Forest Labs Stock

Carl Icahn and Forest Labs: The Uphill Crusade and the 'Show Trial'

Tomorrow, Carl Icahn’s latest crusade will come to end. Will he be happy at the end? Or will the crusade end in tears?

Icahn owns 9.2% of Forest Labs stock, and he has been campaigning to have four of his nominees voted onto the board, instead of director candidates picked by Forest Labs. The director vote is slated for Thursday.

Icahn has stuck to his familiar blueprint in the campaign against Forest Labs.

Icahn’s M.O. is to buy stakes in companies and then publicly insult their financial performance or governance, attempt to push out board members and press for corporate or strategic changes he believes will improve the company’s stock price. As Bloomberg News pointed out, the Icahn technique works sometimes.

In the case of Forest Labs, Icahn has said the board is packed with cronies, management succession planning is a mess, and performance has lagged.

Icahn, however, lost some ammunition in his effort to woo Forest Labs investors to his side.

The government earlier this month dropped a threat to exclude Chairman and CEO Howard Solomon from government healthcare programs such as Medicare. Icahn had glommed onto the threat — based on allegations of marketing misdeeds the company had settled — as evidence of the board’s failures to exert its control over the company and to plan for successors to Forest Labs’ 83-year-old CEO.

Then last week, influential shareholder adviser Institutional Shareholder Services recommended stock holders vote for all the Forest Labs board nominees, rather than for Icahn’s board candidates. The recommendation appears to make Icahn’s fight a uphill one, though investors don’t always vote with ISS on contentious topics.

ISS disagreed with some of Icahn’s arguments against Forest Labs, including the investor’s argument that Forest Labs shouldn’t have paid to defend CEO Solomon from the government action.

But ISS in its report did agree that Forest Labs’ shareholder returns have underperformed its peers. ISS also said it was concerned about Forest Labs’ disclosures regarding management succession. And the proxy adviser raised questions about the role Solomon played in board meetings to decide on how Forest Labs should respond to the government’s plan to exclude Solomon from healthcare programs.

Clean-sweep victory looms for Forest Labs CEO - In the Markets ...

] After Forest pleaded guilty last year to one felony and two misdemeanor charges for selling an unapproved drug and encouraging doctors to prescribe children an antidepressant that was authorized only for adult use.

The administration’s move to oust Mr. Solomon generated a lot of attention in corporate circles, because while the government has pushed out other pharmaceutical executives who pleaded guilty to criminals acts (such as misbranding Oxycontin), the Forest CEO was never personally charged with wrongdoing. His company did agree to pay $313 million in penalties.

But earlier this month the administration decided to drop its quest to oust Mr. Solomon. You can read more about that decision here.

Mr. Solomon’s next victory is expected to come Thursday at his company’s annual stockholders meeting. There, investors are expected to vote in favor of electing the company’s slate of nominees to the board and reject a rival group proposed by Mr. Icahn.

Mr. Icahn, who owns more than 9% of the company’s shares, pointed out that the large fine paid by Forest to settle the criminal case raised questions about the effectiveness of the board’s oversight and noted that stock trades for less than half its peak level from seven years ago.

While Mr. Icahn’s slate of four nominees seemed to have a reasonable chance at gaining board seats a few weeks ago, influential advisory firms like Institutional Shareholder Services argued that the renowned activist investor failed to make a compelling case for change in the boardroom.

Assuming Mr. Solomon prevails, he’ll still encounter big challenges running Forest, which faces big drops in sales and earnings in the coming years as patent expirations take away its exclusive rights to big-selling drugs like Lexapro.

Nice blog would like to add that NSE and BSE are one of the most superior stock exchanges of India. If you wish to earn good money from the share market then you need to understand the functionality of the stock market properly.

Technical analysis of stock trends

The Forest

The five rules for successful stock investing, Morningstar's guide to building wealth and winning in the market

In the forest

The Forest