More on Werner Seifert
“Fly home buddy, I work alone,” Mr Incredible tells Incrediboy at the beginning of Disney/Pixar’s film, The Incredibles. Incrediboy, who has no superpowers but lots of ambition, has his offer of help rebuffed by his idol during a robbery by a notorious French thief. The rejection leaves Incrediboy with a burning desire for revenge, though Mr Incredible and family ultimately survive his dastardly schemes to deliver a happy ending.
Werner Seifert’s new book, Invasion of the Locusts, is evocative of this episode, with himself cast as Mr. Incredible and Chris Hohn, of hedge fund TCI, as Incrediboy. The book is the story of their epic struggle for power over the future of the Deutsche Börse after its failed bid for the London Stock Exchange in December 2004. But there is no happy ending for Mr Incredible in this version – Seifert was unseated on the May 9, 2005 – and is clearly still angry and incredulous that Hohn won. Not only that, the incidental Frenchman, Jean-Francois Théodore, chief executive of Euronext, is still on the loose.
In an unlikely paean to Rhenish capitalism, Seifert’s book – to date published only in German – calls for Hohn and his ilk to be caged before any more damage is done to the world’s businesses. In particular, in an open letter at the end, he asks European finance ministers for harsher treatment of “acting in concert”, which enables a minority of shareholders to rob the majority of their will. Punishment, he says, should include an immediate suspension of the culprits’ share voting rights by the regulator once acting in concert is suspected and financial penalties that pose an “existential risk” to the guilty.
He asks for a loosening of “antiquated” restrictions on traditional institutional investors and asset managers (who are forbidden to take short positions) in order to remove part of the raison d’etre for hedge funds; he asks for more transparency for all actors on the developed world’s capital markets, including those “registered on the Cayman Islands”, so that the hidden conflicts of interest built into some hedge fund positions are revealed. In particular, he thinks that short positions should regularly and promptly be disclosed. Above all, the day-to-day running of listed companies should remain with their executive boards and must not be handed to shareholder activists – not least, he argues, because this gives them privileged access to information and so renders them insider traders.
So, what turned a self-professed proponent of capital markets in general – and share ownership in particular – into a passionate enemy of shareholder activism and a champion of traditional German corporate governance? How does an ex-McKinsey man – and this is an irony Seifert admits to – find himself expanding in such lurid terms the anti-capitalist rhetoric of the former chairman of Germany’s Social Democrats?
“Locusts” has quickly become the accepted German tabloid name for hedge funds and other turbo-capitalists since Franz Münterfering used the term to add class-war spice to Gerhard Schröder’s unsuccessful re-election campaign in the summer of 2005. Seifert takes it into wide-screen surround-sound, referring repeatedly to insect clouds on the horizon, humming wings and the like. He seems to believe the metaphor. Seifert is seeking the broadest possible audience for his revenge, too. The book, with its references to jazz concerts, pipe-smoking and grillfests, is pitched – not entirely successfully – at a folksy, teacherly level, accessible to the suspicious German grandmother with a handful of troublesome Deutsche Telekom shares, and addressed directly as an appeal to the politicians who could supposedly regulate hedge funds back out of Germany AG’s boardrooms.
On the December 13, 2004 Deutsche Börse made public its offer to buy the London Stock Exchange for 530 pence per share. This was in the wake of an abortive merger in 1999/2000 (iX), and a number of false dawns with Théodore, whom Seifert has a colleague liken to Inspector Clouseau.
From today’s perspective, the price Seifert offered 16 months ago looks like a steal – the LSE share price was trading at over 1,000 pence at the start of April. But Chris Hohn of TCI, whose holding in Deutsche Börse went from under a measly 2% to around 8% during the drama, alleged over the following months that this was a misuse of shareholder’s money; that LSE was worth half the price; and, most importantly, that the way in which the decision had been made to bid breeched shareholders’ right of say and raised serious corporate governance issues.
Hohn was joined by a significant handful of other minority investors, who are named from time to time but are not the focus of Seifert’s bitterness. Hohn is treated as the embodiment of the problem, and the ringleader of a group that Seifert suspects acted in concert.
The nasty personal power-struggle that unfolded between Hohn and Seifert culminated – after the abandonment of the LSE takeover and a massive share-buy-back programme – in the latter’s ejection from the Börse. Forming the centrepiece of the book, Seifert regards this as a symbolic battle between the pernicious minority, short-term “Anglo-Saxon” investors in search of alpha and the heroic, serious long-term investors interested in the commercial health and sustainable profitability of the corporation.
Seifert, who describes Hohn as “that weirdo in the corner at a party” and someone “who probably couldn’t find the ‘on’ button of a pocket calculator”, claims not to know to this day what Hohn “actually wanted”.
The tale, it seems, boils down to an offer of friendship that Seifert unwittingly rebuffed, and the revenge that a spurned Hohn sought to wreak. TCI is said to have called a member of the Deutsche Börse advisory team directly after the acquisition announcement to offer their full support and to do “everything in their power” to prevent a counter-bid from Euronext.
