Activist SAF Capital Pushes For Spin At Cash America

“it seems anyone can set up a website these days”

It is truly
amazing (and telling) that the author of this article – who is posting anonymously on a topic he knows nothing about (activist investing), on a
free blog – doesn’t see the irony of him writing this statement.

“activist investors aren’t just a problem for Fortune 500 companies these days”

Say
what? Virtually all activist activity takes place in small-cap
companies. An activist taking on a Fortune 500 company (as opposed to a
small cap or mid cap) is highly unusual, not the other way around. I
should have stopped reading the article at this point- as this statement
alone demonstrates that the author has no idea what he is talking
about. But it goes on……..

“a little known activist fund”

-Again…what? 95% of
activist activity happens behind the scenes. They are “little known” to
outsiders. In contrast to what most people think, it is actually very
rare that the public gets to see what activist funds are doing. SAF
purposely flies under the radar. (I have a theory for why they went
public with this, and it’s a bit of a red flag, I’ll get to that later).
I can’t speak for 2012, but I know in 2009, 2010 and 2011 they did
about 2-3 activist investments a year, with no publicity. SAF is a
different type of shop, they recruit mostly scientists (Phd’s),no
financial types. I think they have two, maybe three different funds
in-house. I have no idea how they did in 2012, but as of 2011 their
“Value Fund” had an IRR of over 35% net. They are in the top 10 funds
that i know of performance-wise, if I exclude levered HFTs. The Bill Ackmans of the world are highly unusual and have distorted the public’s
view of activist investing, most of this type of work is done very
quietly.

“have filed nothing with the SEC”

The author
states this as though it means something. Most activists try to avoid
SEC filings like the plague. I know, for a fact, that SAF, like most
activist funds, typically purchases 4.9% of a stake in a company and
then only crosses 5% if they don’t get their way. This is a common
practice. This is what SAF did at Premier Exhibitions – they got
impatient with the fund that owned almost half the company, SAF pushed
for numerous buybacks starting in 2009,operational changes, replacement
of the CEO, CFO and eventually a board seat. No SAF filings the entire
time (over 3 years).The whole situation was interesting because the CEO
and CFO that were replaced were actually put there by another activist
fund. I only know about it because my friend was an intern at SAF
during the period and I had quarterly letters. If you check the PRXI
insider ownership you’ll see their stake was 4.9%. But never an SAF
sponsored SEC filing. BTW, I have no idea how much CSH SAF owns, but I
doubt they would bother launching a public campaign if they owned “a
handful of shares.” Assuming nothing has changed since 2010, SAF has
in-house funds and they also advise other funds, including one of our
sub-strategy funds, so collectively they could certainly buy enough to
execute a 5 or 10% filing, but i’ve never seen them do that.. Again,
activist funds typically try to avoid crossing the 5% threshold. Ackman, Loeb, and
company are the exceptions not the rule as they seek publicity, or are
simply so large that they don’t have a choice but to make a filing.

“active situation appears to be CBMX”

-Wrong again. That is not an activist situation. It is basically a start-up/turnaround “pet
project”.
Check out the company, it’s a micro cap stock. SAF has told investors
in 2010 to view it as a “speculative start-up” and they had (as of 2010)
less than 1% of the fund invested. It will either implode or soar
within 5 years. They took the company over as a favor to the largest
shareholder, Michael Huffington (i.e. the Huffington Post, former
congressman) who was a prostate cancer survivor and big supporter of the
fund. They wrote a big missive, which I have read, about how they were
using the investment in CBMX to better understand how obamacare would
impact their health care holdings, etc. If you look at the BOD of CBMX
you will see George Bush’s Deputy FDA commissioner serves there with
Mark McGowan as well – that situation is clearly not about economics. I
don’t know all the details, but obviously something else is going on
there. Clearly not an activist play.

-”the company planned to do this (Spin off) itself a year ago”

Completely
untrue. Amazing that you just made that up, and equally disappointing
that there is no sort of fact-checking or editorial process on this
blog.Cash America is a publicly traded company. If the company had
planned a spin off, it would have been major news. The company has
never planned a spin off and has actually resisted this idea
historically, this is what makes the situation interesting (and
probably less of an exciting investment opportunity). They don’t want to
give Enova up- it’s the star of Cash America. Instead, the company
wanted to execute a partial IPO carve out of Enova and Cash America
continually shrank the size of the IPO to retain more and more of the
subsidiary. At the time management said they were against the
distribution spin off route that SAF is pushing for (and they still are,
apparently). And that’s the crappy thing. Just the opposite of what
the author says is true, the spin off likely won’t happen very soon, but
if it does, it will be entirely because SAF (or whomever else joins
their cause – again, most of this stuff happens behind the scenes, we
have no idea who else may be involved) forces them. But I’m not
holding my breath.

BTW, if the author doesn’t know the difference and serious
implications between a spin off and a partial IPO equity carve out, and
the serious implications of getting the company to reignite the
restructuring process and pursue the spin off format instead of the
IPO…he should not be blogging on a site dedicated to spin offs!

Regarding the investment, I trade medium-term (1 to 2 months max),
so I’m not very excited about the situation. Unless SAF has pulled a
complete 180 in their approach, the fact that they went public with this
means that management is pushing back. Which really kills my investment interest. I’ve only seen SAF go public with one other
investment, and they pulled the same move- they had a very detailed
thesis which they negotiated behind closed doors with management, when
management told them to back off, they did a public release and launched a website. That company eventually caved in, but the stock was a
roller-coaster while the process unfolded. I think SAF will
eventually prevail, but it will likely involve a long drawn out battle
or a proxy (I’ve heard rumors of this) which means it could take over a
year and probably doesn’t make the best investment for people sensitive
to volatility. Then you add in the fact that the whole space is under
regulatory pressure and the investment just looks too bumpy. Of
course,now that I’ve stated this, the whole thing will probably go
smoothly and the stock will double in 3 months, but it just seems too
volatile for me.

Alright, critique over. It’s not lost on me that I accused the
author of a rant…and then I sort of ranted myself ..but
misinformation drives me crazy. Also, like the author, if anyone has access
to the site, I’d love to see what’s in there. That might enable us to
understand what exactly is going on here, SAF’s press release wasn’t
very helpful in that regard.

To the author: don’t get annoyed that you couldn’t get into the
site, for all we know SAF and CSH signed an NDA and nobody can get in.
Cool your jets. And get over yourself. The fact that SAF or Enova are
unresponsive to an anonymous internet blogger like you, with no credentials, experience or knowledge on the subject matter, probably
lends to their credibility, it does not detract from it. Sorry to be
harsh, but that is reality. (I’m not claiming that I’m much better than
you are – but at least I’ve researched activist investing and know
something about the players in this situation. I even dropped names in
my request to gain access, and I work in the industry, and I still can’t
get a response- so why would you?)

To the blog owner: You shouldn’t allow your “authors” to publish
material false statements about companies (or people) like CSH, Enova or
SAF. (For example, stating that CSH wanted to do a spin off, or that
SAF has an activist situation in CBMX, etc. etc.). I thinkthe employees at Enova would be outraged to read your authors false
claim that Cash America had been planning to spin off their division
this whole time! They already had mixed views about a partial IPO, but
your author is telling the world that management was lying to them and
has supported a a majority spin off this whole time! When you make
libelous claims you open yourself to legal scrutiny. I doubt any of the
companies involved care enough to prosecute you, but it certainly
damages your credibility.

I think my feedback was longer than the actual article, and actually involved facts. Perhaps I should start a blog!

It’s difficult to respond to such a long comment, but I will attempt to do so. I thank you for writing it and ask that you read my response with an open mind.

My responses are marked with ****

“It is truly amazing (and telling) that the author of this article –
who is posting anonymously on a topic he knows nothing about (activist
investing), on a
free blog – doesn’t see the irony of him writing this statement.”

****The author has remained anonymous up until this point, but we had decided earlier this week to transition away from anonymity in the next few weeks. It is uncharitable and untrue to say that he knows nothing about activist investing. I’m not sure how the fact that we make this freely available adds anything to your argument. Would this article have had more value to you had you paid for it? We started this site to fill a void- there was no free resource with a comprehensive list and information on spinoffs. I think we have filled that niche well, though, of course, not without our missteps. We’re not perfect and we know it, but we do strive to improve.

” Virtually all activist activity takes place in small-cap
companies. An activist taking on a Fortune 500 company (as opposed to a
small cap or mid cap) is highly unusual, not the other way around. I
should have stopped reading the article at this point- as this statement
alone demonstrates that the author has no idea what he is talking
about.”

****The context of the quote you are responding to is that most of the activist situations we have written about here lately have been larger companies. I think you need to consider it in this light.

“a little known activist fund”

-Again…what? 95% of
activist activity happens behind the scenes. They are “little known” to
outsiders. In contrast to what most people think, it is actually very
rare that the public gets to see what activist funds are doing. SAF
purposely flies under the radar. (I have a theory for why they went
public with this, and it’s a bit of a red flag, I’ll get to that later).
I can’t speak for 2012, but I know in 2009, 2010 and 2011 they did
about 2-3 activist investments a year, with no publicity. SAF is a
different type of shop, they recruit mostly scientists (Phd’s),no
financial types. I think they have two, maybe three different funds
in-house. I have no idea how they did in 2012, but as of 2011 their
“Value Fund” had an IRR of over 35% net. They are in the top 10 funds
that
i know of performance-wise, if I exclude levered HFTs. The Bill
Ackmans of the world are highly unusual and have distorted the public’s
view of activist investing, most of this type of work is done very
quietly.”

****I don’t see how it is unreasonable to refer to SAF as little-known. As the fund does not file a 13F, AUM must be < $100 million. You admit they eschew publicity. If they prefer to work behind-the-scenes, doesn't that make them little- known?

"have filed nothing with the SEC"

The author
states this as though it means something. Most activists try to avoid
SEC filings like the plague. I know, for a fact, that SAF, like most
activist funds, typically purchases 4.9% of a stake in a company and
then only crosses 5% if they don't get their way. This is a common
practice. This is what SAF did at Premier Exhibitions – they got
impatient with the fund that owned almost half the company, SAF pushed
for numerous buybacks starting in 2009,operational changes, replacement
of the CEO, CFO and eventually a board seat. No SAF filings the entire
time (over 3 years).The whole situation was interesting because the CEO
and CFO that were replaced were actually put there by another activist
fund. I only know about it because my friend was an intern at SAF
during the period and I had quarterly letters. If you check the PRXI
insider ownership you'll see their stake was 4.9%. But never an SAF
sponsored SEC filing. BTW, I have no idea how much CSH SAF owns, but I
doubt they would bother launching a public campaign if they owned "a
handful of shares." Assuming nothing has changed since 2010, SAF has
in-house funds and they also advise other funds, including one of our
sub-strategy funds, so collectively they could certainly buy enough to
execute a 5 or 10% filing, but i've never seen them do that.. Again,
activist funds typically try to avoid crossing the 5% threshold. Ackman, Loeb, and
company are the exceptions not the rule as they seek publicity, or are
simply so large that they don't have a choice but to make a filing.

******No filings with the SEC does mean something. No 13F means under $100 million AUM. With CSH's market cap at $1.2 Billion, a 4.9% position would be over 50% of AUM. It is likely that SAF's position is, in fact, much smaller. PRXI was a much smaller company.

"active situation appears to be CBMX"

-Wrong again. That is not an activist situation. It is basically a start-up/turnaround "pet
project".
Check out the company, it's a micro cap stock. SAF has told investors
in 2010 to view it as a "speculative start-up" and they had (as of 2010)
less than 1% of the fund invested. It will either implode or soar
within 5 years. They took the company over as a favor to the largest
shareholder, Michael Huffington (i.e. the Huffington Post, former
congressman) who was a prostate cancer survivor and big supporter of the
fund. They wrote a big missive, which I have read, about how they were
using the investment in CBMX to better understand how obamacare would
impact their health care holdings, etc. If you look at the BOD of CBMX
you will see George Bush's Deputy FDA commissioner serves there with
Mark McGowan as well – that situation is clearly not about economics. I
don't know all the details, but obviously something else is going on
there. Clearly not an activist play.

******Please note difference between "active" and "activist"

-"the company planned to do this (Spin off) itself a year ago"

Completely
untrue. Amazing that you just made that up, and equally disappointing
that there is no sort of fact-checking or editorial process on this
blog.Cash America is a publicly traded company. If the company had
planned a spin off, it would have been major news. The company has
never planned a spin off and has actually resisted this idea
historically, this is what makes the situation interesting (and
probably less of an exciting investment opportunity). They don't want to
give Enova up- it's the star of Cash America. Instead, the company
wanted to execute a partial IPO carve out of Enova and Cash America
continually shrank the size of the IPO to retain more and more of the
subsidiary. At the time management said they were against the
distribution spin off route that SAF is pushing for (and they still are,
apparently). And that's the crappy thing. Just the opposite of what
the author says is true, the spin off likely won't happen very soon, but
if it does, it will be entirely because SAF (or whomever else joins
their cause – again, most of this stuff happens behind the scenes, we
have no idea who else may be involved) forces them. But I'm not
holding my breath.

BTW, if the author doesn't know the difference and serious
implications between a spin off and a partial IPO equity carve out, and
the serious implications of getting the company to reignite the
restructuring process and pursue the spin off format instead of the
IPO…he should not be blogging on a site dedicated to spin offs!

******Colloquially, equity carve outs are often referred to as spin offs. A quick google search will show you dozens of articles which referred to what Cash America planned to do with Enova last year as a spin off. You are right, though, It was imprecise. Although companies often follow up equity carve outs with spin offs of their remaining stake, there was no indication that Cash America management planned to do so. I have asked the author to clarify this point with a correction, and I will ensure that he does so.

To the author: don't get annoyed that you couldn't get into the
site, for all we know SAF and CSH signed an NDA and nobody can get in.
Cool your jets. And get over yourself. The fact that SAF or Enova are
unresponsive
to an anonymous internet blogger like you, with no credentials,
experience or knowledge on the subject matter, probably
lends to their credibility, it does not detract from it. Sorry to be
harsh, but that is reality. (I'm not claiming that I'm much better than
you are – but at least I've researched activist investing and know
something about the players in this situation. I even dropped names in
my request to gain access, and I work in the industry, and I still can't
get a response- so why would you?)

**** Again, I think you're reading something that isn't there. The author never tried to contact Enova or SAF, merely tried to register at the site and could not. This took all of 30 seconds and was mentioned only to note that the site was not public. I do think that there's something odd about "going public" but hiding your case behind a login wall, and it should be mentioned.

To the blog owner: You shouldn't allow your "authors" to publish
material false statements about companies (or people) like CSH, Enova or
SAF. (For example, stating that CSH wanted to do a spin off, or that
SAF has an activist situation in CBMX, etc. etc.). I thinkthe employees at Enova would be outraged to read your authors false
claim that Cash America had been planning to spin off their division
this whole time! They already had mixed views about a partial IPO, but
your author is telling the world that management was lying to them and
has supported a a majority spin off this whole time! When you make
libelous claims you open yourself to legal scrutiny. I doubt any of the
companies involved care enough to prosecute you, but it certainly
damages your credibility.

***** With the exception of imprecision around Cash America's previous plans, I don't see anything that can be construed as false by a reasonable person. I certainly see nothing remotely libelous. If you feel that my responses don't hold water, please let me know; we can certainly disagree on matters of opinion, but we take very seriously claims of material false statements and libel. Since it seems like you are very familiar with this situation, we would be happy to publish anything you might have to say about it as its own article, should it meet our editorial standards. Our readers benefit from a diversity of well-reasoned and articulated ideas.

I’m a classmate of the original commenter. I don’t know anything about investing and I’m only intermediately skilled at corporate finance, but, I’ve been an editor of 2 school newspapers. Patrick asked me to give my unbiased review of this article. Clearly we have too much time on our hands.

I’m not a grammatical nit-picker but I’m very good with liability and journalistic integrity issues. If this article were on my desk, I would make the following comments.

I agree with the site host; I don’t see the connection between the author being denied access to the site and him, or her, being bitter. However, overall the article has an aggressive negative slant against SAF. I’ve read the article twice, and I’m left with the impression that the author has a beef with SAF. If there is a history here, it should be disclosed. There is nothing wrong with having a negative view, but, when writing with a negative stance against professional performance you need to make especially sure your statements are substantiated. I think the author crosses the line a few times here.

“little known activist investor” – I think this statement is fine. I’m an MBA student in Chicago, and I wasn’t aware of SAF prior to today.

“found itself under attack” – the SAF press release states that they are seeking a “collaborative dialogue” with management. I think the author is falsely characterizing this press release to make the story more interesting. Probably OK, but the author is certainly taking some liberties here.

“Of course” “subtly titled” – nothing wrong with these word choices, but, this is now turning into an attack piece.

“It sure seems like anyone can set up a website these days” – crossing the line into the ad hominem domain. The bar for launching a website is pretty low these days. To suggest that SAF exemplifies this trend is an aggressive statement. A quick google search reveals that SAF has served on the board of directors of multiple publicly traded companies and that their business has been open since late 2006. The fund’s returns and successes that Patrick mentions don’t really matter. The fact that they are a legitimate business concern certainly makes their establishment of a website a legitimate action. If I were an editor, I would have killed this line. If it’s inappropriate for a 6-year old hedge fund to open a site regarding a billion-dollar company, the vast majority of websites in existence are inappropriate. How can you justify your spin off website? Or any of my websites? Or the website for any small or medium-sized company? Characterizing the SAF company as below the internet legitimacy standard is needlessly aggressive and doesn’t withstand a “reasonableness” check. I don’t think there is any liability, but, it’s not a substantiated comment to make in a journalistic piece.

“heck, the company itself planned to do so last year” – I googled this. They planned an equity carve out last year. This is a fact, not a matter of perspective. I learned the difference between an IPO carve out and a spin off about ten minutes ago. Based on my nascent understanding, the author’s statement is false and misleading. The difference between an IPO and a spin off might not matter in most contexts, but in this case it is pretty important. You (the owner of the site) describe this as an “imprecision.” That is not the case. The author’s entire line of reasoning falls apart if the company was not already planning to execute a spin off as SAF has requested it to do. In a hypothetical situation, if a fund convinced a company to switch from utilizing an IPO to using a spin off structure to make a divestiture, it would certainly be material. In this circumstance, with the IPO plans shelved, it would be even more dramatic. The site and author only have liability here if either SAF or Cash America feels this statement makes them look bad AND that it impacts their reputation. Both of these criteria need to be met. The author is implying that the company already wanted to pursue the plan that SAF has outlined, and therefore if Cash America executes along that plan, SAF has achieved nothing. If the company executes an IPO, we could only reasonably guess at its motivation. If the company executes a spin off or increases its stock buybacks, I think it would be disingenuous to suggest it was a random act. This is bad for your site’s liability because the author makes a false statement and then uses that false statement to try to discredit SAF. If Cash America claimed that this statement made them appear dishonest – because they had been saying that they were not interested in executing a spin off, while your author claims that they were- that could generate liability as well. However, I think the odds of Cash America pursuing that case are practically zero.

“but I am willing to bet that pressure from SAF will have little bearing” – based on what? All evidence that Patrick shows me points to the contrary, but, Patrick is totally biased in favor of SAF. The author should provide examples of SAF trying to get companies to perform certain strategic shifts, and the companies successfully blunting SAF’s requests. The author is stating that SAF is not effective at persuading companies to take action, but he provides no evidence. The burden of proof is on the author. IF, big if, SAF projects itself as an activist fund, you have liability here. You are stating that the company is not good at its craft. You could make ad hominem attacks against personalities at the fund without much real exposure, however, you need to substantiate any attacks against their professional performance. (You can call a doctor a jerk with little exposure, but, if you say that he is dangerous in the operating room, you need evidence.) I see nothing wrong with the negative tone of the article. Perhaps SAF is the devil’s spawn. I don’t care. Prove it. Golden rule is that if you are going to print something negative, you need twice as much substance to back the statement up. If this were on my desk I would kill the entire last paragraph. It’s irresponsible journalism.

The ‘golden rule’ test resolves most of these issues. If I worked at SAF, I’d be upset by this article. The next question is whether or not the negative bias adds value to the piece. Negative bias is the steroid of journalism, it provides short-term results at a cost. Use it wisely. I’m not sure what the basis of the author’s bias is here. It doesn’t appear to be substantiated, in fact, it appears to be based on a false foundation. It seems like the only purpose is to make the story more interesting, and that, by itself, does not justify taking an substantiated angle to the story. I think there really isn’t much of a story here, so the author tried to “juice it up” by putting an anti-SAF spin on it. That’s shoddy work, in my book.

Nothing personal is meant by my feedback, I enjoy these types of discussions. I tried to be unbiased, but I have a double bias in that I’m Patrick’s friend, and as a former editor I always side with being conservative.

Have a great night!

Thanks for writing in and keeping the dialogue going.

I think my tone is pretty clear and that is that I am skeptical of SAF – ‘something feels off’ – a position I am eminently comfortable with. Activist investors essentially come out and say that they know what is best for a company – even more so than its own management. A bold claim for sure and a clear attack on company management. To make that claim publicly, I would expect some proof or analysis to back it up from them and that is what is often contained within the SEC filings your ‘broham’ derides. Perhaps it is on the website they set up…I don’t know, they don’t let people see their case. As a shareholder, the original commenter couldn’t even gain access! It seems management does not agree with SAF as there would otherwise be little reason to go public.

At the very least, some of the larger activist funds have a long track record of successful public activism to stand on. They can say ‘trust me –
I have done this before and I know what I am doing’. They also have a huge asset base to make them a more formidable (threatening) foe and one with implicit support from large investors. I can’t say the same about SAF (one example is not enough and lack of 13F implies low assets) who has provided no backing for their attack on Cash America. Why should management feel compelled to follow SAF’s ideas for the company? Because it says so? It’s not even a large shareholder in the company. Based on all of this, I feel some skepticism is warranted and that was the point of the piece. No hate.

And RE:IPO carve out versus spinoff – here are some highly respected
news sources (AP, Reuters etc. – at least to a non-editor like me) referring to the same situation as a spin off:

http://finance.yahoo.com/news/Cash-America-to-spin-off-apf-1876474937.html

http://www.bizjournals.com/dallas/news/2011/09/15/cash-americas-enova-to-spin-off-via.html

http://www.reuters.com/article/2011/09/15/us-cashamerica-idUSTRE78E32A20110915

http://www.marketwatch.com/story/payday-lender-cash-america-cancels-spin-off-after-poor-results-2012-07-26

I guess their editorial standards must be lacking…

I think you’re still grossly misrepresenting what was said and your criticisms are way off base. First, let me clarify my relationship with the author. We are partners in this. I review and edit his articles, he reviews and edits mine. So I guess you could call me his editor, but that doesn’t fully describe the situation.

You’re dead wrong on the spinoff vs. ipo distinction. I felt it could be made a little clearer, but it was not wrong, just imprecise. The implications you claim, that the author implied or stated that the company and SAF agreed on strategy is not supported by the text. It is in fact quite common for failed ipo carve outs to be spun off to shareholders, see, for example SEACOR’s spinoff of Era Group. It is also quite common for the remaining stake from an ipo carve out to be distributed to shareholders. In any event, your assertion that “Side note, I also think it’s absurd to think that the company would just randomly re-start the IPO process after cancelling it…even if they did that, I would suspect that someone, whether it’s SAF or another fund, was forcing their hand.” is laughable to the extreme. Companies who pull ipos due to “market conditions” often refile when they feel the market would better support their new issue.

As for the rest of what you say, I think you fail to make a distinction between public and activist. When activism is behind closed doors, we obviously have nothing to say about it. When a firm goes public with its activism, it opens itself up to scrutiny. When it does so, it can only be judged on its public record, and for SAF, that record is scant indeed. I understand what they’re trying to do, and, if they have the track record you claim, then perhaps they’ll be successful. But there is nothing in the public record to suggest that they will be. They certainly have no obligation to make loud pronouncements. But by staying quiet, they lose the right to narrate their story.

I think we have reached the point where we are incorrectly characterizing each others writing, whether purposely or not. For example, I clearly never said that shareholders “had” to agree with SAF just because SAF states that they feel they do – I clearly wrote that it seemed to be what SAF was implying. This was in response to you stating that public style activists come to management with an “implicit” level of support from shareholders. I was suggesting it seems SAF is doing just that.

I have nothing against the public style of activism, I simply stated that you are comparing apples and oranges by comparing the amount of information typically available in full-blown media driven activist campaign against the SAF situation. I disagree that there is a “magic line,” that once breached means that a fund should disclose all information to the general public. It is ridiculous to assume that “what you see is what you get” and therefore because a fund crossed the “public line” with a press release, and because you personally don’t have access to a fund’s track record or analysis of an investment, that one must not exist. (Or, as you put it, that you can “bet” the fund won’t have an impact, because you don’t have access to the instances where they have…(even though you do, but only on small cap stocks)). Generally, I think it is irresponsible for you to weigh-in on a subject matter without first performing diligence.

Bottomline: I agree, a company opens itself to scrutiny when it issues a press release – but that doesn’t mean that the scrutiny can be ill-researched. SAF opened itself to scrutiny with its press release, but that doesn’t excuse you from performing basic diligence prior to writing an attack piece. It would be irresponsible to comment on any public figure or company without first performing diligence. The fact that they are public means that they are relevant to discuss, it doesn’t change the bar on decent journalism.

I googled SAF this morning. From the web, I only see evidence of two activist investments. PRXI and Soapstone. Assuming that SAF exited their position in PRXI (I have no idea if they have or not) it looks like they made about a 300% return there (the first public record I see from them is when they lent PRXI money via a small tranche of convertible bonds). On Soapstone, it looks like they made about a 30-50% return, it’s difficult to pin when they purchased their shares. The PRXI return took place over 3 years. Soapstone seemed to be a short (6 month) process. I’m giving SAF the benefit of the doubt on CBMX, because they publicly stated that is was a lottery ticket. Their public record looks positive, you can read that they’ve done this at least twice before. I think your point is fair, that both companies were small cap stocks. I consider their fund’s returns, to be somewhat “public” as marketing materials can typically be located for most funds with a little journalistic probing. I would expect a journalist to pursue these records before writing negatively about a fund. I would expect basic diligence before saying you are “skeptical” or that you can “bet” the fund will be ineffective. When I combine the publicly available info, I don’t come away with a negative conclusion. I think your statement that there is “nothing in the public record to suggest they will be (successful)” is just factually incorrect. I think a proper article would have begun with some basic diligence. Before I write something, I like to know what I’m talking about. To my broham’s point, that goes double if you are going to write something negative about someone or a company. If the fund refused to provide their records to you, a responsible article would have said “we were only able to find a few publicly disclosed instances of SAF in action…prxi,cbmx, and soapstone. Both instances of activism were successful, CBMX has been a loser so far. We don’t have public record of them restructuring a company the size of Cash America, and SAF refuses to provide us with additional information, so it remains to be seen whether they can take on a company this size.” But – I appreciate that unfounded slam pieces are easier, (and more fun!) it would be tough to actually research the funds you are writing about. Hedge funds are notoriously secretive. And let’s put aside the basic journalistic rule of seeking comment on any entity which you are looking to criticize. That takes time. And I’m sure you’re busy.

I disagree with essentially the entire content of both response posts, however, at this point, I don’t think a tit-for-tat is productive.

I do, however, agree with your point that often companies will reattempt IPOs as market conditions warrant. I overstated my case on that point. But I also think it would be unwise to assume that funds hadn’t affected the decision, after all, for all we know, certain funds may have influenced the original IPO to begin with and or could pressure the company to resume the IPO process more quickly. I think my bias is to assume funds are taking action, because I so rarely see boards pursue these plans on there own. (Again, it may appear that they are doing so to you, but more often than not it is only after shareholders have been pressuring them behind closed doors.) I think Third Point is responsible for the recent Murphy spin, even though the parent co. had false-started a spin previously. That is the closest example I can think of to CSH that involves the high publicity style you are familiar with .

You both have successfully avoided the core issue here. You wrote a slam piece without performing any diligence. That is bad journalism. It took me 1 minute to find SAF’s involvement with PRXI. Ad hominem lines such as “it seems anyone can create a web site these days,” can’t be justified – especially coming from a website that, by any measure (firm value, number of employees, revenues, age of company), is a less serious concern than any of the companies involved in this situation. And lines like that make the site appear trashy. At the end of the day, you have to decide what type of site you want to run. It’s not my job to clean up the web. I took exception in this instance because I knew people involved on both sides of the issue.

I think we have closure here (?) Agree to disagree and we’ll see what happens with CSH.