Hedge fund manager Daniel Loeb, the founder of $US14 billion Third Point LLC, wrapped up a great interview with Andrew Ross Sorkin at the Dealbook Conference.
It’s pretty rare for the activist investor to give an interview like this and he covered a lot of topics.
Loeb has been in the news a lot lately. He’s been going after Sony and Sotheby’s. He was also the subject of a recent brutal Vanity Fair profile by William D. Cohan.
Sorkin began the conversation by talking about activist investing and whether it’s a good thing for society.
“When you’re talking about activism you’re really talking about shareholders and their rights,” Loeb said adding that “You’re also talking about capitalism.”
He said both are at the cornerstone of what makes this country great. Loeb said that his efforts have bought a sense of accountability at the companies his hedge fund has been involved in.
“I can’t think of a time where we’ve misstepped,” he said, adding that there probably will be at some point.
Sorkin asked Loeb about Bill Ackman, the founder of Pershing Square, and his stake in JCPenney, which was a failure.
“Certainly, a messing situation. Bill has had a lot of real successes in activism. General Growth. Canadian Pacific…” Loeb added that JCPenney’s board also had a role in the retailer’s whole mess.
Sorkin said Loeb is being “very nice” to Bill. The audience chuckled.
The conversation quickly changed to Sony.
“I don’t think of us as going against Sony. I would think of our model as much more like a private equity investor….We have a role. It’s expressed as a shareholder, not as a director. So far, we’ve had a very good relationship with Sony,” Loeb said explaining that he’s met with the CEO a couple of times.
Sorkin is quoting George Clooney’s harsh comments about Loeb and his involvement in Sony.
“That sounds a little hyperbolic,” Loeb said. “Look, I get where George is coming from…actually I’d love to meet him sometime. We’d actually agree more than we’d disagree about the company…I think we both want the same thing. We want less money spent on overhead and more money spent on making money.”
Sorkin asked Loeb about the Vanity Fair piece, which is the “elephant in the room,” he points out.
“I haven’t read it,” Loeb said.
Sorkin said he didn’t believe him.
“There have been a few snippets,” Loeb replied.
Sorkin told Loeb about the part of the feature involving his relationship with Bill Ackman over his investment with Herbalife.
In February both Loeb and Ackman attended Vanity Fair’s Oscar party in Los Angeles. A person there reported that Ackman went up to Loeb, said hello, then added about Herbalife, “Look, you really shouldn’t have done that,” to which Loeb replied, “Why? Why shouldn’t I have done that?” Ackman said, “It was really wrong.” Loeb replied,“No, why? I made $US50 million. What’s wrong with that?” The two men no longer speak.
“Let’s be clear about a couple things. I have a fiduciary duty to earn a rate of return for my investors. My fiduciary duty is to my investors, not Bill Ackman. An opportunity was created where we thought a sell off in Herbalife was overdone. I spent my Christmas vacation last year analysing the company…”
After Ackman presented his big Herbalife short, Loeb snapped up an 8.2% stake in the company. He also called Ackman’s pyramid scheme accusation “preposterous.” He gave Herbalife’s stock a price target of $55 to $US68 a share .
He exited the position sometime in the first quarter of this year for a nice profit when it was around $US44 a share.
“There was nothing disingenuous about our price target… There is no responsibility to hold a stock until it hits that price target,” he explained.
“We decided to take the money and run. There was no pump and dump.”
As for stepping down from Yahoo!, Loeb said that they had reached their price target.
Sorkin is asking Loeb about his letters he writes. Loeb has a reputation for his poison pen and the letters make for great reads.
“For the most part, we carry on discussions with management teams. There’s generally a period of explaining what our intentions are…”
Loeb met with Fred Smith in Memphis the other week. He’s the CEO of FedEx, Sorkin pointed out.
Loeb is an owner of FedEx and he “likes” the CEO.
The stock shot up.
Sorkin changed the conversation to Loeb’s support of education reform. The American Federation of Teachers, a large teacher’s union, put Loeb on a “blacklist” earlier this year with a bunch of other fund managers telling pension trustees that shouldn’t invest with them.
Loeb said he’ll continue to advocate for kids, though.
Then, Sorkin talked to Loeb about the time he almost blew up in 2008.
Loeb shared an interested anecdote about one of his hedge fund manager friends who withdrew $US50,000 cash from an ATM because he was fearful that ATMs would stop working.
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