an Apple shareholder, so from a personal finance point of view, I’m not unhappy with what happened yesterday.
As a market observer and fan of Apple’s products, however, I’m annoyed.
What happened yesterday, in case you missed it, is that a famous investor named Carl Icahn announced in a Tweet that he had bought a bunch of Apple stock and had just talked to Apple CEO Tim Cook on the phone.
Carl Icahn’s private conversation with Tim Cook had gone well, Carl Icahn said, and Icahn said he planned to talk to Tim Cook again soon.
Apple quickly confirmed on the record that Carl Icahn and Tim Cook had had a conversation (with the aim, I assume, of demonstrating that Apple is responsive to its shareholders).
And in the next couple of hours, Apple’s stock exploded 5% higher, increasing the company’s market value by $US17 billion.
Now, again, as a shareholder, I’m not going to object too loudly to the fact that Apple’s stock jumped 5% in two hours.
But I have two issues with this…
The first isn’t so much an “issue” as an observation: In case anyone out there has ever been tempted to believe that the stock trading game is “a level playing field,” this incident should be a cold bucket of water in the face. You and I cannot buy some Apple stock and then call Apple and demand to talk to Tim Cook. We also can’t buy the stock knowing that we will likely be able to put ourselves firmly in the black merely by tweeting that we have bought the stock and saying that we have just had an encouraging private conversation with the company’s CEO.
This incident should make crystal clear, in other words, that Carl Icahn and other big investors have a very significant “edge” over the rest of us. And in case we get tempted to play the trading game, we should remember who the suckers at the table are: Us.
The second issue I have with what happened yesterday is the reminder that Apple CEO Tim Cook is wasting his time having private conversations with investors.
I realise that this is standard practice for public-company CEOs these days, but I wish it weren’t.
Companies like Apple already share an extraordinary amount of information with their investors. (Glance through even one quarterly filing and listen to one quarterly conference call and you’ll be astounded at how much information you get.) They also publish press releases, announce products, and employ vast investor and media relations departments to spend gobs of time holding the hands of investors and reporters. CEOs and senior managers like Tim Cook also speak relatively frequently in public. So investors who don’t feel like they’re getting enough information from the conference calls, press releases, product announcements, investor relations folks, and SEC filings can try to pick up some nuggets from from those public utterances.
Meanwhile, companies like Apple also have hundreds of major shareholders.
Carl Icahn owns a billion dollars worth of Apple stock?
So what. That’s still chump change.
Dozens of Apple shareholders own more than a billion dollars of Apple stock. State Street owns $US15 billion, for example. So does Fidelity. BlackRock owns $US11 billion. Northern Trust, Bank of New York, Susquehanna, J.P. Morgan, Invesco, and T. Rowe Price each own $US5-$US6 billion. And so on.
If Tim Cook is going to race to the phone when Carl Icahn calls, is he also going to make time to talk to each of these other much-more-significant investors, too?
After all, these other big shareholders probably have lots of questions and suggestions for Tim Cook, too.
And what shareholder wouldn’t want to have a private conversation with Apple’s CEO every once in a while?
Then there’s the disclosure issue.
Even if Tim Cook is extremely careful not to say anything in these private conversations that he and Apple haven’t said in public, there’s always the “body language” thing. As any junior Wall Street analyst quickly learns, the way a CEO says something is often as (or more) informative than what the CEO actually says. And if this body language communicates anything helpful, well, then, that’s information that other investors would probably like to have.
And then there’s the time commitment.
As the CEO of one of the world’s biggest companies, Tim Cook has a lot that he could spend his time on.
Personally, as a small Apple shareholder and customer, I would rather have Tim Cook spend his time working on Apple’s products and management team than wasting his time having private conversations with bigger Apple shareholders. I’d rather have him pressing Jony Ive to design a bigger iPhone, for example. I’d rather have him out trying to recruit a great leader for Apple’s retail stores. I’d rather have him negotiating with China Mobile to try to cut a deal to have China Mobile sell the iPhone. I’d rather have him doing just about anything other than having private conversations with investors–especially ones that I’m not privvy to.
If Tim Cook wants to get suggestions from Apple investors, that’s different, and that’s fine. But if Tim Cook wants to get investor suggestions, I’d rather he just say that and then provide an email address to which all investors can send them.
But won’t big investors like Carl Icahn be furious about being snubbed?
Don’t these big investors have a right to have private conversations with Tim Cook?
If Tim Cook refuses to waste his time talking to these investors, won’t they, gulp, threaten to sell their stock?
Yes, investors like Carl Icahn might be mad if Tim Cook refuses to talk to them. But so what. Let them be mad. These investors don’t have a “right” to talk privately with the CEO of one of the world’s biggest companies, especially when they own only one quarter of one per cent of the company’s stock. If these investors threaten to sell their stock because the CEO won’t talk to them, then let them sell their stock. Carl Icahn didn’t own Apple stock a few months ago, and he probably won’t own it a few months from now. Apple doesn’t need to keep Carl Icahn happy. And having Apple’s CEO take the time to have private conversations with Carl Icahn is not just unfair all other Apple shareholders. It’s also a colossal waste of time.
If securities regulators are actually serious about trying to create a “level playing field,” one of the things they should do is eliminate private meetings and conversations between senior managers and investors altogether. Without having the ability to have these meetings, or know what information is communicated in them, non-huge investors are at a major disadvantage. But the “private meetings with management” culture is now so entrenched that it will probably never be eliminated. The more practical step is for investors to understand that all the talk about a “level playing field” is ridiculous.
But whether or not these meetings and conversations are kosher, there is still the question of whether they are a good use of a CEO’s time.
I would argue that they aren’t.
Investors and stocks are going to do what they are going to do, regardless of whether a CEO spends time kissing up to investors. And if a company puts up good numbers, the stock will take care of itself.
As a smaller shareholder, I would far rather have the CEO of Apple spend time working on the company’s products than having private conversations with bigger shareholders.
Disclosure: I own Apple stock.
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