A fun thing about being rich is that it expands your opportunities for passive-aggressive sniping. Like, if Michael Dell wants to insult Carl Icahn, he can call up the Wall Street Journal and Bloomberg and say “hey, I was thinking about insulting Carl Icahn, if I do will you print it?,” and of course the answer is yes.1 Or if Carl Icahn wants to insult Michael Dell, he can just tweet his insults like any underemployed 26-year-old, but then he files his tweets with the SEC, which gives them an unusual gravitas, for tweets.
So those boys are having a good time. Their pretext for sniping today is a debate over who should get to vote on the Dell buyout. The current rule is that anyone who owned shares as of June 3 can vote, and that a majority of the non-insider shareholders have to vote to approve Michael Dell’s buyout. Since those rules seem to lead to the deal being voted down,2 and since Carl Icahn opposes the deal, he’s happy with the rules and thinks it’d be a massive betrayal to change them. Michael Dell, unsurprisingly, wants to change them, so as to limit the required vote to a majority of the votes cast and maybe to allow more recent buyers to vote:
We also believe that, in connection with this change, it is appropriate to reset the record date, which will reset the playing field and give all of our current shareholders plenty of time to consider whether they want to accept our offer and then make their decision.
Which makes some sense? The record date for the vote is June 3, meaning that anyone who bought shares on or after May 303 doesn’t get to vote. I see about 1.06bn shares traded between May 30 and now, or about 2/3 of the shares eligible to vote, though of course a lot of those trades are the same shares changing hands multiple times. Still it’s likely that hundreds of millions of shares are now held by people who can’t vote them. Icahn, for instance, owns 72mm shares that he can’t vote, since he bought them from Southeastern on June 18, though Southeastern has the voting rights and is presumably voting them against the deal. But presumably a lot of the 330mm+ shares that haven’t voted are abstaining because their record owners no longer actually own them, have no economic interest in the deal, and so haven’t bothered to vote.
Also presumably they were all in favor of selling their Dell shares for cash, most of them below $ 13.65 (and all of them below $ 13.75), so, really: deep down they’re all voting for the deal.
There is, however, one newish owner whose voting rights Michael Dell doesn’t particularly care about:
I actually take Southeastern’s opposition as a compliment. They are basically saying that they believe in my ability to navigate the risks and challenges of the transformation the company faces and would like to participate with me. I came to the conclusion that we could do what we needed to do better and faster as a private company, but I respect Southeastern’s point of view. In contrast, Carl Icahn was not a shareholder when we announced the deal or at any time before, but the voting standard in our contract gave him the opportunity to buy into the company and organize a blocking position with a minority of the company’s shares.
Well which is it? Do you want to let people who bought last week vote, or would you prefer to limit the voting to people who owned stock before the deal was announced?4
The technicalities of the record date sniping shouldn’t obscure one important thing, though, which is this: those technicalities mean that August 2nd, this Friday, the re-rescheduled date of the special meeting, and the 60th day after June 3rd, is the last day that Dell can vote on the deal without changing the record date and pissing everyone off. Which means: there’s an unusually high chance that this thing will actually end this week.
Some Dell 14As: Bloomberg & Wall Street Journal interviews [EDGAR]
Carl C. Icahn Issues Open Letter to Stockholders of Dell [EDGAR]
Carl C. Icahn and Southeastern Asset Management Issue Open Letter to Dell Special Committee [EDGAR]
Voting Rule Change Is Seen as Crucial to Dell Founder’s Takeover Bid [DealBook]
1. Needless to say this is not meant as a criticism of the Journal or Bloomberg. Michael Dell, if you call me and insult Carl Icahn, I’ll print it, and vice versa and ceteris paribus. Basically if you’d like to insult any famous-for-Dealbreaker person, and you yourself are a famous-for-Dealbreaker person, we can probably help you achieve your dreams. If you’re just some guy who doesn’t like Cliff Asness, we do have a comment section.
Also the insults are all family-newspaper-appropriate. From Bloomberg:
Question: Icahn has derided your management of Dell and accused you and Silver Lake of trying to steal the company. What is your assessment of him? What do you think his real agenda is? And how well — or poorly — would you say that you have played your hand? Do you wish you had played things differently?
Dell: The tone and tenor of Mr. Icahn’s tweets and other statements speak for themselves and I have no desire to respond in kind. As I have said before, I think the steps Mr. Icahn has suggested would be destructive to the company and I will not support them. I do not view this as a game, so I do not think in terms of how I have “played my hand” or how anyone else has played theirs. The real problem, as events have unfolded, is that the voting standard in our contract gave Mr. Icahn, who had never been a Dell shareholder before we announced our deal, the opportunity to come in and organize a blocking group representing a minority of the company’s shares. That’s the problem we’re trying to address by asking for the voting standard to be reset so that the will of the majority of the unaffiliated shares voting on the transaction can be honored.
Question: What will you do if (1) the deal is voted down, and (2) Icahn wins a proxy fight and Icahn undertakes the buyback? Would you tender your shares? What sort of a situation would that create?
Dell: I do not believe the leveraged recapitalization that Mr. Icahn has suggested will ever occur, so I’d rather not speculate on that hypothetical. I will point out, however, that if it did occur and I did not tender my shares, I would end up owning about 42 percent of the company.
2. DealBook has the breakdown:
According to recent tallies, of the roughly 1.1 billion shares that have been cast so far, about 579 million have been cast in favor, while 563 million have been voted against the deal, people briefed on the matter said.
That is not enough to win at the moment, however. According to the current rules set by Dell’s board, a majority of the company’s 1.476 billion shares eligible to be voted must be cast in favor of the deal; that number excludes the 16 percent stake that Mr. Dell holds. So the more than 334 million shares that have not voted yet are treated as no votes.
3. Subtle! But true.
4. A dorky game is to try to figure out the answer to the question: if you want to announce a merger, and you want to limit the voting to shareholders who held shares prior to the announcement, (1) can you do that and (2) if not how close can you come? DGCL section 213 seems to let you set the record date to be any date on or after the day that you declare it, so you could have a board meeting on Sunday July 28th saying “the record date is Monday July 29th” (or even Sunday the 28th really) and therefore the ex date is Thursday and no one who buys after that can vote. SEC Rule 14a-13 sort of requires 20 days’ notice before the record date, which is a poser, but it doesn’t really if that’s impracticable. In any case you have to have the meeting within at most sixty days of the record date, and in that time you need to file the proxy with the SEC, finalize it, and mail it out enough in advance of the meeting to comply with your charter etc. notice requirements. If you’ve got a go-shop, like Dell, whose was 45 days, you’re basically completely sunk. But, like, next time skip the go-shop and just try to freeze out Icahn.