What is the best way to go about telling a company that you don’t like the way they are running things? Well, if that person has a lot of money, the best way is to do what Carl Icahn did. On August 20, the activist investor and billionaire announced that he purchased an 8.5 percent stake in the car rental giant. He then announced that he was thinking about seeking to join the board of directors.
So why would he do all of this? Apparently, he believes that Hertz is undervalued. He wants to join the board and tell them up close and personal about his growing lack of confidence in the current management team. He mainly wants to address their underperformance and operational failures.
Of course, not everyone has the money to just buy a huge stake in a company and give them a piece of their mind. For example, in order for Icahn to get the 8.5 percent stake in Hertz, he had to buy nearly 39 million shares.
Icahn is not the only shareholder who wants to see a management change. Fir Tree Partners, a hedge fund based in New York City, said that it wants to see the removal of the current Hertz chief executive. This company owns a 3 percent stake in Hertz.
A spokesperson for Fir Tree Partners, Scott Tagliarino, said that his company believes that the current CEO has had a number of very serious missteps. As a result, it’s time for some very serious change. Hertz has a great chance to take control of the car rental industry, but with the current management staff, it‘s not going to happen.
Hertz has played everything very cool so far. In fact, it released its own statement saying that it welcomes all types of constructive dialogue from its shareholders. It has a good handle on the market right now, but while there are some issues that the company is facing, there are plans in motion to remove them.
Hertz moved to a one-year rights plan for shareholders in December 2013 because it noticed some very unusual activity in terms of trading. This plan, which is usually referred to on Wall Street as the poison pill, is commonly used by companies to help limit share accumulations. In short, it helps to prevent takeovers. With this plan active, Hertz is able to keep investors’ stakes at just under 10 percent.