EditorsAbout the SiteComes vs. MicrosoftUsing This Web SiteSite ArchivesCredibility IndexOOXMLOpenDocumentPatentsNovellNews DigestSite NewsRSS

03.04.10

GNU/Linux-Savvy Writers View Elliot Associates as Bad Neighbourhood

Posted in Finance, GNU/Linux, Novell, OpenSUSE, SLES/SLED at 3:53 pm by Dr. Roy Schestowitz

Vulture

Summary: People who care about GNU/Linux at Novell are not exactly overlooking the reality of Singer’s “vulture fund”

WE have found some analyses that seem to agree with what we wrote earlier today about the bid for Novell [1, 2, 3]. Here is a prominent OpenSUSE user calling Elliott a “Vulture Fund” over in IDG:

The stock market reaction to the offer was predictable: Novell’s stock surged 27 percent right after the news broke, and it should stay strong for a while until the market figures out if this is a Good Thing.

The Linux community hasn’t raised a big fuss, though I suspect they’re still absorbing the news. I know I am, for my part. In particular, I am wondering what will happen to Novell if they accept this unsolicited bid?

Here is what SJVN wrote in IDG:

Some people in the know, like Canonical’s COO Matt Asay think this deal could work for SUSE. In his view, Elliot would do well to sell off Novell’s Linux division.

I wish I could agree with him, but I looked at Elliot Associates’ past history of taking “an activist approach to investing, frequently amassing significant but minority stakes in distressed or under performing companies and attempting to foment change,” and I don’t like what I see.

Elliot Associates is best known as a ‘vulture fund.’ They don’t make investments to turn companies around. They make investments to crush the cash out of them and then leave the picked over bones for someone else to pick up.

Andy Updegrove, a lawyer, calls it a “Game of Cat and Mouse”.

I haven’t seen any article yet, though, that describes in detail how the high stakes game of tender offers is played, and how the usual process maps (and doesn’t) to a high tech company like Novell. So I thought I’d provide an overview for those that haven’t had occasion to follow a tender offer in the past, and also my thoughts on what may happen over the next several months in this particular game of cat and mouse.

So here goes.

The tender offer game: First up, let’s talk about how the standard drama plays out. It starts with the acquiror trying to pick up as much stock as possible on the sly before it comes out of the closet. That’s because once word gets out that the company (referred to as the “target”) is “in play,” the stock will go up. So the acquiror wants to build as big as stake as possible at the cheapest price it can.

But the securities regulators have long realized that this presents two problems: first, the sellers will feel cheated if they later find out they sold at a steep discount to what others get a short while later, and second, the acquiror will vote all the shares it picks up in favor of the acquisition. So the Securities and Exchange Commission (SEC) requires any company that acquires more than 5% of the stock in a public company to make a public filing disclosing that ownership and its intentions.

That filing is made on form 14D, and it must be regularly updated as the acquiror’s ownership percentage changes, and as its intentions change. When an acquiror files a 14D, it could affirmatively state that it has no intentions of making a tender offer. Depending on the acquiror, that statement might be credible, or it might be viewed with suspicion. But if it affirmatively states that it intends to make a tender offer, or is keeping its options open, then the word spreads – fast.

Novell’s stock may be rising (the valuation of Novell’s assets is discussed at IDG), but that’s not the point. As Chips B. Malroy explains, “If Singer acquires Novell for 1.8 billion, the causal bid, and Novell has 991 million is cash, Singer is only paying 809 million actually. Singer has lowballed the bid, in hope another company will come in and bid more, so that drives up the price of the 8.5% that Elliot already has, profit, short term, mission accomplished. But if that doesn’t happen, and Novell will surely reject the bid, wait for some minor setback in the SCO case, or the next quarterly results from Novell, something bad, and then, true to form, Elliot will reoffer at a lower bid. That is Singer’s modus operandi. By doing this, he causes the stock to tank, so he can buy more cheaply.”

“Singer has lowballed the bid, in hope another company will come in and bid more, so that drives up the price of the 8.5% that Elliot already has, profit, short term, mission accomplished.”
      –Chips B. Malroy
We have already learned that lesson from Carl Icahn. Malroy comments further on “what Singer will do to Novell, should [he] buy it. He will get rid of almost all top management, and most of middle management. Stop all R&R mostly. Stop and or sell any parts of the company not profitable (and transfer the 991 million to Elliot first).”

Perhaps the only positive side is that Mono junk like Banshee can suffer from a takeover of Novell. As we pointed out last week, Novell no longer contributes much to Linux anyway.

Share this post: These icons link to social bookmarking sites where readers can share and discover new web pages.
  • Digg
  • del.icio.us
  • Reddit
  • co.mments
  • DZone
  • email
  • Google Bookmarks
  • LinkedIn
  • NewsVine
  • Print
  • Technorati
  • TwitThis
  • Facebook

If you liked this post, consider subscribing to the RSS feed or join us now at the IRC channels.

Pages that cross-reference this one

What Else is New


  1. Links 19/12/2014: Robolinux 7.7.1 LXDE, Red Hat Thriving

    Links for the day



  2. Another Microsoft Partner Markets Linux FUD Using Logo, Name, and Lies

    Microsoft's partner Alert Logic is trying to label a feature of Linux a security flaw and even makes marketing buzz for it



  3. Redmonk is Spreading Black Duck's Anti-GPL Talking Points After Payments From Black Duck, Microsoft

    CBS' ZDNet spreads the GNU-hostile narrative which comes from Redmonk, funded by Microsoft and Black Duck, citing Black Duck, which also comes from Microsoft and is a partner of Microsoft



  4. 'Good' Software Patents From EA Show Cases Where DRM is a Patent Infringement

    Where two evils collide the public benefits, or how some software patents discourage the use of DRM



  5. Richard Stallman: What Does It Mean for Your Computer to Be Loyal?

    New article from Richard Stallman



  6. Links 18/12/2014: LinuxQuestions.org Polls, Fedora for POWER

    Links for the day



  7. Links 16/12/2014: Google and ODF, Civilization: Beyond Earth Comes to GNU/Linux

    Links for the day



  8. Bill Gates' Pet Troll Intellectual Ventures is Collapsing as Founder Quits

    Intellectual Ventures founder leaves after an exceptionally large round of layoffs, despite [cref 77299 recent subsidies from Sony and Microsoft]



  9. Keeping Software Patents Out of Europe Following the Demise of Software Patents in the US

    Instability in the EPO seemingly prevents further expansion of patent scope, which is the subject of scrutiny of EPO staff



  10. Links 15/12/2014: OSI 2014 Annual Report, GPLv2 Court Test

    Links for the day



  11. Links 14/12/2014: Calligra 2.9 Beta, Krita 2.9 Beta

    Links for the day



  12. Software Patents Are Dying in the US, But Patent Lawyers Refuse to Admit It

    Patent lawyers continue to distort the reality of software patents' demise in the United States



  13. Links 13/12/2014: Android Wear “Lollipop”, European Commission and FOSS

    Links for the day



  14. Time to Take Microsoft Out of British Aviation Before Planes Crash Into Buildings

    London's mighty Heathrow Airport among those affected by a Microsoft-reliant air traffic control system which is not being able to properly recover from an outage, and not for the first time either



  15. News From France and Germany: Battistelli Under Fire, But Not Fired Yet, Just Firing His Opposition

    The régime headed by Benoît Battistelli and his criminal deputy continues to overthrow or pressure out everyone who is not 'loyal' to the régime



  16. Links 12/12/2014: Linux++, KDE Frameworks 5.5.0, Calligra 2.8.7

    Links for the day



  17. The USPTO is Broken: New Evidence Presented

    The scope of patents, as evidenced by some statistical figures and individual patents, shows that the USPTO is broken and must be reformed or dismantled



  18. US Patent Reform (on Trolls Only) More or Less Buried or Ineffective

    An update on efforts to reform the patent system in the United States, including the possibly imminent appointment of Michelle Lee to USPTO leadership role



  19. Software Patents in Canada Not Dead Yet

    Canada's patent status quo increasingly like that of the United States and Canadian giants like BlackBerry now pose a threat to software developers



  20. Dreaming of a Just Christmas: When a Third of EPO Walks Out to Revolt and European Judges Attack the EPO Over Abuses

    Information about the abuses of Battistelli et al. at the EPO are finally receiving wider coverage and increasing the strain on Battistelli's authoritarian reign



  21. Links 11/12/2014: Red Hat Enterprise Linux 7.1 Beta, Firefox 35 Plans

    Links for the day



  22. Ubuntu Core Announcement is Not About Microsoft and Hosting Ubuntu on Azure is Worse Than Stupid

    The power of media spin makes the idea of hosting Free software under the control of an NSA PRISM and back doors partner seem alluring



  23. France Gets Involved in Battistelli's Abuses in the EPO - Part XII (Updated)

    The EPO scandal has officially spilled over to France, where a French Senator got involved and starts asking serious questions



  24. Rolling of Heads Likely Imminent at EPO

    The European patent system is shaking as management breaks the rules, staff is protesting against the management every week, and charges of corruption resurface



  25. Links 11/12/2014: systemd 218, Empire Total War

    Links for the day



  26. Links 10/12/2014: Fedora 21, Ubuntu Core

    Links for the day



  27. Links 9/12/2014: Fedora 21 and Torture Report Are Out

    Links for the day



  28. Exclusive: The Enlarged Board of Appeal Complains About Battistelli's Corrupt Management to the Administrative Council (Updated)

    Text of the complaint from the Enlarged Board of Appeal (EBoA) reaches Techrights, demonstrating just how rampant the abuse in Battistelli's EPO has become



  29. Protests Against EPO Corruption Approach 1,000 in Attendance

    EPO staff at all levels is revolting against the management of the EPO, whose dismissal seems to be only a matter of time



  30. Links 9/12/2014: Greg Kroah-Hartman Interview, Fedora 21 Imminent

    Links for the day


CoPilotCo

RSS 64x64RSS Feed: subscribe to the RSS feed for regular updates

Home iconSite Wiki: You can improve this site by helping the extension of the site's content

Home iconSite Home: Background about the site and some key features in the front page

Chat iconIRC Channel: Come and chat with us in real time

CoPilotCo

Recent Posts