MidlandMike I think a distinction should be made beteen venture capitalist (who support start up companies and take big risks with little chance of recovery if the company fails), vs., corporate raiders (who swoop in on established companies to "unlock shareholder value" which often means looting the built-up assets). And yes, I passed high school and college economics courses, and even a graduate level course in economic geology.
I think a distinction should be made beteen venture capitalist (who support start up companies and take big risks with little chance of recovery if the company fails), vs., corporate raiders (who swoop in on established companies to "unlock shareholder value" which often means looting the built-up assets). And yes, I passed high school and college economics courses, and even a graduate level course in economic geology.
Greetings from Alberta
-an Articulate Malcontent
Electroliner 1935And the golden rule, Do unto others as you would have then do unto you, still works for me.
Unfortunately in today's world in too many instances it has become "Do unto others before they have the opportunity to respond."
Never too old to have a happy childhood!
Electroliner 1935 And the golden rule, Do unto others as you would have then do unto you, still works for me.
And the golden rule, Do unto others as you would have then do unto you, still works for me.
zardoz greyhounds I'll ask my standard question: "Did you ever take and pass a college level economics course?" No, I certainly did not; hence, I still have some semblance of right and wrong. I never learned that it is acceptable to screw somebody, as long as it is done in the name of 'business'.
greyhounds I'll ask my standard question: "Did you ever take and pass a college level economics course?"
No, I certainly did not; hence, I still have some semblance of right and wrong. I never learned that it is acceptable to screw somebody, as long as it is done in the name of 'business'.
Somehow, I did come to the conclusion that, as it has been said, "honesty is the best policy."
Johnny
BaltACDI know high level corporate malfeasence and theft when I see it. Vulture capitalism is pump and dump theft.
I took Engineering Economics via my employer and understood the cost of capitol and return on equity and I concur with you Balt. Vulture Capitalism where the raiders take money out of companies and load them down with debt is high level corporate malfeasence, theft and is criminal. Unfortunatly, they have corrupted enough politicians that write the laws and tax code, (is that redundant) so they don't go to prision.
greyhoundsI'll ask my standard question: "Did you ever take and pass a college level economics course?"
greyhounds zardoz If someone shoplifts food for their family and gets caught, they might spend years in prison. But if someone 'steals' millions from a company or pension fund, they are considered capitalist successes. What's wrong with that picture? The thing that's wrong is your interpretation of the picture. I'll ask my standard question: "Did you ever take and pass a college level economics course?"
zardoz If someone shoplifts food for their family and gets caught, they might spend years in prison. But if someone 'steals' millions from a company or pension fund, they are considered capitalist successes. What's wrong with that picture?
The thing that's wrong is your interpretation of the picture. I'll ask my standard question: "Did you ever take and pass a college level economics course?"
I took and passed several Economics courses as I worked toward and recieved my Business Degree from Kent State.
I know high level corporate malfeasence and theft when I see it. Vulture capitalism is pump and dump theft.
Deggesty One can wonder the basis for awarding the bonuses--running the compnay into bankruptcy?
One can wonder the basis for awarding the bonuses--running the compnay into bankruptcy?
I like reading about companies that are in bankruptcy petitioning the court to allow "retention" bonuses. The reason given for the bonuses is that these "key" people would otherwise leave and take their institutional knowledge with them. Thus making it hard, if not impossible, to successfully operate during and after reorganizing.
I've always wondered why you would want to keep management that ran your business into the ground. You would think with that on a resume, no other company would be beating down their door to recruit them. That they would be lucky to keep their jobs.
But I've never taken any college economics classes, either.
Jeff
There were obscene bonus's given to Wall Street failure CEO's in the 2008 market crash and worse yet they were paid by the taxpayers in the bailouts. Several exceeding 60 million each!
Of course there were questions but the answer always came that is was contractual.. so they were paid huge bonuses for total failure and ruining people.
A good example of what Zardoz is talking about is the ongoing Sears Canada pension fund lawsuits in the aftermath of the company's bankruptcy and liquidation.
Prior to going under Eddie Lampert and other executives received large bonus payments, and now the retirees are seeing their pensions cut.
And no, I never took economics or college courses of any kind (straight from high school to the railroad). But one does not need to attend college to learn ethics and morals.
Just because something makes business sense and is legal does not mean that it is ethical or the right thing to do. People see that, management does not.
zardozIf someone shoplifts food for their family and gets caught, they might spend years in prison. But if someone 'steals' millions from a company or pension fund, they are considered capitalist successes. What's wrong with that picture?
CSSHEGEWISCHThe issue is that a lot of hedge funds are short-term to very short-term speculators who are demanding a quick appreciation in the stock price, even if the underlying firm is gutted in the process.
Bingo!
Larry Resident Microferroequinologist (at least at my house) Everyone goes home; Safety begins with you My Opinion. Standard Disclaimers Apply. No Expiration Date Come ride the rails with me! There's one thing about humility - the moment you think you've got it, you've lost it...
BaltACDCorporate raiders tend to run off long term managements for their own form of incompetent short term syphoning of corporate revenues as 'shareholder value'. Mantle Ridge and EHH are such a incompetent short term raider. Mantle Ridge doesn't want to RUN a railroad, it wants to get the cash and move on the next victim.
Carl Icahn certainly didn't do TWA any favors when he got stuck owning the airline after the board of directors wouldn't cave in to his greenmail demands.
The issue is that a lot of hedge funds are short-term to very short-term speculators who are demanding a quick appreciation in the stock price, even if the underlying firm is gutted in the process.
jeffhergert I think Carl Icahn is also a good example. Jeff
With the possible exception of American Railcar, there is nothing in the article to indicate that Icahn or any corporate raider has had a deleterious impact on a railroad.
To truly know the impact of corporate raiders on American businesses, one would need to take a statistical sample from every company impacted by a corporate raider and do a deep dive into their financials to understand the true impact of corporate raiders.
I don’t know of anyone that has argued corporate raiders are nice people. But a case can be made for them. Usually they are only successful because management is not performing effectively.
American capitalism is not a nice system. But it is reasonably effective in creating wealth for a large number of people in an open and free market-based society. Which I support 120 percent!
As the article points out, some if not most of the shareholders in the company's Icahn influenced or controlled benefited from his intervention. But some did not. Exceptions can be found in any activity.
Rio Grande Valley, CFI,CFII
I think Carl Icahn is also a good example.
https://www.investopedia.com/articles/managing-wealth/080516/how-did-carl-icahn-get-rich.asp
Deggesty Quoting PJS 1 "A better term for vulture capitalist would be corporate raider. One of the best know in Texas is T. Bone Pickens. His argument for what he does or did is straight forward. Corporate raiders tend to run off incompetent managements! I don’t like them. But he has a point worthy of consideration. " You did mean T. Boone Pickens, did yhou not?
You did mean T. Boone Pickens, did yhou not?
Correct! Hopefully a misspelling error did not deter your understanding of the point!
DeggestyQuoting PJS 1 "A better term for vulture capitalist would be corporate raider. One of the best know in Texas is T. Bone Pickens. His argument for what he does or did is straight forward. Corporate raiders tend to run off incompetent managements! I don’t like them. But he has a point worthy of consideration. " You did mean T. Boone Pickens, did yhou not?
He had a bone to pick with him!
Quoting PJS 1 "A better term for vulture capitalist would be corporate raider. One of the best know in Texas is T. Bone Pickens. His argument for what he does or did is straight forward. Corporate raiders tend to run off incompetent managements! I don’t like them. But he has a point worthy of consideration. "
You did mean T. Boone Pickens, did you not?
If CSX was doing so well, wouldn't your traditional, long-term investor be delighted - slow and steady means my retirement account will be nice and strong when I quit working.
Why would a long-term investor be interested in the short-term gains the vulture investor/corporate raider wants? Sure, the stock is high right now, but what happens when all those cuts come home to roost?
PJS1A better term for vulture capitalist would be corporate raider. One of the best know in Texas is T. Bone Pickens. His argument for what he does or did is straight forward. Corporate raiders tend to run off incompetent managements! I don’t like them. But he has a point worthy of consideration.
Corporate raiders tend to run off long term managements for their own form of incompetent short term syphoning of corporate revenues as 'shareholder value'. Mantle Ridge and EHH are such a incompetent short term raider. Mantle Ridge doesn't want to RUN a railroad, it wants to get the cash and move on the next victim.
tree68 Children's Fund, Mantle Ridge. I'm sure it will be hard to discern from CSX's financials, but one has to wonder how much of the "savings" that EHH's actions created went back into improving the railroad, and how much simply found its way into investor's pockets. I know, that's what's supposed to happen - money goes into investor's pockets. The question is how long that type of cash flow can be maintained, ie, how many assets can be sold off before the railroad is unable to function and thus ceases to pay the investors.
I'm sure it will be hard to discern from CSX's financials, but one has to wonder how much of the "savings" that EHH's actions created went back into improving the railroad, and how much simply found its way into investor's pockets.
I know, that's what's supposed to happen - money goes into investor's pockets. The question is how long that type of cash flow can be maintained, ie, how many assets can be sold off before the railroad is unable to function and thus ceases to pay the investors.
The article is one person's opinion, i.e. whether hedge fund investors harmed CSX. Many of the statistics seem to reflect trends that would have happened irrespective of who had control of CSX. Coal traffic, as an example, is declining, and there is little anyone can do about it.
People invest in hedge funds because they expect to have a return. Just like all of us.
Without access to CSX's books, it is not clear whether EHH's action were or will prove to be correct. But the company's cash flow statements for the past five years don't indicate that anyone was raping CSX.
From 2013 through 2017 the company invested $11.8 billion in property, plant, and equipment. In addition, through the first three quarters of 2018 it invested another $2.4 billion in its PP&E.
Over the same period the company’s cash flow from operations increased 6.27 percent while dividends increased 18 percent. However, during EHH’s reign, dividends increased just 4.1 percent.
For the year ended September 30, 2018, cash from operations increased 19 percent while dividends paid increased by 7.5 percent.
These are not my numbers. Anyone can look them up in the published audited financial statements of the company.
The present value of the dividend payments, including the liquidating dividend, is how he hedge fund recoups its investment. So, it appears that during most of EHH’s reign at CSX the dividend payments to the hedge fund declined significantly, only to increase modestly in 2018.
A better term for vulture capitalist would be corporate raider. One of the best know in Texas is T. Bone Pickens. His argument for what he does or did is straight forward. Corporate raiders tend to run off incompetent managements! I don’t like them. But he has a point worthy of consideration.
PJS1What is a vulture capitalist? How about some railroad examples with specifics.
Children's Fund, Mantle Ridge.
https://www.railwayage.com/news/hedge-funds-and-good-railroading-dont-compute/
tree68 It's not the venture capitalists that are the problem. It's the vulture capitalists - those folks who don't care about the long run - just what they can extract in the short term.
What is a vulture capitalist? How about some railroad examples with specifics.
PJS1Without venture capitalists we probably would not have Apple, Dell, Microsoft, Oracle, etc., as well as many of the innovative medical technologies that have served most of us well.
It's not the venture capitalists that are the problem. It's the vulture capitalists - those folks who don't care about the long run - just what they can extract in the short term.
Venture Capitalists and Vulture Capitalists have different views and manufacture different outcomes.
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