So Werner Seifert the ex-CEO of Deutsche Borse has just launched his new book, with the original title of “Invasion of the Locusts”. I guess there is nothing wrong with jumping on a bandwagon to sell a few books. It’s a free world and that’s what capitalism is all about.
I haven’t read the book. I followed the DB/LSE saga in the press and have read a number of articles reporting on the book launch. So health warning, my comments are not based on a complete knowledge of either the details of what transpired nor by having read the book first-hand. But these quotes (as reported in Bloomberg) if they accurately reflect the theme of the book mystify me:
“They cause irreparable damage to the companies they attack — that is why the comparison with locusts, which has become current in Germany, is so appropriate,'’ Seifert writes. “The intentions of these investors are mostly of a short-term nature.'’
Seifert describes Hohn as a man “who collects money the way others collect trophies.'’ Hohn doesn’t fit the stereotype of a multimillionaire, either. He doesn’t wear designer clothes or drive a Ferrari, Seifert says.
The first stands out as a gross generalisation. Hedge funds and private equity firms have created enormous value for a whole spectrum of constituencies (shareholders, fund investors (and thus indirectly the pensions of millions), employees, economies, etc.), and while it would seem plausible that in some instances this is not true and like any heterogeneous large group, a few bad apples does not make a rule. More specifically in this case it is not obvious that Deutsche Borse has sufferred ‘irreparable damage’. Their share price has performed admirably over the last year and they continue to be one of the most successful financial exchange companies in the world. Would they have been even better off if they had been ‘allowed’ to pursue the LSE deal by their shareholders. Perhaps. Perhaps not. I think intelligent people could disagree, but clearly no irreparable damage has been done. It is hard not to wonder if the ‘irreparable damage’ Mr. Seifert describes refers more to himself (read incumbent management) than to the company. A heightened defensiveness on the part of agent-managers on the continent seems to be endemic these days. Capital(ism) it would seem, is something that should be seen but not heard. By threatening the incumbent power structures in these economies, the private equity/hedge fund bogey-men seem to have struck a nerve.
The second quote is just bizarre. As if it matters what he drives or wears! Sticks and stones… Again, Mr. Seifert’s personalisation of the affair is striking - as if to say “who-is-this-rich-wierd-guy-to-tell-me-a-captain-of-industry-how-to-run-my-company”. My point is not to opine on who was actually right or wrong assuming there is an answer to that. I don’t know. The fact that Mr. Hohn’s fund TCI is pretty unique amongst hedge funds in that it gives a mandated and substantial portion of its fees to charity is just a delicious additional irony in the context of the ‘locust’ epithet.
One of Mr. Seifert’s themes apparently is a call for greater transparency on the part of investors. In general I would endorse this, although I’m not exactly clear on what specific lack of transparency exorcises him.
Finally, he apparently calls for companies to have legislatively imposed minimum capital requirements ’so that cash hungry investors were limited in the amount of cash they could plunder from corporate coffers.’ Wow. How incredibly patronising and paternalistic. Ummm, the shareholders own the company. And as the ex-CEO of a global financial exchange I find it incredible that he thinks that governments or regulators can better decide what the optimal capital structure of any given (non-bank) firm might be.
Mr. Seifert seems like an interesting and intelligent man, I’m not sure I understand why he is obsessing over this episode. My advice would be to just move on. Unless of course he’s fooled us all and just wants to sell a boatload of books and he figures this is what sells in Germany. Already ranked 141 on amazon.de in pre-release, maybe he’s on to something!
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