An Indecent Proposal Indeed

Oh it's late, but reader 212213 has brought to my attention Warren Lichtenstein's proposal (as reported by Reuters) to float "his" Steel Partners II Fund in order to errrr ummm attempt to do something redeeming. No... redeeming is not the correct word for that is what most of his investors would like to do following their 40% smelting. Irredeeming is perhaps the more apt term. For it would seem that the hedges so carefully and scornfully explained to dear Cassandra in the comments section of this post perhaps by Mr Lichtenstein himself (or one of his soon-to-be unemployed lackeys) would seem not to have quite worked out the way Mr Lichtenstein (or lackey) suggested they would. But the Lord workeths in strange and mysterious ways. Particularly the God of the Old Testament who was forever smiting that which wasn't entirely kosher and even some that were. Ignoring that, Mr Lichtenstein's fate should come as no surprise to readers of this blog, or anyone with even a double-digit intelligent quotient, for rarely was there a more cockamamied harebrained and self-serving basis for an investment fund than this one. And now, having left investors exposed to the elements and rusting; now, with only Pig Iron left of the Steel, Mr Lichtenstein would like a vote of confidence that would in effect grant him permanent capital in order to lighten his Limited "Partners" of yet more money.

I admit that I haven't seen Steel's letters to investors explaining recent performance or proposing a solution to the situation highlighted by Reuters. But I can tell you with certainty that a perfect storm was NOT responsible, but near-fraud, and almost-certain neglectful misrepresentation and stupidity are to blame. Strong stuff, yes, but below are the posts - most which in hindsight were reasonably prescient - which detail what in my market vernacular is a more cynical form of ponzi for it attempts to justify the scheme with bullshit bullshit bulllshit, to veneer over the S.O.P. of using the weight of NEW INVESTOR money to buy monstrously concentrated positions in illiquid securities at higher and higher prices. And as much as I hate reading old posts, it is worth trolling through these for the record.

Be Careful What You Wish For
December 27th 2005. Ruminates upon the differences between American and Japanese systems, introducing Activists (and Steel) as forces to be evaluated (then dismissed).

New Shock & Horror: Livedoor Fraud!! January 17 2006 Near-fraud and market manipulation discussed as adjunct to Horie's Livedoor shocker (or not).

Pirating Buccaneering and Steeling October 4th 2006 Detailed analysis of Tom Hudson's (Cap'n Hook?) bizarrely hilarious problems and activism in Japan. I think this was a great post, (please read!!) which foretold with uncanny accuracy The Great Unraveling of activists. Yet sadly all it achieved were two Spammer comments. Ummm I guess the Fund of Funds and Steel investors' missed this one...

Bully Steels Candy From Baby November 29, 2006 Brief discussion of the "sacrifice" of Myojo Foods, forcing its sale to Nissin (#2897), and paying the greenmailer Stel, rather than letting the unworthy carpetbaggers get their smelly paws on one of the crowning achievements of the corporate food industry in Japan: Instant Noodles!

How Do You Hide An Elephant?!? December 22 2006 Analysis of large-shareholder reporting shenanigans in japan. Porsche must have read this one...

Man of Steel May 8th 2007 See them here!! Photos of the camera-shy activist in Korea taken from the sacking of KT&G meeting. How tall is he?!?!

9513 to TCI: "......"%#&k &##" ! June 4th 2007 Like the waves of cannon fodder in WW1, yet another foreigner storms the fortress. Forecasts [correctly] the travails of TCI, and Steel.

When You Wish Upon A Star June 6 2007 Included some mention about Steel Partners and Tokyo Hostess Bars

Reprint of Bulldog Sauce Letter to Steel (In Full) June 12 2007 Very funny (at least I thought so, but no one else commented!) reprint of mock-letter from Bulldog telling Mr Lichtenstein to "Please Fuck-Off" [again]...

Team Japan 1 - Activists 0 June 30 2007 Detailed look at the implications of TCI vs Japan Power suggesting patience will be the victor. Remember Muhammad Ali's famous rope-a-dope?!?!

Megan's Law For Activists in Japan
July 19th, 2007 Comment on the labeling of Steel as "An Abusive Acquirer..."

Team Japan 3 - Carpetbaggers 1 July 24 2007 Yet another hostile acquirer rebuffed. Score now? See the board....

The World in 2008 - A Sneak Preview December 17 2007 My forecasts for 2008 including the demise of Steel Partners. Pretty damn good overall (Naked Capitalism highlighted it because of the unrequited forecast that Condi Rice would leave like a rat on a sinking ship. The one I am most proud of: "The best investment in 2008 will be disinvestment..." Need I have said more?

A Kindler Gentler Kind of Greenmailer May 6 2008 Recap of late-innings desperation by Steel to be nice and ask kindly for management to b uy their large unmarketable stakes in highly illiquid enterprises. Foretold of doom to come....and now arrived. I think this one was VERY funny, but as with most of the things I think are VERY funny, few others do...at least judging by the comments

A Bad Hair Day For Aderans' Management May 29, 2008 This is was one that jerked the chain of someone in Steel's organization. He rudely and amateurishly tried to argue the case, and then finally shut-up at the suggestion that Steel be transparent and show the time sales & prices to dispel the notion that it was a market-impact trade on illiquid securities. THIS IS A MUST READ IF ONLY FOR THE EXCHANGES IN THE COMMENTS.

Effingly Absurd Efforts July 22 2008 Effingly amusing post actually about home grown Steel imitator Effissimo, rooting for the lions to finish Steel off and put them out of their misery.

So where does the proposal leave investors? Between a rock and a hard place. Vote to float, and the ingrate who got you there is rewarded. Redeem, and you will get royally buggered on the exit, or perhaps pursuant to the fine-print, payment-in-kind which would be a rag-tag-bag of illiquid stakes in cheap-for-a-reason enterprises.

But the audacity of the suggestion is what should incense investors most of all. It would be like being a customer at a restaurant where you've been very obviously poisoned by the appetizer and main courses, so much so, that you've bee rolling and vomiting all over the floor and now are dry-heaving bile, when the owner personally comes up to you and smarmily asks what you'd like for dessert, and whether you'd like to reserve the same table next week, same time.

The Directors should fire Mr Lichtenstein and appoint a new manager to unwind the book WITHOUT FURTHER ENRICHING THE EXISTING MANAGER. Someone errrr like me!??!? Well, at least I would charge reasonable fees, be trying to figure out how to get my investors out of the Steel Partners Hell-hole rather than partying with Denise Rich in St Tropez, and not be self-serving other than put a bit of grub on my family's table, and perhaps most importantly, I would - as I have always been in the past - and contrary to current management, be a true and proper fiduciary.