I always state that Dan Loeb is not someone whose bad side you want to get on. He has publicly ridiculed potential job applicants, CEOs, and President Obama in the past.
I just found this letter from 2007, where he publicly ridiculous the board and management of PDLI (which Seth Klarman’s Baupost Group, is currently the third largest shareholder of). It is outdated but is humourous and always on the investment ascept shows the important of evaluating management, and how they are allocating capital and spending their time.
Below is the full letter:
EX-99.1 2 dex991.htm LETTER, DATED APRIL 11, 2007
Third Point LLC
390 Park Avenue
New York, NY 10022
April 11, 2007
Mr. Mark McDade
PDL BioPharma Inc.
34801 Campus Drive
Fremont, CA 94555
Jon S. Saxe
L. Patrick Gage
Laurence Jay Korn
Karen A. Dawes
Bradford S. Goodwin
George M. Gould
Dear Mr. McDade and PDL BioPharma Board Members:
In our initial letter to you dated March 5, 2007, we expressed a sincere and strong interest, as PDL BioPharma’s (“PDLI” or the “Company”) largest shareholder, to work constructively and discreetly with management and the Board of Directors to implement the cost-cutting and other measures necessary to fully enhance the extraordinary value inherent within PDLI that is currently being obscured by the Company’s equally extraordinary current levels of spending. Indeed, we are certain that you are aware that our initial overtures have been greeted by overwhelming shareholder support and positive Wall Street research reports. The Company’s shares have also reacted positively, rising 15%, or increasing in value by over $300mm, as a result of our involvement – to the benefit of all shareholders. After our first telephone calls with management in March, we were hopeful that matters were moving in the right direction, as they agreed to retain either the leading consulting firm that we proposed, or one of similar stature, to analyze your excessive R&D and SG&A spending, and to seriously consider our highly-qualified nominees to the PDLI Board of Directors.
Unfortunately, our initial optimism that we could work constructively with management quickly faded through a series of subsequent telephone calls with Mr. McDade, culminating in a “slap-in-the face” on Friday, April 6th, in which it became abundantly clear that Mr. McDade has no intention of pursuing a constructive dialogue. It became apparent that the earlier dialogue was a charade intended to stall for time, a tactic we have seen employed many times before by underperforming CEOs. Mr. McDade’s inexplicable insouciance towards us, along with numerous negative findings that emerged over the course of our ongoing investigation (the “Investigation”) into Mr. McDade’s
managerial abilities, judgment and ethics (discussed below), led us to determine that it is in our best interests, and those of all shareholders, to terminate discussions with Mr. McDade.
Many fund managers who have been similarly rebuffed, and who have detected such a deficit in talent, probity and judgment as we have come to find in Mr. McDade, might come to the logical conclusion to “cut and run” and decrease their positions as one major mutual fund has done according to recent filings. Instead, we have come to a different view: we concluded that the Board of Directors has no choice but to immediately terminate Mr. McDade. We believe that a PDLI unencumbered by Mr. McDade’s management blunders and wasteful spending will appreciate in value considerably, and thus we have increased our position by 1,100,000 shares and now beneficially own 9.7% of the Company’s outstanding stock.
In support of our demands for Mr. McDade’s immediate termination, we review below the content of our discussions and negotiations over the past month and elaborate on the specific significant mismanagement and waste for which Mr. McDade is directly culpable.
McDade’s Insincerity and Disorganization
During the past month we had four separate calls with Mr. McDade in which we repeatedly expressed our concerns regarding spending levels and other planned strategic initiatives by the Company. In each call, we reiterated our interest in working with him and with the Board in order to better understand and rationalize the cost structure at PDLI and to help realize the many valuable, currently poorly-recognized assets embedded within the Company. From the very first conversation, we made it clear that, as PDLI’s largest shareholder by a wide margin, Board representation would be essential, and we submitted to Mr. McDade the names of four highly-qualified candidates for consideration. On March 30th, Mr. McDade informed us that none of our four candidates fits the profile of what PDLI is looking for in a Board member, but that the Board would (reluctantly) consider one of our candidates. We replied that this was not acceptable, and demanded that two of the other three candidates be named to the Board. At our suggestion, and in response to his now obviously feigned interest, we provided to Mr. McDade that very afternoon the contact information for TWELVE references for our Board candidates – all of them senior management or Board members of public companies with whom we’ve worked (and, in most cases, served on boards with). Mr. McDade and his assistant sent follow-up emails with questions regarding the references list. However, when we spoke with Mr. McDade again this past Friday, he informed us that none of our candidates is “qualified” to serve on PDLI’s board. Although Mr. McDade is dead wrong about this, what is truly galling, and what speaks directly to Mr. McDade’s lack of character, professionalism, and competence, is that our references reported to us that Mr. McDade did not call a single one of them to hear first-hand about the tremendous value that our candidates have brought to shareholders by working on other public boards, both within and outside of the biotechnology arena.
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Moreover, one of our director candidates, Mr. Jason Aryeh, emailed to Mr. McDade contact information for his references, followed up with a confirmatory call to Mr. McDade’s assistant Diana, and sent a second email to ensure its receipt. Nonetheless, Mr. McDade claimed days later never to have seen this important correspondence so essential to evaluating our candidates’ qualifications to join the PDLI board, and even then he did nothing with the information it contained (despite assurances to the contrary). How can Mr. McDade purport to effectively run a public biotechnology company with a market capitalization of over $2 billion when he cannot even manage his own Microsoft Outlook inbox?
It is now clear to us that we’ve wasted the last month attempting to engage in a productive dialogue with Mr. McDade, while his only objective was to buy himself more time. We’ve been engaged in discussions with the Company for over a year about our concerns, and have heard management’s explanations and excuses countless times over that entire