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 30/8/2016: Fedora 24 Reviewed, Ubuntu Patched

    Links for the day



  2. Links 29/8/2016: Linux 4.8 RC4, Maru OS Source Code

    Links for the day



  3. Let Them Eat Patents

    A reality check regarding software patents and regarding those who truly benefit from an expensive patent system with an even more expensive litigation process/proceedings



  4. Nothing Whatsoever Has Improved at the European Patent Office, It's Just Summer's Recess (and Silence)

    The European Patent Office (EPO) has done absolutely nothing to improve the work atmosphere, it just alters the marketing strategy somewhat



  5. Links 28/8/2016: Q4OS 1.6, ConnochaetOS 14.2

    Links for the day



  6. The United States Has Gotten Over Software Patents

    A roundup of new articles about software patents in the United States, 2 years into the post-Alice era (the US Supreme Court deeming patents on software too abstract to have merit)



  7. More Lies From President Benoît Battistelli and the EPO Crisis Which Continues to Deepen

    The European Patent Office (EPO), collectively speaking, is still wrestling with a Battistelli infiltration (a circle of high-level managers) which habitually lies and viciously attacks those who dare counter these lies



  8. Links 27/8/2016: Torvalds and GPL, “DOD Must Embrace Open-Source Software”

    Links for the day



  9. Links 26/8/2016: Maru OS Resurfaces, Android More Reliable Than 'i' Things, PC-BSD Becomes TrueOS

    Links for the day



  10. Good Job, David Kappos, Says the 'Boss' (IBM)

    Responses to the latest call against Alice (eliminator of many software patents), courtesy of the man from IBM (still paid by IBM) who was responsible for the policy that blindly approved a lot of software patents in the US



  11. Being for Patent Quality or Against Patenting Excess Does Not Make You Anti-Patents

    Like IAM, which tries to portray sceptics and critics of software patents as "anti-patents", IP Watchdog (or Watchtroll as we call it) is 'trolling' the Electronic Frontier Foundation, simply because it expressed an opinion that patent maximalists cannot tolerate



  12. Erosion of Patent Quality Enables Patent Extortion With Large Portfolios of Low Validity Rate

    Revisiting the EPO's vision of poor patent examination and the effect of discriminatory granting practices, favouring patent bullies such as Microsoft (which actively attacks Linux using low-quality and usually pure software patents)



  13. The EPO's Francesco Zaccà Presenting in Turin Alongside Patent Trolls (Like the Patent Mafia Sisvel) and Lobbyists/Front Groups for Software Patents, UPC

    Benjamin Henrion (FFII) on seeing the EPO alongside patent trolls and other nefarious actors, doing what they do best, which is undermining public interests and harming patent quality



  14. The EPO, USPTO, and Patent Microcosm Peddle Myths About Patents in Public Universities and Research

    Tackling some of the commonly-spread myths about patents as "saving lives" and "promoting research" (in practice leading to the death of poor people and promoting trolls)



  15. Large Corporations' Lobbyist David Kappos Disgraces Former Employer USPTO by Meddling in Their Affairs on Software Patents, Downplaying the Supreme Court

    The latest lobbying from David Kappos, who blatantly exploits his connections in patent circles to promote software patents and work towards their resurgence after Alice v CLS Bank



  16. Journal of Intellectual Property Law and Practice Calls the European Patent Office “Rotten”, Other Sources Scrutinise Recent Moves

    The patent office which was once known for being the best bar none is rotting under the Frenchman Benoît Battistelli, who made himself and his friends the main clients of the Office



  17. PTAB Emerges as Hero of USPTO Because Quality of Patents Improves, Software Patents Are Effectively Dead (or Dying Once Reassessed)

    With help from the Patent Trial and Appeal Board (PTAB) -- not just patent courts -- software patents drop like flies by the thousands



  18. Creative Technology, Now Operating in 'Patent Troll' Mode, Shot Down by the ITC; Jawbone Too Shot Down

    Some good news from the U.S. International Trade Commission (ITC), which may have put an end to Creative's new war on Android (using old patents)



  19. Corporate Media in India Misrepresents Startups to Push for Software Patents

    A parade of misinformation as seen in Indian (but English-speaking) press this week as questions about patentability of software resurface



  20. Links 25/8/2016: Linux Turns 25, NetworkManager Turns 1.4

    Links for the day



  21. Links 24/8/2016: More From LinuxCon, Uganda Wants FOSS

    Links for the day



  22. Links 23/8/2016: GNOME 3.22 Beta, Android 7.0 Nougat

    Links for the day



  23. The Linux Foundation Gives Microsoft (Paid-for) Keynote Position While Microsoft Extorts (With Patents) Lenovo and Motorola Over Linux Use

    This morning's reminder that Nadella is just another Ballmer (with a different face); Motorola and Lenovo surrender to Microsoft's patent demands and will soon put Microsoft spyware/malware on their Linux-powered products to avert costly legal battles



  24. Not Just President Battistelli: EPO Vice-Presidents Are Still Intentionally Misrepresenting EPO Staff

    Evidence serving to show that EPO Vice-Presidents are still intentionally misrepresenting EPO staff representatives and misleading everyone in order to defend Battistelli



  25. Battistelli the Liar Causes a Climate of Confrontation in French Politics, Lies About Patent Quality (Among Many Other Things)

    Battistelli's lies are coming under increased scrutiny inside and outside the European Patent Office (EPO), where patent quality has been abandoned in order to artificially elevate figures



  26. The Collapse of Software Patents and Patent Law Firms Trying to “Overcome” Alice

    The United States continues its gradual crackdown on software patents (which are viewed as abstract and thus unpatentable), whereas in Europe things are murkier than ever



  27. Apple's Patent Wars Against Android/Linux Make Patent Trolls Stronger

    Apple's insistence that designs should be patentable could prove to be collectively expensive, as patent trolls would then use a possible SCOTUS nod to launch litigation campaigns



  28. Links 22/8/2016: Linux 4.8 RC3, Linux Mint 18 “Sarah” KDE Beta

    Links for the day



  29. Links 21/8/2016: Apple and Microsoft Down, Systemd Spreading to Mount

    Links for the day



  30. Links 20/8/2016: Android Domination, FSFE summit 2016

    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