When the Wolves Bite: A book review by Bob Morris

a href=”https://bobmorris.biz/wp-content/uploads/2018/04/When-the-Wolves.jpg”>When the Wolves Bite (4/24): Two Billionaires, One Company, and an Epic Wall Street Battle
Scott Wapner
Public Affairs (April 2018)

A brilliant analysis of “the fights, the factions, the money, and the mayhem of an epic Wall Street war.”

Especially since the conclusion of World War II, C-level executives have applied many of the insights in Sun Tzu’s Art of War to their crises and opportunities in the business world. For example, “Every battle is won or lost before it is fought.” Here’s another, from the chapter on estimates: “When small, seem large [and vice versa]; when far away, seem near [and vice versa]; when weak, seem strong [and vice versa]…you get the idea. Today, in a business world that is more volatile, more uncertain, more complex, and more ambiguous than at any prior time that I can recall. Lessons to be learned from Art of War are even more valuable now than ever before.

Scott Wapner focuses on those whom he characterizes as “the Masters of the Universe.” Some are super investors/shareholder activists — including Carl C. Icahn and William A. Ackerman — who have an interest “not just in owning a piece of a company, but also in using their influence and money to change the way it operates.” Their “activism isn’t just proliferating — it’s exploding.”

Of course, resistance to hostile takeovers is substantial and frequently successful. Be that as it may, Wepnar suggests “there’s no denying the rock-star status these activist investors have achieved, mostly for their methods, but sometimes as much for their madness — their noise and provided platforms.”

For example, the years-long battle for control of Herbalife that began in December of 2012 “and rages on to this day.” Opposing forces have been led by two highly competitive “wolves,” Ackerman and Icahn, and Herbalife’s CEO, Michael O. Johnson. Wepnar provides “the inside story of how it all went down — “the fights, the factions, the money, and the mayhem of an epic Wall Street war.”

The book’s title refers to the title of a lengthy article written by Leo E. Strine, Chief Justice for the Deleware Supreme Court, for the Yale Law Review in 3017: “Who Bleeds When the Wolves Bite? A Flesh-and-Blood Perspective on Hedge Fund Activism and Our Strange Corporate Governance System.” Strine makes several key point that Wepnar cites.

The wolf packs of activist hedge funds identify companies such as Apple, DuPont, Macy’s, JC Penney, PepsiCo, and Yahoo “and take an equity position in them only when they have identified a way to change the corporation’s operations in a manner that the hedge fund will cause its stock price to rise. The rise that most hedge funds seek must occur within a relatively short time period, because many activist hedged funds have historically retained their position for only one to two years.”

These are among the passages of greatest interest and value to me, also shared to suggest the scope of Wapner’s coverage:

o William A. Ackerman (Pages 10-11, 14-15, 17-18, 70-74, 87-88 134-135, 141-165, 181-182, and 201-202)
o MBIA company (Pages 10-12 and 31-34)
o Christine S. Richard (12-15, 19-20, and 64-67)
o Federal Trade Commission (13-14, 137-138, 142-145, and 189-190)
o Shane Dinneen (15-16, 19-22, and 81-82)
o Herbalife (15-22, 64-69, 179-180, and 212-213)
o Carl C. Icahn (33-35, 110-129, and 184-188)
o Mark Reynolds Hughes (41-45 and 45-47)
o Michael O.Johnson (49-55, 56-58, 66-67, 76-77, and 97-99)
o David Einhorn (58-69 and 73-74)
o Robert Chapman (84-86 and 89-90)
o Yahoo (92-96)
o Lobbying (141-146)
o AXA Center (159-162)
o Valeant pharmaceutical company (168-176)

Other wolves continue to bite in a war “which amazingly still rages” now that Ackman, Icahn, and Johnson are no longer involved. When asked who had “won,” one of Wapner’s contacts replied, “They both lost.” He was referring to “the unflattering spotlight the episode was likely to shine on the business  itself and ultimately on its deep-pocketed participants.” Can there be winners and losers when such wars are declared?

For me, his book is a tour guide to an “exclusive, iconoclastic world” only a few people were beginning to discover just five years ago. Opinions are divided on that and other questions posed within Scott Wapner’s lively narrative. He concludes, “Good food for thought as we wonder who and where the so-called wolves will bite next.”

Stay tuned….


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