Coca-Cola Points Out Winters’ Overstated Case, Incorrect Calculation

Coca-Cola is engaged in an aggressive campaign to counter statements made by activist investor David Winters. The firm contacted ValueWalk to counter statements made by Winter, saying Winters has overstated his case and pointing out the goal of the Coke board fully backs the compensation plan and the goal is to “encourage employees to act like owners.”

Coca-Cola Points Out Winters' Overstated Case, Incorrect Calculation

As reported Tuesday morning, Activist investor David Winters’ fight with The Coca-Cola Company (NYSE:KO)’s board of directors over management compensation just received a new ally in the Ontario Teachers Pension Plan.  Winters had said that Coca-Cola was engaged in an “informational shell game.”

Winters takes facts “out of context”

For its part, Coke points out that Winters has “taken out of context” facts used to support his claim that the plan will dilute shareholders by 16.6% of the company value, ignoring the company’s share repurchase program in the calculation. In 2013 they note that they repurchased $4.8 billion of stock, $1.3 billion of which was related to employee stock options, facts they had previously noted.

Company says calculation inaccurate

Coke also points out that Winters did not calculate the number of employees who do not take stock options, which are granted in 10 year terms.  Employees who do not stay with the company for the term of the contract to receive options are not included in the dilutive impact, and the plan is in line with past plans approved by the board and shareholders.

“We can find no reasonable basis for gifting management 14.2% of the share capital of The Coca-Cola Company (NYSE:KO), worth $24 billion at today’s share price,” Winters said in a statement last week. “No matter how well a management team performs, it is unfathomable that they would require such astronomical sums of money to provide motivation.  Twenty-four billion dollars is a lot of money, by anybody’s standard.”

Incentive plan not just for senior management

A key issue with Winter’s attack on the beverage company is that the plan is not limited to senior management, as Coke says approximately 6,400 employees throughout the organization are eligible to participate.  Coke had initially responded on March 28 to Winter’s statements.



About the Author

Mark Melin
Mark Melin is an alternative investment practitioner whose specialty is recognizing a trading program’s strategy and mapping it to a market environment and performance driver. He provides analysis of managed futures investment performance and commentary regarding related managed futures market environment. A portfolio and industry consultant, he was an adjunct instructor in managed futures at Northwestern University / Chicago and has written or edited three books, including High Performance Managed Futures (Wiley 2010) and The Chicago Board of Trade’s Handbook of Futures and Options (McGraw-Hill 2008). Mark was director of the managed futures division at Alaron Trading until they were acquired by Peregrine Financial Group in 2009, where he was a registered associated person (National Futures Association NFA ID#: 0348336). Mark has also worked as a Commodity Trading Advisor himself, trading a short volatility options portfolio across the yield curve, and was an independent consultant to various broker dealers and futures exchanges, including OneChicago, the single stock futures exchange, and the Chicago Board of Trade. He is also Editor, Opalesque Futures Intelligence and Editor, Opalesque Futures Strategies. - Contact: Mmelin(at)valuewalk.com