For those that don't know what is going on, here is the backstory:
Carl Icahn has recently bought a bunch of ebay stock. He has claimed the company is mismanaged. He has also personally attacked Marc Andreesen. Here is the accusation from Ichan:
1) Marc Andreesen was/is on ebay's board.
2) While on ebay's board, Marc bought most of Skype from eBay.
3) He flipped Skype to Microsoft in less than 2 years, earning himself a multi-billion dollar profit.
Carl Icahn is running Marc Andreesen name through the mud. The basic accusation is that if Marc knew Skype was so valuable as the smart phone wars were heating up, he had an obligation as a board member to give ebay better advice on the divesture.
Now Marc is fighting back.
This is a comic schoolboy fight among billionaires.
Edit: After a bit of fact checking, it looks like A16Z only invested $50M in the skype deal. Their fund at the time was around $300M. His gain was on the order of $150 million, not billions. A16Z only had around 2% of skype, and ebay retained 35%.
Carl Icahn is scum. He does serve a purpose, and scum cleans out scum every once in a while. But I believe he is a virus and a destructive force dismantling companies for personal gain. Although he is scum, if there were virus's like him, large companies would live on forever and have nothing to fear. Interesting mechanics at work.
I upvoted you, but I'm not sure I agree. If you look at people who've really disrupted industries, they don't tend to be like Carl Icahn. Increasingly, as I read up about what happened during the M&A boom of the '80s, it does seem to me that finance played an essentially destructive role during that decade and the three that have followed. I don't see very many advances that would have been impossible without the financial industry. Instead, I see an industry which has become focused on short-term profits in exchange for long-term bailouts. Carl Icahn epitomizes this trend. That's why so many people hate him.
Leveraged buy outs aren't about disruption, they're about efficiency. Any company worth doing a hostile takeover of has a working business model (product market fit) and the acquirer is betting they have a lot of expenditures that are basically irrelevant to what they do to make money, or they are running at far below full utilisation on some resources or capacities, which can be cut without materially effecting anything the customer really cares about.
It usually sucks to be the employee of a company that's just been LBOd because layoffs are almost certainly coming, and whether they are or not, you're going to have to do more work, probably with less resources.
But for society as a whole it should be a win if competently executed; getting the same product/service out of less resources leaves the now excess resources free to be used elsewhere.
well most of the time its about asset stripping and loading up a company with expensive debt and selling it before the chickens come home to roost as a recent number of company collapses in the uk proves)
Or its about forcing companys to do trendy things - bad for the long term by selling off core assets on the cheap BT selling O2 is a classic example.
In theory leveraged buyouts are all about what you describe: getting rid of incompetent management, shedding non-core businesses, and restructuring the company to be more efficient. In practice, LBOs tend to leave companies weaker than before, since people like Carl Icahn strip cash reserves and load the company up on debt instead. This means that the company is running much closer to its financial red-line than before, and so when an unforeseen contingency occurs (like a year of bad sales, or an economic recession) the company is forced into bankruptcy with ruinous costs for its remaining shareholders, managers, and line workers.
Finance probably did play a destructive role and it still does mainly because like you said its not the dividend not the big picture that matters. However, going public is one of the prime factors that subject a company to that world. Staying private keeps you "safe" to a certain degree.
Once you are in public domain I think in the long run being subject to all sorts of positive and negative inputs e.g Icahn, Pershing square weed out weak links and bad fruit. Many times good fruit gets thrown out too without realizing the tree will not yield any more produce if done so.
Finance has a very simple function in terms of what it does for companies. If its making money => it works. If it WAS making money and isn't now => it can still make money with change.
I don't get why anyone would believe anything Carl Icahn says.
It blows my mind how people can be fooled by money.
Icahn is professional liar and has profited greatly from his ability to fool and deceive.
I don't know the whole story behind this, but Icahn calling out Andreesen for enriching himself at the expense of a company is laughable. The pot calling the kettle black.
Regardless, it's too super rich guys throwing feces at each other.
I have a slight inclination to believe Andreesen, but who knows, really.
I think Marc Andreessen position is weak in this fight. I have absolutely no empathy for Carl Icahn, but on this issue, he's got a good point. It seems Marc Andreessen had a conflict of interest and instead of showing that wasn't the case, Andreessen decided to attack Icahn for stuff that aren't related to this issue, even if they were definitely questionable.
* Throughout the eBay board’s process of divesting Skype, I fully disclosed
my potential interest and recused myself from all deliberations on the
transaction, including all discussions, negotiations, and decisions. I was
uninvolved in eBay’s decision to spin off Skype and in eBay’s decision to
choose to partner with the Silver Lake syndicate.
* eBay’s retained ownership in the Skype spinoff was 30% vs. Andreessen
Horowitz’s approximately 3%. That much larger ownership gave eBay a far
bigger role in decision making on Skype after the spinoff than Andreessen
Horowitz, as well as a far bigger economic payoff on the sale to Microsoft.
http://blog.pmarca.com/2014/03/03/my-statement-on-ebay-director-role-and-governance/
Ebay retained 30%, so we're really arguing over 70% of the gain that didn't go to ebay. And some of it was always going to go back to the founders because Meg Whitman is a fucking moron -- she not only bought a company without buying the backing tech, but then proceeded to fuck over the founders, screwing them on over $1B, who retained ownership over the backing tech. No cause for bad blood there! Leadership!
Anyway, it does seem a little sketchy, but on the other hand, marc seems to have acted well within established business practices.
(3) Restrictions on use of company confidential information by
any director for any purpose other than that company’s benefit.
I don't have any idea what the discussions happened between A16Z and Silver Lake, but it seems like tons of emails could be construed as a conflict.
Even a wikipedia quote is problematic:
"Through our research, we found that Skype had a core group of engineers who were completely dedicated to the mission. They stayed through the eBay acquisition and were hugely determined to make Skype the communications company of the future."
Did he learn that as a board member, or from research done at a16z?
That's the crux of it: Andreessen did the right thing. The wider question is too much of the tech landscape running through one man? All power to him: all companies want his magic, but at some stage, the web of connections will cause these issues.
What, Icahn can fling random accusations but Andreessen can't? It's all just mud-slinging.
As for Andreessen's motive, I suppose he probably thinks Icahn is making a power play and is more interested in fending off Icahn than in defending himself in this particular instance. Icahn clearly wants Andreessen on the defensive, so it kind of makes sense, though it all feels a bit embarrassing.
I understand this is all mud-slinging and I think most of us agree that Icahn probably got more mud in his past (though I am sure someone will disagree).
The question for Andreessen is that did he think (and could prove) that he's a more ethical businessman than Icahn (note I am not saying a better person here) Apparently not, at least in the Skype sale.
I hate to agree with Ichan, but eBay is probably one of the worst run brands ever. 15 years ago, my grandparents were excited about buying and selling crap on eBay, and they know nothing about technology.
Nowadays, it's a place to get ripped off. I have to say that I haven't even thought about eBay for many months.
They've averaged ~13% growth year over year since 2008, doing 16 billion last year. Not sure what your metric is but I hardly think that qualifies as, "worst run brands ever."
This astonishes me. I can't think of any good reason for this except for lack of competition. Among everyone I know almost no one ever buy stuff of ebay anymore and the only people I can think of who use it are mostly scammers.
Well it's a good thing you're not an eBay stockholder. I use it probably a dozen times a year to buy hard to find stuff. Stop thinking the world is you and your friends times a billion.
So, an app that lets you buy anonymously? Brilliant! Really! Just give your payment info to one site that you trust (because its all about trust and nothing else); they buy (maybe in bulk; maybe at a price break) FOR you.
What exists like this now? What market would be best served by this? Is your app in to YC yet?
Pretty unlikely when a fund invests 1/6th of its total capital in a single deal, the namesake of the fund is not intimately involved. Most funds have a cap of 10% of total equity in a single deal to avoid concentration risk and even if this was 15% for a16z, they were still above this limit.
Note: since this $300MM fund, a16z has gone on to raise enormous funds many multiples of the size.
Wrong side. He didn't claim to be uninvolved with a16z's decision, but with ebay's. He resolved the conflict by walling himself off from one side of it, not by absenting himself from the process entirely.
Category error. That's no different than being out of contact on vacation. Actually, it's better, since they were only missing his guidance on this specific subject, not anything else that came up during that time.
The shareholders could simply kick him out if they felt he wasn't doing his job. Instead they re-elected him with near-unanimity.
The alleged behavior in question is not that he didn't do his job, but that he committed various torts and federal crimes.
Carl Icahn has recently bought a bunch of ebay stock. He has claimed the company is mismanaged. He has also personally attacked Marc Andreesen. Here is the accusation from Ichan:
1) Marc Andreesen was/is on ebay's board.
2) While on ebay's board, Marc bought most of Skype from eBay.
3) He flipped Skype to Microsoft in less than 2 years, earning himself a multi-billion dollar profit.
Carl Icahn is running Marc Andreesen name through the mud. The basic accusation is that if Marc knew Skype was so valuable as the smart phone wars were heating up, he had an obligation as a board member to give ebay better advice on the divesture.
Now Marc is fighting back.
This is a comic schoolboy fight among billionaires.
Edit: After a bit of fact checking, it looks like A16Z only invested $50M in the skype deal. Their fund at the time was around $300M. His gain was on the order of $150 million, not billions. A16Z only had around 2% of skype, and ebay retained 35%.