How to fend off Activist Investors: Tech Edition
Activist investors are targeting tech companies, think - eBay, Apple, Microsoft, Qualcomm - that's no secret. But instead of surrendering, some companies are fighting back.
Marc Andreessen has said, “Public companies are being basically forced by pressure from activists and their investors to give back huge amounts of cash instead of investing it in their business."
To forestall such outcomes, Mr. Andreessen urges startups to mimic Facebook and Google Inc. by granting founders special types of stock that give them control over key decisions. He says that tactic will insulate the companies from outside pressures after they are public.
Many entrepreneurs are heeding the call. Seven of the 10 most-highly-valued, venture-backed private tech companies have multiple classes of stock, according to Fenwick & West LLP. The law firm says it agreed not to disclose the companies’ names as a condition of gathering the data.
Mr. King, the Skadden Arps lawyer, estimates he spends about 30% of his time advising tech companies on activism, up from about 5% three years ago. His tactics include writing mock letters from potential activists to help prepare tech-company boards for future fights.