Third Point Pointers

Has Dan Loeb turned over a new leaf?

It would appear so, at least until proven otherwise. He has historically produced prodigious volumes of literature for public consumption. But until this week he had gone months with nary a broadside blast. Perhaps some of his recent investments have not been worthy of tongue lashings; while he might not be happy with Flow International Corp. (FLOW-NASDAQ) until it is 40% higher, the unfolding drama there has been unusually civil.

Dan is ratings gold, at least for websites looking for page views. Unfortunately some internet pundits are new to his game, and certainly not hip to it. Indeed, given the amount of recent retractions and corrections at some of these destinations we can only surmise the summer interns have taken over the editorial duties.

Loeb’s ire with the management of PDL BioPharma is well deserved. Some of the stunts the CEO has pulled are outrageous:

There is no better example of McDade’s “empire building” philosophy, pathological selfishness and poor business judgment than his decision to build out PDLI’s absurdly large and unnecessary new corporate headquarters (the “Taj Mahal"). It is appalling that Mr. McDade is spending nearly $100 million of our money to build out 450,000 square feet of leased space, much of which is completely unnecessary. But what is most troubling is what this says about his overall business judgment and qualification to continue to run the Company. As examples:

* Mr. McDade decided to lease, and build out, the Taj Mahal (reportedly the largest corporate lease deal, as measured in square footage, signed in the Bay Area in 2006) despite the fact that members of PDLI’s financial team reportedly advised him that the expenditures were both unnecessary and imprudent;

* Mr. McDade has, from the beginning of this project, apparently been fixated on when his boat slip in the marina adjacent to the new corporate headquarters will be ready (one would think that the CEO of a Company, the stock price of which was down 40% last year - and the second worst performer in the entire biotechnology index - would have more important priorities), and

* Mr. McDade has made it clear in private that one of the key drivers behind his decision to relocate the Company from Fremont to Redwood City is that the new headquarters location will lead to a far shorter commute to work for him from his home in Woodside (not only less than one-half the mileage, but he will not have to cross any heavily-trafficked Bay bridges to get to the new headquarters). Loeb Letter to PDL BioPharma

Good stuff to be sure, but far different from the type of jihad he often waged as a younger man. Some of his best work is on the internet for all the world to see, but most don’t know where to find it.

Although his cage rattling can get stocks moving and tongues wagging, Dan has done his best work on the short side. His dismantling of Chromatic Color Sciences, Hitsgalore.com, Actrade and FirstPlus Financial nearly 10 years ago are the stuff of legend. He brought so many stock promoters and shady management teams to their knees it appeared for some time the Enforcement Division of the SEC was redundant. Dan hit the bad guys where it really hurt.

Third Point’s former offices

In their pocketbooks. Just ask Amos Aharoni.

Is Dan retiring the poison pen? We hope not, but given the gross transgressions committed by Mr. McDade we would have expected a bit more vitriol. Dan is certainly older, wiser and a bit mellower.

But above all, he is talented.
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The content contained in this blog represents the opinions of underthecounter. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.

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