blog is not about its focus on malicious misrepresentation of its financial status or poor risk management at Intercontinental Bank but about how well the bank has mastered the new tools of communication on the web to publish and distribute its own position. Today, the issue is the de-marketing of banks. Tomorrow, it could be a product recall, a proxy fight, a sexual harassment allegation or a factory fire. Unless companies can match the techniques used by these publishers, it requires no imagination to realize that like Intercontinental Bank, they will be reacting in an ill-prepared, disorganized and bumbling manner to sniper potshots.
In an historic speech given in 2004, Professor Charles Chukwuma Soludo, the governor of the Central Bank, listed out the persistent problems faced by Nigerian banks.
Weak corporate governance, evidenced by high turnover in the Board and management staff, inaccurate reporting and non-compliance with regulatory requirements, falling ethics and de-marketing of other banks in the industry.
Late or non-publication of annual accounts that obviates the impact of market discipline in ensuring banking soundness.
Gross insider abuses, resulting in huge non-performing insider related credits.
Insolvency, as evidenced by negative capital adequacy ratios and shareholders’ funds that had been completely eroded by operating losses.
Weak capital base, even for those banks that have met the minimum capital requirement, which currently stands at N1.0 billion or US$7.53 million for existing banks and N2.0 billion or US$15.06 million for new banks, and compared with the RM2.0 billion or US$526.4 million in Malaysia.
Over-dependency on public sector deposits, and neglect of small and medium class savers.
Five years later, the global economic crisis has returned these issues to the top of the agenda. Suddenly, now that the tide is out, it appears that banks have been swimming naked. In fact, before the full brunt of the financial crisis hit Nigeria, some analysts had raised red flags about the banks. In spite of assurances from bank CEOs that the crisis would be fleeting, and that they were more than able to ride out the storm without casualties, events have proven that the turmoil caught many of the banks unprepared. Of even greater concern, the economic distress has exposed the risks the banks were exposed to, and in some cases, less than prudent credit approval practices which have heightened the panic in the sector.
As if to worsen the situation, in recent months, members of the public have been receiving anonymous SMSs announcing the impending failure of a number of banks. The uncertainty created fertile ground for damaging rumours about the financial state of the banks. Known as de-marketing, the objective of the text messages was to sow doubts about the viability of the targeted financial institutions. In a business where perception is as good as gold in the vault, no bank can withstand a sustained battery of questions about its financial soundness in populist fora.
In the circumstances, bank customers and investors have been gripped by anxiety. With memories of failed banks still fresh, many prefer to be safe rather than sorry. Despite, guarantees from the Central Bank that no Nigerian bank will be allowed to fail, investors have dumped bank shares en masse.
Perhaps, no other bank has come under greater scrutiny than Intercontinental Bank. To stave off a run on the bank, as a result of rumours that it was on the verge of collapse, the Central Bank issued a statement to calm the public. In its entire history, the apex bank had never made a public pronouncement on the safety of any bank.
Curiously, those behind the attacks and innuendos about the state of specific banks have preferred to remain faceless. Rather than the presentation of sound analyses based on diligent research, most commentary on the status of banks has relied on facile insinuation. Due to the gravity of their claims, one would have expected them to show, if not the courage of owning up to their views in public, at least, the industry to demonstrate rigour in arriving at their conclusions.
However, Dayo Coker, one of the skeptics about the health of the banks has gone public with his views. Using his blog, The Insider, as a platform, the blogger, who identifies himself as the ex-editor of NigeriaReporters.com and a financial analyst, has, depending on one’s interlocutor, raised salient questions about the bank’s financial health or is on a fanatical mission to ruin the bank’s reputation.
Intercontinental Bank, one of Nigeria’s high-flying banks is facing serious difficulties that could force it into liquidation before the end of 2009. The bank’s precarious situation is due to its huge exposure to toxic loans to stockbrokers and importers of petroleum products. . . I’ve already cleaned out my account. I advise you to do the same.
Interestingly, the blogger has compared himself to David Einhorn, the hedge fund manager, infamous short-seller and founder of Greenlight Capital.
People have called me all sorts of things ranging from hired hack to devil’s spawn but I will continue to ask the necessary questions just like David Einhorn. I seriously believe that behind its glitzy facade, something is seriously wrong with Intercontinental Bank and I’m willing to bet my resources on it.
If Coker has made the public choice of comparison with Einhorn, then it is fair that he should be held to the same standards as the hedge fund manager.
Greenlight Capital, the long-short value-oriented hedge fund Einhorn founded in 1996, manages about US$6 billion. Until 2008, the firm had returned an average annualized net return above 25% each year since its founding . Noted for his meticulous analysis and dogged pursuit of companies with overpriced securities, Einhorn called Lehman Brothers out on the toxicity of its mortgage loans book and excessive leverage ratios even when the bank denied that it had either.
In the following videos, we see Einhorn discuss some of his positions.
On pages 4-9 of the following speech, Einhorn’s eagle eye attention to detail is undeniable.
Needless to say, Einhorn does his homework and extensively too before jumping to conclusions or making public assertions.
Bill Ackman, managing partner and founder of Pershing Square Capital Management, who is a close friend of Einhorn, has also attacked certain companies’ stocks as overvalued, even as their trading conditions were deteriorating. This creates ample opportunities for short-sellers like himself. He is widely regarded for thorough analysis before shorting any stock, or going public with his views. For instance, prior to launching his public campaign against MBIA’s AAA credit rating in 2002, Ackman is reputed to have read and annotated over 750,000 pages on documents, including 140,000 directly related to the monoline, and spent over $109,000 in photocopying costs.
In January 2008, Ackman wrote a letter to US regulators about his concerns for MBIA in which he offered an open source financial model for stress testing the exposure of MBIA and invited ‘users to estimate losses using their own assumptions’.
In the following presentations, Ackman shares his views on the credit crisis and the bond insurers respectively.
Now, let’s compare these fund managers process for reaching conclusions with the analysis offered by Dayo Coker.
Intercontinental Bank, one of Nigeria’s high-flying banks is facing serious difficulties that could force it into liquidation before the end of 2009. The bank’s precarious situation is due to its huge exposure to toxic loans to stockbrokers and importers of petroleum products.
While CBN has offered a stout defence of the bank’s financial position, a detailed investigation by THE INSIDER has confirmed that Intercontinental’s net assets are dwindling by the hour. The FIRS recently stopped the bank from collecting revenue and the EFCC has invited some of the bank’s top brass over the 19 billion facility given to Alhaji Shehu Badamasi, the CEO of Tanzila Petroleum.
The bank recently tried to raise some money by increasing its minimum savings balance from 1000 to 10000 hoping to use the cash to bolster its books. The move backfired as the general public could not understand the rationale behind the directive. As people rushed to withdraw their funds, the bank shut down its systems on March 6, 2008 and later blamed it on a technological problem. . .
Intercontinental Bank also claims that it has a N1 trillion balance sheet but analysts at Proshare, Nigeria’s leading independent analysts, have already raised questions over its financial statements. Many people do not know that a company can generate a huge balance sheet by revaluating its fixed assets and employing other creative accounting gimmicks. . .
I received an email from one of Nigeria’s most respected financial analysts on Friday arguing that while Intercontinental Bank may have structural problems, the CBN would not allow such a big bank to fail. She also pointed out that the bank owns some highly profitable businesses such as Flexmore Technologies.
She added that bad loans such as the one to 18 billion Tanzila loan and the 200 million dollar loan advanced to Henry Imasekha to buy Wilbros would not cripple the bank. . .
People argue that the nation’s economic commanders will try their damnedest to stave off the collapse of some banks but we can never be certain given the hostility of Northern oligarchs towards the present CBN governor. Banks that are perceived to be too close to him might be pushed aside. All it takes is one shift in policy from Yar’Adua’s erratic government.
Even if that doesn’t happen, there is no excuse for mismanaging a public company, owned by many Nigerians around the world. And I personally do not believe that Mr Erastus Akingbola is qualified to lead Intercontinental Bank in this critical period. There is no rationale for opening 70 new branches in a recessionary cycle. Has he considered the huge costs of maintaining generators, deploying ATMs and staffing those branches?
No numbers. No analysis of the financial statements. No critique of the bank’s strategy as unsustainable, unprofitable or value-destroying. No necessary and causal relationships shown to demonstrate a link between the events he describes and the implications he imputes.
Two related and classic examples of an intelligent critique of a bank model as unsustainable, because they provide management with clear points on which they may be refuted, would be the arguments of James Chanos of Kynikos Associates and Edward Chancellor, acclaimed author of Devil take the Hindmost: A History of Financial Speculation. Both have attacked the securitization-dependent business model of Macquarie Bank, the Australian investment bank, as unsustainable.
Of even greater interest, unlike Einhorn and Ackman who always insist on meeting with management before going public with their views if unsatisfied, Coker does not mention a single attempt to contact the CEO, CFO or other executive member of the bank with his concerns. No records of letters written to management, no emails, no phone calls.
Most shocking of all, Coker does not disclose whether he has a position in the bank’s stock, debt securities or if he represents parties who stand to benefit from a drop in the prices of these securities. If he does represent such parties, he needs to provide information on whether he does so as a fiduciary, under what jurisdiction and license. Further, if he is a fiduciary, he needs to provide information on how long he has acted in this role, objectively verifiable results of his returns for investors, and broad description of his investment strategy.
As a touch of modesty, even humility, which is a marked sign among all great managers, he should also discuss areas where he has been wrong in his analysis. Since the blogger describes himself elsewhere as a financial analyst, it would enhance his credibility among readers if he provided published and distributed equity strategy and company reports from 2006 and 2007 which had predictive pointers to the 2008 market crash or other signal events. If these were sent via email, independent means should be provided for verifying the dates of distribution.
Although the blogger questions the bank’s branch expansion in the current economic climate, he fails to offer an alternative strategy for deploying its capital. Moreover, his focus on the set-up and running costs do not critique the opportunities that the bank seeks to exploit as its competitors retreat.
If one compares the content of Coker’s posts with those offered by Bruce Wasserstein’s Lazard Freres in its Lazard Report on Time Warner, the media company, prepared on behalf of Carl Icahn, the legendary activist investor, and Eric Knight of Knight Vinke Asset Management in its strategy review for HSBC, the global bank, the gaping absence of any value-add of his criticism is obvious.
Clearly, Dayo Coker’s analyses falls short of the efforts that knowledgeable investors like Einhorn and Ackman make before going public with their views.
In our view, the blogger’s style may fit closer to those of whistle blowers and poison pen letter authors. Let us see.
The US Office of the Special Counsel, which is charged with evaluating whistleblower submissions, classifies these to cover those disclosures that ‘the applicant reasonably believes evidences a violation of a law, rule or regulation; gross mismanagement; gross waste of funds; an abuse of authority; or a substantial and specific danger to public health or safety.’
Due to the high number of tips and complaints that the agency receives it stresses the need for applicants to provide it with sufficient evidence that there is a ’substantial likelihood’ of confirming claims. Spurious speculation about the existence of misconduct does not provide the agency with a sufficient legal basis upon which to launch a full investigation of the matter.
The need to distinguish between a whistle blower with valid and significant issues to disclose and a tipster, who fails to provide the necessary basis for claims, is no where more important than in financial markets where the wealth of so many resides. Since financial markets, really trade on information, mischievous allegations can wreck a lot of harm on investors, even as it raises the cost of capital for the issuer and perhaps threatens its acceptability as a counter-party, before an independent investigation and controverting results disprove it.
Harry Markopoulous is widely credited with sounding the first siren about Bernard Madoff’s Ponzi scheme. In November 2005, Markopoulos, an independent financial fraud investigator with forensic accounting expertise, sent a letter to the US Securities and Exchange Commission listing out his concerns about the investment manager and securities firm. Before sending his memo to the regulator, Markopoulous had spent five years studying the firm’s claims on its fund returns and the strategies it used to achieve them, including the split-strike strategy, and concluded that they were too good to be true. His report is reproduced below.
Unfortunately, for three years, the SEC failed to act on Markopoulous’ advice. In spite, of the overwhelming evidence, bureaucracy delayed action.
If we compare the evidence presented by Markopoulous with what Coker offers as his own version of whistle blowing, the difference is clear.
As an interested observer of the financial system, I’m aware that several banks are exposed to toxic loans and that wobbly banks such as Sterling Bank will be the first to fail.
But Intercontinental Bank is a danger to Nigeria’s financial system as long as it refuses to disclose the true state of its books.
Intercontinental Bank has said nothing about its $350m loans to Henry Imasekha’s Ascot Offshore and Shehu Badamasi’s Tanzila Petroleum. None of the directors that approved these loans has been reported to the authorities. Rather, Intercontinental Bank’s PR managers have decided to blame their woes on their satanic detractors and the imaginary Northern oligarchy. Such “reports” are to be expected.
Here is another.
In February, after repaying a multi-million dollar Merrill Lynch facility, Intercontinental Bank Nigeria Plc announced that it had secured a 50 million Euro loan from the European Investment Bank, an AAA-rated financial institution. According to the bank’s CEO, Mr Erastus Akingbola, the facility was to be used to finance projects in the health and education sectors. As the global financial crisis began to savage African financial markets, Akingbola would later say that this loan was a strong endorsement of the bank from a top-rated international financial institution.
However, an investigation by Dayo Coker, a Lagos-based blogger and financial analyst has revealed how Intercontinental Bank brazenly misled its clients, investors and the general public by claiming that it obtained the EIB facility in 2009 after the onset of the financial crisis. In an email to Dayo Coker, Clifford Una, the Press Officer of the European Investment Bank, EIB, confirmed that the EIB and Intercontinental Bank had signed the loan agreement in 2007, well before the near collapse of global financial markets. Mr Una also added that ‘to date, no allocations have been made under this loan and therefore, none of the agreed loan amount has been disbursed to date.’
It would have been of great help to readers if Coker provided copies of his letter to the EIB and the reply from the press officer on his blog. One would expect that the blogger’s focus on the bank’s debt book would lead to an analysis of the bank’s capital adequacy ratio, and loan exposure to the activities (margin trading), sectors (petroleum marketing) and companies (Ascot Offshore and Tanzila Petroleum). Then, based on these, Coker should have shown how they constitute ‘a violation of a law, rule or regulation; gross mismanagement; gross waste of funds; an abuse of authority; or a substantial and specific danger to public health or safety.’ It is unlikely that he would be able to furnish this analysis or establish the connection.
Next, we consider the poison pen affinities between Coker and other denizens of that craft in the hedge fund industry.
Daniel Loeb is the founder of Third Point. According to a 2005 Bloomberg magazine story on Loeb, Hedge Fund Rabble Rouser, since he founded the firm in 1995, it had posted average annual return of over 28%, more than double the average annual return of the his hedge fund peers.
But Loeb is known for more than just his investment management record. According to the Bloomberg article, Loeb’s ‘pungent prose’ has drawn him a lot of attention as well. Here are samples of two letters sent to the management of companies in which he has made investments.
The first was sent to the board of Nabi Biopharmaceuticals in June 2006.
As one of the largest shareholders of Nabi Biopharmaceutials (“Nabi” or the “Company”), I am shocked that management has failed to contact us directly regarding our letter of April 27th and has refused to address any of the issues therein. We submitted our proposal in good faith and we had looked forward to a prompt and thoughtful reply. Instead we received a terse note dated May 1, 2006 which addressed our specific issues and concerns in a perfunctory and platitudinous manner. Frankly, we did not expect this inexplicable level of insouciance and disrespect for such significant shareholders.
Rest assured: our silence since receiving your flaccid response should not be interpreted as reduced focus on our position in Nabi, nor diminution in our resolve to see Nabi undertake an immediate formal and public process to maximize shareholder value. Perhaps management and its cronies on the Board have deluded themselves into thinking that Third Point would be placated by the unsupportable statement in the note that ‘[t]he Board of Directors and senior management team have developed and are effectively executing on a strategic business plan. . . .’
Maybe you thought we would ‘go away’ or sell our position in frustration. To the contrary, each day that passes without action by management increases our resolve. In fact, for the reasons outlined below (specifically, our knowledge that there is significant current interest in purchasing Nabi, either in components or as a whole) we have increased our already-substantial stake in the Company during this time. . .
We have to assume that:
You are aware that there is currently significant interest in various pieces of Nabi (all of your marketed products, some of your developmental products, and the plasma business) and in the Company as a whole – which Mr. McLain, the CEO, undoubtedly well knows, and
You are currently seriously considering this interest as a means to maximize the value of NABI stock in the near-term without incurring all of the risks and uncertainties that your many-year, high-risk strategic plan entails.
Loeb goes on.
To summarize:
We do not believe that you or your long-term strategic plan have the support of a majority of current shareholders,
Ignoring your largest shareholders is not a workable strategy, and
We are aware of current significant and serious interest in purchasing all or parts of your Company as, we believe, is Mr. McLain.
He concludes.
Accordingly, we call on you again to discharge your fiduciary duties to shareholders and immediately hire an investment bank with which you do not have a pre-existing relationship (which should hold true for the new relationship banker as well) to commence a public process to maximize shareholder value. We are not asking that you commit to any specific outcome, only that you explore all possible value-enhancing options fully and openly, so that all of the Company’s owners can judge them on risk and time-adjusted metrics versus your current plans.
Neither you nor the Nabi management team has earned the right to unilaterally embark on another multi-year program that puts shareholders at significant risk and is unlikely to yield results, positive or negative, within an acceptable timeframe. Both current management and the majority of the Board have presided over a virtually unbroken string of missed earnings estimates, failed milestones, trial failures, etc.However, if there is to be an asset sale along the way, it must be demonstrably and irrefutably positive for shareholders.
MOST IMPORTANT, ANY PROCEEDS DERIVED FROM ASSET SALES SHOULD BE FULLY AND IMMEDIATELY RETURNED TO SHAREHOLDERS IN THE FORM OF A ONE-TIME DIVIDEND.
It is our fear that your plan is to ‘burn the furniture to heat the house’ – i.e., sell off our revenue-producing assets to fund your ongoing cash burn and high-risk development projects. As we’ve stated many times, and as have other major Nabi shareholders, your strategic plan is laden with financial risk,scientific risk, execution risk, time risk, etc.
We believe that the value to Nabi shareholders that could be derived from a value maximization process is comfortably in excess of $10 per share, a number that has been validated by additional work that we’ve done, and contacts that we’ve made, subsequent to our last letter to you (the recent IPO of Grifols also highlights the significant value of your plasma business in the right hands). We would be happy to review our valuation metrics with you in detail should you wish.
When the stock was over $7 per share early last month (i.e., before you were re-elected), a Wall Street analyst wrote ‘. . . if a potential bidder were to offer a premium to today’s current value, we believe it would be wise for the company to sell itself, as its pipeline and core technology still have clinical and regulatory hurdles to overcome, and are still several years from making it to market.’
Clearly we agree. As we’ve said previously, we believe that you have an extremely valuable and desirable set of assets, but only if managed properly – which history has shown will not be the case under the current Nabi management team. . .
We are highly confident that this value maximization process will result in the best risk-adjusted and present-valued outcome for Nabi shareholders. We are also certain that this course of action has the support of the majority of current Nabi shareholders, for whom you work. If you disagree, why not canvas your current shareholder base to get their views rather than refusing to interact with them?. . .
Should you disregard the will of the majority of your shareholders, the consequences will be meted out through the democratic process afforded shareholders under Delaware law and your charter and bylaws. In that event, the clock is ticking towards the next annual meeting, and we will make sure to fully chronicle your many missteps, past, present and future, as you’re shown your way out the door.
Now, let us read a second letter from Loeb. This one is to the board of PDL Biopharma.
In our initial letter to you dated March 5, 2007, we expressed a sincere and strong interest, as PDL BioPharma’s (‘PDLI’ or the ‘Company’) largest shareholder, to work constructively and discreetly with management and the Board of Directors to implement the cost-cutting and other measures necessary to fully enhance the extraordinary value inherent within PDLI that is currently being obscured by the Company’s equally extraordinary current levels of spending. Indeed, we are certain that you are aware that our initial overtures have been greeted by overwhelming shareholder supportand positive Wall Street research reports.
The Company’s shares have also reacted positively, rising 15%, or increasing in value by over $300mm, as a result of our involvement – to the benefit of all shareholders. After our first telephone calls with management in March, we were hopeful that matters were moving in the right direction, as they agreed to retain either the leading consulting firm that we proposed, or one of similar stature, to analyze your excessive R&D and SG&A spending, and to seriously consider our highly- qualified nominees to the PDLI Board of Directors.
Unfortunately, our initial optimism that we could work constructively with management quickly faded through a series of subsequent telephone calls with Mr. McDade, culminating in a ’slap-in-the face’ on Friday, April 6th, in which it became abundantly clear that Mr. McDade has no intention of pursuing a constructive dialogue. It became apparent that the earlier dialogue was a charade intended to stall for time, a tactic we have seen employed many times before by underperforming CEOs.
Mr. McDade’s inexplicable insouciance towards us, along with numerous negative findings that emerged over the course of our ongoing investigation (the ‘Investigation’) into Mr. McDade’s managerial abilities, judgment and ethics (discussed below), led us to determine that it is in our best interests, and those of all shareholders, to terminate discussions with Mr. McDade.
Many fund managers who have been similarly rebuffed, and who have detected such a deficit in talent, probity and judgment as we have come to find in Mr. McDade, might come to the logical conclusion to ‘cut and run’ and decrease their positions as one major mutual fund has done according to recent filings. Instead, we have come to a different view: we concluded that the Board of Directors has no choice but to immediately terminate Mr. McDade. We believe that a PDLI unencumbered by Mr. McDade’s management blunders and wasteful spending will appreciate in value considerably, and thus we have increased our position by 1,100,000 shares and now beneficially own 9.7% of the Company’s outstanding stock. . .
We also learned from sources we deem to be reliable that PDLI received a takeover bid from a large pharmaceutical company for more than $30 per share (approximately 50% above the current stock price), which Mr. McDade effectively dismissed out of hand as being grossly insufficient. While we share the view that PDLI is significantly undervalued, we believe that due care requires management to present all such expressions of interest to the Board. We are not necessarily advocating a sale of the Company at this time (although it should be carefully considered), but we believe that if such bidding interest exists, it should be carefully weighed against the present value of the Company in a scenario where it executes its long term operating plan under new, better-qualified management.
In addition, we believe that the Company should examine splitting into two publicly traded entities – one a commercial operation, and the other an R&D company. We believe that material incremental value could be created through such a separation and have raised this concept with Mr. McDade (not surprisingly, given his empire-building mindset, he had not given this structure a thought previously, and laughed dismissively – or perhaps defensively – when we suggested it). We would be happy to share with the Board our analysis as to why we believe that separating PDLI into two public companies would create significant shareholder value.
Finally, we firmly believe that any deals currently being contemplated to encumber Ularitide, or to commit the Company to further R&D spending on this product, should be suspended while the above analyses are ongoing.
When Mr. McDade became CEO in 2002, he made a pledge to create shareholder value. Nearly five years later he has not lived up to his pledge. It is now time to put the valuable assets of this Company into more capable hands, either by bringing in a high-quality CEO or selling the assets to a larger, better-run company, before the Company’s asset values are further diminished by uncontrolled and wasteful spending under his ineffective stewardship. Mr. McDade has said repeatedly that he serves at the will of shareholders, and would immediately step down if shareholders do not want him running the Company anymore.
It is clear to us that a majority of PDLI’s shareholders share our views, so we therefore demand that Mr. McDade stop hiding behind the Company’s corporate defenses and newly-instituted poison pill and live up to his word by resigning. (We believe that we can deliver consents from a majority of the Company’s shareholders calling for Mr. McDade’s resignation to prove our point.)
It is very easy to be taken in with Loeb’s acerbic style. But it would be misleading to think that his objective is simply to insult management. Far from it. Loeb’s goal at all times is to convince management to explore strategic options that stand a good chance of delivering better returns for shareholders. It is unthinkable that he would wage a campaign for the bankruptcy of a company. Not after spending substantial amounts to become a significant shareholder.
The point here is that those who copy his style of communications without his interest in the future of the company, are missing the point. Loeb, and other managers like Barry Rosenstein of Jana Partners who also use the poison pen, pursue this method as a last resort. In fact, they admit that they would rather engage with management discreetly, as that is a more productive and constructive style.
Robert ‘Bob’ Chapman of Chapman Capital, who is credited with inventing the 13D letter, its SEC filing title, also known as the poison pen letter, in March 2000, said he wrote the first one to get the attention of Michael Wilson, the CEO and son of the founder at American Community Properties Trust who had been ignoring his letters and phone calls. At the time, Chapman owned 5.4% of the company’s stock. In the US, when an investor who acquires 5 percent or more of a company’s shares it is required to complete, within 10 days of the transaction, a Schedule 13-D filing with the SEC, which may include but is not limited to acquisition agreements, financing arrangements, contracts, guarantees and other agreements. Chapman extended this to include letters to management. This is how he came to write the first poison pen letter.
The questions therefore are:
Is the blogger a shareholder in the company?
What credible strategic alternatives is he proposing?
How Dayo Coker’s tactics raise serious questions about the possibility for constructive exchange with management and the mobilization of shareholder support for his position, if that indeed is his goal.
The definition of success of Dayo Coker’s campaign to see if it includes the interests of investors, customers, and employees.
The implications of the costless publication and distribution of guerrilla narratives for corporates
Methods of response to guerrilla narratives.
The need to see the issue as one with implications that extend beyond checkmating guerrilla narrators. The real challenges are about developing and executing effective strategies for enhancing disclosure, participating in online discussions about issues that affect customers, investors and other key stakeholders, as well as building the trust that results from such conversations.
One cannot help noticing how Niyi Meka Olowola, Oando's Head of Corp Comms, is nodding in approval. Maybe Goldman Sachs can learn lessons.04:47:49 PM January 25, 2012from HootSuite
Twitter: CustomsStreet
