Mar

31

I used to work for my Dad's hedge fund. At peak we had ~300 million. We never considered ourselves an "activist fund" in the new sense. We were just money managers. Now "activist fund" is the new fad. When I was in college my dad sent me to wage a proxy fight at Ceradyne (CRDN). We frequently owned ~15% of companies, and were involved in this sort of thing.

In the instance of Ceradyne it was somewhat of a surprise attack, but we had ~17% and another guy with ~5% was on board with us. The CEO knew we and the other guy were cheesed off. There was cumulative voting for directors at CRDN. So I show up at the meeting, I nominate the candidate. The vote is called, I show my proxies. The CEO didn't challenge them at all. Why? He knew. He knew how we felt, and he knew how the guy with ~5% felt, and he saw in my hand the proxy from the guy with ~5%. It wasn't that hard for him to know.

So when a hedge fund calls up and says others are with him, what do you do? Say, "I don't believe you unless you tell me who they are." Then you call them and ask them. It's not that tough. When I worked at Devon I knew the IR guys. They knew darned well who owned the stock and what they thought of management. That was their job.

Once, the unions were leading a big proxy fight against Avondale Shipyards (AVDL). The unions claimed big shareholders were on their side. So what did management do? They looked at the 13Fs, talked to the custodians to try to get ownership info, and they called the shareholders. It's not that hard, happens all the time.


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