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January 02, 2007

How to Fire A Portfolio Company CEO Via Email Like Daniel Loeb - Hedge Fund Manager Extraordinaire

posted by MR WAVETHEORY at 1/02/2007 09:03:00 AM
You have to love Daniel Loeb. As manager of Third Point LLC, a New York-based hedge fund that earned an average annual return of 28.9 percent since its 1995 start, Loeb has gained stardom by sending out scathing memos and unleashing his wrath on various movers and shakers whose companies he has invested in. Not only has Daniel perfected the art of running a hedge fund, but also Danny has mastered the craft of grinding the axe with company CEOs.

Hiring and firing are the two toughest decisions any venture investor eventually has to make. It's all ying and yang to me. When the sh*t hits the fan at a startup, you have to fire the CEO. When a company is going gangbusters, you have to interview new candidates and new hires, and reject the bums. You used to have to do these things in person - actually face to face - or over the phone. You actually had to look at the guy in the face. But today, you can do it all via e-mail. Thank the Internet! On the e-mail etiquette of hiring and firing and gloating at your competition, venture capitalists and private equity investors alike can learn alot from the ways of Danny Loeb.

Daniel Loeb on How to Publicize, Vilify, and Fire a Portfolio Company CEO

To Leonhard Dreimann, CEO of Salton Inc. (NYSE SFP), he ranted: "It was only over time that we came to recognize the magnitude of your incompetence and apparent disregard for shareholders." Salton is the maker of the George Foreman Lean Mean Grilling Machine which has sold over 55 million units worldwide. At the height of its success, Foreman received $4.5 million a month in payouts, says Salton CEO Leonhard Dreimann. But in the past few years, consumers have put off replacing their old Foreman grills, and Salton has struggled: It reported a loss of $3.2 million on sales of $274 million in its most recent quarter.

To Kenneth Griffin, CEO of Citadel Investment Group, he once taunted: "There is little I enjoy as much as watching you from afar as your reputation and 'organization' declines as the same rate as your falling returns." Ken Griffing started Citadel in his Harvard dorm room. He is accused of poaching employees from Greenlight Capital and Third Point. Sued by his friend and mentor, Rush Simonson, of fraud, breaching a partnership agreement, and misappropriating trade secrets when he launched his fund. (Bloomberg profile on Kenneth Griffin.)

And to Wilbur Ross, chairman of W.L. Ross & Co.: "The many years you spent generating fees as a financial advisor make it irresistible for you to try to extract fees in your relatively new capacity as principal."

Loeb also vowed to boot the CEO and board of directors of Nabi Pharmaceuticals, telling them: "We will work assiduously . . . to ensure that you will have ample time to pursue your golf games and to enjoy the Florida sun thereafter."

But that was then. When confronted by a Men's Vogue reporter at a fund-raiser, Loeb snapped, "I can't talk to you. I'm not allowed to talk to you," and then backed away. (via)

Daniel Loeb *EXCLUSIVE* Email - How to Say No to a Potential Hire Reject

-----Original Message-----
From: Alan Lewis
Sent: Tuesday, March 22, 2005 11:34 AM
To: Daniel Loeb
Subject: CV

Daniel,

Thanks for calling earlier today. Enclosed is my cv for your review. I look forward to following up with you when you have more time.

Best regards,

Alan

Alan D. Lewis
Managing Director
Sthenos Capital Ltd.

-----Original Message-----
From: Daniel Loeb
Sent: 27 March 2005 23:08
To: Alan Lewis
Subject: RE: CV

what are your 3 best current european ideas?

Daniel Loeb
Managing Member
Third Point LLC

-----Original Message-----
From: Alan Lewis
Sent: Monday, March 28, 2005 1:03 AM
To: Daniel Loeb
Subject: RE: CV

Daniel,

I am sorry but it does not interest me to move forward in this way. If you wish to have a proper discussion about what you are looking to accomplish in Europe, and see how I might fit in, fine.

Lesson one of dealing in Europe, business is not conducted in the same informal manner as in the U.S.

Best regards,

Alan

-----Original Message-----
From: Daniel Loeb
Sent: 28 March 2005 09:50
To: Alan Lewis
Subject: RE: CV

One idea would suffice.

We are an aggressive performance oriented fund looking for blood thirsty competitive individuals who show initiative and drive to make outstanding investments. This is why I have built third point into a $3.0 billion fund with average net returns of 30% net over 10 years.

We find most brits are bit set in their ways and prefer to knock back a pint at the pub and go shooting on weekend rather than work hard. Lifestyle choices and important and knowing one's limitations with respect to dealing in a competitive environment is too. That is Lesson 1 at my shop.

It is good that we learned about this incompatibility early in the process and I wish you all the best in your career in traditional fund management.

Daniel

-----Original Message-----
From: Alan Lewis
Sent: Monday, March 28, 2005 4:08 AM
To: Daniel Loeb
Subject: RE: CV

Daniel,

I guess your reputation is proven correct. I have not been in traditional fund management for more than eleven years. I did not achieve the success I have by knocking back a pint, as you say. I am aggressive, and I do love this business. I am Half American and half French, and having spent more than half my life on this side of the pond I think I know a little something about how one conducts business in the UK and Europe.

There are many opportunities in the UK and Europe, shareholder regard is only beginning to be accepted and understood. However, if you come here and handle it in the same brash way you have in the U.S. I guarantee you will fail. Things are done differently here, yes place in
society still matters, where one went to school etc. It will take tact, and patience (traits you obviously do not have) to succeed in this arena.

Good luck!

Alan

-----Original Message-----
From: Daniel Loeb
Sent: 28 March 2005 10:23
To: Alan Lewis
Subject: RE: CV

Well, you will have plenty of time to discuss your "place in society" with the other fellows at the club.

I love the idea of a French/english unemployed guy whose fund just blew up telling me that I am going to fail.

At Third Point, like the financial markets in general,"one's place in society" does not matter at all. We are a bunch of scrappy guys from diverse backgrounds (Jewish Muslim, Hindu etc) who enjoy outwitting pompous asses like yourself in financial markets globally.

Your "inexplicable insouciance" and disrespect is fascinating; It must be a French/English aristocratic thing. I will be following your "career" with great interest.

I have copied Patrick so that he can introduce you to people who might be a better fit-there must be an insurance company or mutual fund out there for you.

Dan Loeb (via)

Links: Bloomberg Profile on Daniel Loeb

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