Elliott Management vs Twitter and Softbank - activist investment

Started this as a comment to @Raul’s I've just started reading - but maybe this should be a separate topic, since it covers a few companies we know:

  • Twitter
  • Softbank
  • WeWork
  • OYO (the next WeWork?)
  • … SpaceX

You can learn about what activist investors do through following news: there was a time when Carl Icahn bought shares in Apple and convinced them to start paying dividends, and Paul Singer of Elliott Managemenet had a long standoff with Argentina which even involved SpaceX.

Retail and institutional investors can perhaps do some passive participation by taking similar positions to the giants and letting them do all the work. You can try following those catalysts. These funds don’t always succeed. This is not an investment advice.

:new: Elliott vs Twitter’s CEO

Some very big activist investor developments recently - Elliott wants to replace $TWTR’s CEO:

Is Paul Singer, who runs Elliott, a fan of Professor Galloway?

Surely, Paul read Scott’s blog posts? Is the CEO Africa-bound while running two companies?


(Source - https://www.profgalloway.com/twtr-enough-already)

Elliott has a new fund

Last year, we learned that Elliott Management built a new fund:

Elliott vs Softbank (WeWork, OYO, etc):

The $40 billion hedge fund, one of the most powerful activist investors, has a $3 billion stake in the company and is trying to push for changes after SoftBank’s bet on start-ups such as space-sharing firm WeWork soured.

Why OYO?

But, a number of these SoftBank-backed startups, including OYO, Wag and Fair.com, have undergone layoffs as of late. In total, more than 7,300 people have lost their jobs across 12 privately-held SoftBank-backed companies in the past four months, according to a CNN Business tally based on company sources, media reports, and company filings.

Parallels to WeWork aren’t hard to draw. Both Oyo and WeWork secured rich paper valuations in private financings led by SoftBank. Both had charismatic cofounder-CEOs who wowed Son with their vision and ambition. Both spent heavily on new locations and racked up losses amid frenzied global expansion. Oyo even dabbles in co-working.

“Oyo is a WeWork in the making,” says Santosh Rao, head of research at New York-based Manhattan Venture Partners. “They need to slow down and pull back.”

(Source - https://www.bloomberg.com/news/articles/2020-02-16/masayoshi-son-s-other-big-real-estate-bet-has-some-real-problems)

Elliott managers must’ve read this and thought - this is bonkers:

Vision Fund portfolio companies sometimes seem to suffer from an overabundance of vision. Until Dave Grannan, co-founder and CEO of Light Labs Inc., a camera startup in Redwood City, met with Son in Tokyo and then again in Woodside in early 2018, he hadn’t considered developing his imaging technology into a new way for autonomous vehicles to navigate. “That idea came directly from Masa,” he said in an interview last year. The concept helped Light get $121 million in funding in July 2018, with SoftBank leading the way. As was customary with many of its investments, the capital would come in tranches, with subsequent funds dependent on meeting sales and growth targets. Light pivoted to the autonomous car market, as Son had advised. About half of Light’s employees were laid off in July, when the company eliminated its original smartphone-camera technology to help stem losses.

(Source - https://www.bloomberg.com/news/features/2019-12-18/softbank-vision-fund-employees-depict-a-culture-of-recklessness)

Elliott’s historic $2.4 billion win

And the fund is perhaps known for its 15-year litigation with Argentina over the sovereign debt default and treatment of bond holders:

… After the country defaulted on $80bn of debt in 2001, Elliott and a group of hedge funds rejected the government’s debt restructuring offer and sued for full repayment. The gambit, which involved the attempted seizure of an Argentine frigate and two SpaceX contracts, proved successful. More than a decade later, Elliott collected some $2.4bn from the country after striking a deal with reformist president Mauricio Macri.

(Source - https://ftalphaville.ft.com/2019/04/16/1555399578000/The-utility-of-vulture-funds/)

SpaceX…

More on the company and its long list of “greatest hits”: https://en.wikipedia.org/wiki/Elliott_Management_Corporation

The other bunch

Other known names in activist investing you may have read about on CNBC:

Sidenote: Elliott owns Barnes & Noble? https://finance.yahoo.com/news/elliott-completes-acquisition-barnes-noble-121500434.html

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Wow, the euphemism used to justify inorganic/unsustainable business pivoting. It’s Genius. I’m definitely going to use that term in my next meeting regarding a project that has spiralled.

Back to the point in hand, activist investors seem to make just as many poor decisions as the stubborn management they are trying to influence. I would hate to be running a company that had some Johnny-come-lately turn up and demand me to change the way I run things, because I know they aren’t doing it for altruistic reasons.

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Oyo, Wag, etc. show we are heading to a world where VC money is not abundant.