New York-based hedge fund Taconic Capital Advisors has upped its stake in systems software maker CA Technologies in an effort to convince the company to wring more profits from its books. CA is in its quiet period ahead of reporting its financial results for the third quarter of fiscal 2012 ended in December, which happens on …
your numbers don't add up
If "CA has a market capitalization of $10.3bn" with "$2.3bn in cash and equivalents and $1.3bn in debt", how do you come to the conclusion that "CA is a roughly $5bn company"?
I am afraid that your numbers don't add up.
Re: your numbers don't add up
I was speaking of their revenue and profit stream in the second reference.
I expected a hedge fund managed by dreadlock sporting New Agers, literally living in a hedge and using their financial nous to fight fight against globalisation and corporate irresponsibility. I am sore disappointed.
Can someone help me out here? What exactly is an 'Activist' hedge fund?
another CA price hike?
Most of CAs "enterprise" software is, to put it mildly, poor value for money. Doing tasks the base OS now does for free, or, saving MIPS that are now too cheap to be worth saving.
Hopefully another price hike will persuade management to allocate some resources to sunset the software so they can waste the license fees on something more trendy with a "cloud" in the name.
What is an activist hedge fund?
Activist hedge funds, or activist shareholders are trying to make lots of moolah, at lower risk than buying companies outright. The idea is to:
1. Find company that is 'badly run', and therefore has undervalued shares.
2. Buy lots of shares.
3 basically involves badgering the management to do stuff that gets the share value to go up. Sometimes this can be getting a company to spend its cash-pile on share buy-backs / dividends, bumping up the share value, plus divvie pay-out. Then you sell shares for profit.
Alternatively you might decide that the company has loss-making divisions it should sell off/close, or its prices are too low. So you badger management until they do something about it. Hopefully increasing profits, and therefore divvies / share price.
Sometimes they cause enough trouble, and persuade enough other shareholders that they're right, that they can get a seat on the board. Or even get a general shareholder vote to start sacking directors off the current board.
It's lower risk (and cheaper) than the venture capital thing of buying a company and turning it around then selling it. Plus you don't need to have someone who's good at the executive side of running things, you just have to analyse the situation correctly and persuade / force the company's executives to do your bidding.
I've read about cases where it's been successful, and whipped a lacklustre board into action. I'd imagine there's also plenty of failures, where the financial whiz kids have misunderstood what they saw in their spreadsheets for reality...
Activist Hedge Fund
What is an Activist Hedge Fund?
See SAM (Southwest Asset Management in Santa Fe NM) and what they did to Sun Microsystems.
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