(FINANCE) when a corporate raider initiates a hostile takeover of an undervalued corporation with the intent of forcing the management to buy him off.
HOW IT WORKS
A corporate raider engaged in greenmail requires a takeover vehicle to launch a hostile takeover. The takeover vehicle is usually another corporation controlled by the raider, although in recent years ESOPs have been used (e.g., Tribune Corp., 2007). The vehicle buys up a lot of shares of the target company's stock on the market, then announces it wants to acquire a controlling interest.
Management opposes the takeover bid. It can (a) challenge the legality of the takeover, (b) adopt a charter that makes it hard for the takeover vehicle to run the company it's proposing to buy (a poison pill), (c) seek another buyer that is more favorable (a white knight), or (d) borrow a ton of money and buy so many shares that the stock price goes up.
The raider makes a tender offer for the shares he doesn't own. If the target picks (c) or (d), then the raider will probably make a huge amount of money when he suddenly dumps all his shares on the market. His tender offer probably started a bidding war with management, driving share prices to something very high.
WHAT CAN GO WRONG
The management can use (a) or (b) successfully, or it can use (e), viz., launch a hostile takeover bid of the target vehicle. The raider can lose of lot of money if a lot of shareholders have accepted his tender offer.
HOW IT WORKS
A corporate raider engaged in greenmail requires a takeover vehicle to launch a hostile takeover. The takeover vehicle is usually another corporation controlled by the raider, although in recent years ESOPs have been used (e.g., Tribune Corp., 2007). The vehicle buys up a lot of shares of the target company's stock on the market, then announces it wants to acquire a controlling interest.
Management opposes the takeover bid. It can (a) challenge the legality of the takeover, (b) adopt a charter that makes it hard for the takeover vehicle to run the company it's proposing to buy (a poison pill), (c) seek another buyer that is more favorable (a white knight), or (d) borrow a ton of money and buy so many shares that the stock price goes up.
The raider makes a tender offer for the shares he doesn't own. If the target picks (c) or (d), then the raider will probably make a huge amount of money when he suddenly dumps all his shares on the market. His tender offer probably started a bidding war with management, driving share prices to something very high.
WHAT CAN GO WRONG
The management can use (a) or (b) successfully, or it can use (e), viz., launch a hostile takeover bid of the target vehicle. The raider can lose of lot of money if a lot of shareholders have accepted his tender offer.
The most successful greenmail practitioner was T. Boone Pickens, who used Mesa Petroleum (now Pioneer Oil) to greenmail six companies. Eventually he was ousted from his own company.
by Sorry, the good guys lost September 04, 2010
(BUSINESS) in a hostile takeover, the business entity that will be the new owner. Usually a takeover vehicle is a corporation in an industry related to that of the target company.
In cases where the takeover is not NECESSARILY hostile, the term "acquisition vehicle" is used.
In cases where the takeover is not NECESSARILY hostile, the term "acquisition vehicle" is used.
by Sorry, the good guys lost September 04, 2010
(US LAW) tax-exempt nonprofit as defined under Treasury Code section 503(c)(4). Very similar to a 501(c)(3), but while a 501(c)(3) is more completely exempt from taxes, a 501(c)(4) has more leeway in what sorts of political activities it may engage in.
For example, a 501(c)(4) organization may explicitly endorse a ballot position or candidate, whereas a 501(c)(3) may not.
For example, a 501(c)(4) organization may explicitly endorse a ballot position or candidate, whereas a 501(c)(3) may not.
There are many examples of 501(c)(3) organizations paired with 501(c)(4) organizations. This arrangement is known as the "Sibling Option" and is used by the Koch Family Foundations for funding Tea Bag political associations.
by Sorry, the good guys lost September 10, 2010
Name of a 501(c)(3) group created by Berman & Co., a
lobbyist for the restaurant, hotel, alcohol, and cigarette companies. "Defeat the Debt, another 501(c)(3), is supposedly organized by the Employment Policies Institute ALSO created by Berman & Co.
The Employment Policies Institute is not an institute, in the sense that it doesn't conduct research or perform services to the public. All it does is recycle American Enterprise Institute talking points under a false flag. Berman & Co. has a very large number of "institutes" or organizations, usually little information about the funding or affiliations. It cites "articles" which are letters to the editor published by a "senior economic analyst" at the "Employment Policies Institute," etc.
The "studies" are not peer-reviewed, but they take a long time to download (they're PDF files, naturally). The "doctors" are merely Ph.D. holders in an unrelated field spouting glibertarian theories. All in all, another front for wingnut welfare.
lobbyist for the restaurant, hotel, alcohol, and cigarette companies. "Defeat the Debt, another 501(c)(3), is supposedly organized by the Employment Policies Institute ALSO created by Berman & Co.
The Employment Policies Institute is not an institute, in the sense that it doesn't conduct research or perform services to the public. All it does is recycle American Enterprise Institute talking points under a false flag. Berman & Co. has a very large number of "institutes" or organizations, usually little information about the funding or affiliations. It cites "articles" which are letters to the editor published by a "senior economic analyst" at the "Employment Policies Institute," etc.
The "studies" are not peer-reviewed, but they take a long time to download (they're PDF files, naturally). The "doctors" are merely Ph.D. holders in an unrelated field spouting glibertarian theories. All in all, another front for wingnut welfare.
The Employment Policies Institute is a phony organization created in 1991 by Richard Berman, the principal of Berman & Co. It is little more than a website.
The Wikipedia entry for the "Employment Policies Institute" was obviously written by someone affiliated with the institute. Essentially devoted to ending the minimum wage (among other issues), it includes a section taking the 501(c)(3)'s position on a study, and then cites a "paper" by that same entity as "proof." This is the sort of bullshit we have come to expect from Berman & Co.
The Wikipedia entry for the "Employment Policies Institute" was obviously written by someone affiliated with the institute. Essentially devoted to ending the minimum wage (among other issues), it includes a section taking the 501(c)(3)'s position on a study, and then cites a "paper" by that same entity as "proof." This is the sort of bullshit we have come to expect from Berman & Co.
by Sorry, the good guys lost September 12, 2010
(US LAW) nonprofit corporation; legal status permitted to certain types of organizations under Treasury Regulations section 501(c)(3) that exempts it from taxation.
The 501(c)(3) is quite easy to organize, especially if one wants to funnel money from donors to some form of activism. It was first made available in 1934 but has become extremely common since 1986 because successive rulings greatly loosened restrictions on electioneering for 501(c)(3) entities.
Often 501(c)(3) entities engaged in politics are affiliated with an almost-identical 501(c)(4) entity, which has EVEN WEAKER limitations on electioneering.
The 501(c)(3) is quite easy to organize, especially if one wants to funnel money from donors to some form of activism. It was first made available in 1934 but has become extremely common since 1986 because successive rulings greatly loosened restrictions on electioneering for 501(c)(3) entities.
Often 501(c)(3) entities engaged in politics are affiliated with an almost-identical 501(c)(4) entity, which has EVEN WEAKER limitations on electioneering.
The 501(c)(3) clause in the IRS code is practically an invitation by the government to launder corporate profits into lobbying.
by Sorry, the good guys lost September 10, 2010
(FINANCE) leveraged buy-out; when a takeover artist like Kohlberg Kravis Roberts & Co (KKR) arranges to borrow huge amounts of money at high interest, buy a controlling interest in a corporation, and then replace the management so its more profitable. The new profits then pay off the cost of buying the company.
Usually a takeover artist requires a vehicle corporation to carry out an LBO. For example, T. Boone Pickens used Mesa Petroleum against Union Oil in the 1980's.
by Sorry, the good guys lost September 02, 2010
(FINANCE) someone like Carl Icahn or Victor Posner; a manager of a PE fund or takeover vehicle (e.g., T. Boone Pickens with Mesa Petroleum) who organizes hostile takeovers of undervalued corporations.
WHY THEY'RE BAD
Corporate raiders insist they're looking out for the shareholder by forcing the managers to focus on increasing the value of the firm. If a company's share prices are high, it supposedly reflects well on the management of the firm; if the prices are low, the shareholders presumably would benefit from the takeover battle and subsequent change of management.
The flaw in this argument is (a) shareholders are not the only stakeholders in the corporation; workers, neighbors, and consumers also have interests that deserve protection; and (b), the impact of the corporate raider on FUTURE shareholders is inherently damaging over the long run because the targeted corporation's share prices are driven to a higher baseline anyway. After the takever battle between the raider and management, FUTURE buyers of the stock pay a higher price but are stuck with stagnant share prices because further increases don't make economic sense.
If the leveraged buyout succeeds, the company is saddled with debt in excess of its book value, which imposes an extreme burden; if it fails (greenmail), then company is still saddled with immense debt.
WHY THEY'RE BAD
Corporate raiders insist they're looking out for the shareholder by forcing the managers to focus on increasing the value of the firm. If a company's share prices are high, it supposedly reflects well on the management of the firm; if the prices are low, the shareholders presumably would benefit from the takeover battle and subsequent change of management.
The flaw in this argument is (a) shareholders are not the only stakeholders in the corporation; workers, neighbors, and consumers also have interests that deserve protection; and (b), the impact of the corporate raider on FUTURE shareholders is inherently damaging over the long run because the targeted corporation's share prices are driven to a higher baseline anyway. After the takever battle between the raider and management, FUTURE buyers of the stock pay a higher price but are stuck with stagnant share prices because further increases don't make economic sense.
If the leveraged buyout succeeds, the company is saddled with debt in excess of its book value, which imposes an extreme burden; if it fails (greenmail), then company is still saddled with immense debt.
Usually a corporate raider makes his killing by risking (and mostly losing) the money of other people.
He usually quotes Ayn Rand bromides about his adversaries being moochers and wreckers, but he destroys the livelihood of thousands, and he makes his fortune through ambush.
He usually quotes Ayn Rand bromides about his adversaries being moochers and wreckers, but he destroys the livelihood of thousands, and he makes his fortune through ambush.
by Sorry, the good guys lost September 04, 2010