Street Capitalist: Event Driven Value Investments

Since the announcement in February, investors have been looking forward to Carl Ichan’s blog The Icahn Report. Finally, after being bogged down by antsy lawyers, the blog is live. From the initial posts on the blog, it looks like Icahn will focus on critiquing the poor corporate governance of today’s companies.

Icahn is an investor we can learn from, many of the situations he involves him in are inherently event driven, where he focuses on pushing management towards value creating initiatives like spin-offs and breakups, see: Temple Inland (TIN).

Here is what Icahn has to say about poor corporate boards:

When you rid a company of a fruitless board, the rewards are often enormous because the underlying company and its employees can be excellent. It is the top level management that hangs like an albatross around the company’s neck. Years from now historians will marvel why we the shareholders – the legitimate owners of companies – did not do something effective about removing terrible managements. We can do something about the current situation. I will discuss in future entries how simple it can be and what has constrained us from taking action.

Corporate Democracy is a Myth (Icahn Report)

One of my own holdings, Steak N Shake (SNS) is currently held hostage by the kinds of machinations perpetrated by poor corporate boards that Icahn describes. At Steak N Shake, management enacted a change in the bylaws to require an 80% vote of the shareholders in order to call a special meeting (before it was only 25%). The result of this is a board that is difficult to change and the promotion of a corporate culture based on excess and value destruction.

While I doubt that a blog will be able to do much in terms of changing corporate governance, maybe it can stimulate some discussion of governance with the public and nudge management towards being more proactive to their shareholders.