What is Green Mail? Carl Icahn’s Genius Strategy And How It Has Made Him Filthy Stinking Rich!
In this blog post, we will answer the question of What is Green Mail, and of why it is Carl Icahn’s most prized strategy that has literally made him almost $20,000,000,000.00. Green mail, for those of you reading this without any sort of a clue what this is, is essentially the board members and stock traders equivalent of black mail. Green mail, is when a corporate activist or a corporate raider, such as Bill Ackman or Carl Icahn, buys up enough of the shares of the company so as to obtain a controlling interest, they do this by either purchasing shares on the secondary market, or by purchasing voting shares at a premium from other board members. From here, what they do is sell back the shares, and thereby the controlling voting interest in the company, at a premium, to those same directors that will otherwise lose their board seats, they then liquidate and dump all their shares at a premium, and pocket he hefty profit, paying the low bracketed capital gains taxes rather than ordinary income taxes to boot. In this blog post, I will show you how green mail works, and of how hedge fund kings use Green Mail.
Those known for their Green Mail strategies include the following:
And a host of other managers, read on or subscribe to our blog for additional details and information.
What is Green Mail in a Nutshell, And Why Raiders Do It?
So, as stated in the former, Green Mail in a nutshell is as follows, basically a corporate raider, a hedge fund manager or a corporate activist finds a company with a weak spot, maybe its a board member they think they can take down, or maybe its something similar to this matter, and they buy up voting shares at a premium. From here, they gain enough voting shares to grab a controlling interest in the company, which they then spin around to the stronger board members in order to facilitate the sale of a company and in turn convince the stronger board members to buy back their controlling interests in the company at a premium. From here, they basically just cash out their shares at a premium, earn some quick cash, and they then take their profits and proceed to the next company. It is called green mail because it is just like black mail, just with money and shares, rather than extortion and dirty laundry.
Is Green Mail Legal?
I believe the black letter law has this being completely legal, although highly discouraged and unethical in the practice of business. This is now less and less common I’m assuming due to the much stricter financial laws and SEC regulations that were imposed after the 2008 financial crisis. This is also much less easy to pull off since it is so well known as a corporate strategy, in that as soon as people know about it, it is no longer something special, and people start coming up with ways to defend against it. I am going to go out on a limb here and say that this is much more easily preventable now, in that if I am Mark Zuckerberg and I only own 37% of Facebook, I can make it so for each one of my shares, I have 10 or 20 or 50 votes, to the remainder of the outstanding shares only having one vote per share, I then will always have a controlling vote interest in the company, no matter how many Carl Icahn’s come my way.
Is Green Mail Still Profitable?
If you can find a company to use it with, it is definitely still profitable. Whether or not it is worth it to try often times depends on the size of the company, in that smaller companies, small caps or penny stocks, are typically going to be the only boards this can still be done with. Good Fing luck running a Green Mail campaign against Facebook or Google, not just for the aforementioned reasons above, but also for the multitude of other reasons that I’m sure I’m missing.
Final Thoughts on What is Green Mail, The Pros and Cons of This Strategy
How was this article with regards to explaining what Green Mail is in the world of Finance? If I missed something, be sure to leave a comment down below and let us know, and remember to subscribe for regular updates on all things finance.
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