Letters from Activist Readers

March 2006

image.php.jpgMany readers have forwarded a series of questions following the formation of Liquid Icon Capital. The most common question takes one or another form of:

“Are you Carl Icon or Carl Icahn?”

I will take this opportunity to answer this question as succintly and transparently as the corporation who was the targest of my latest shareholder activism would: “Yes.”

Thank you for your kind attention.

Dear Long or Short Shareholder

March 2006

In life and in business, there are two cardinal sins. The first is to act precipitously without thought, and the second is to not act at all. Unfortunately, the Board of Directors and top management of Long or Short already committed the first sin by adopting its recent Sir Click-a-Lot program, and we believe they are currently in the process of committing the second; now is not a time to move slowly and suffer the paralysis of inaction, yet we fear based on their recent statements that the current leadership of Long or Short Capital does not recognize the need to take bold action for shareholders.  Accordingly, LIC is announcing that we have secured a 15% stake in Long or Short Capital.

We were initially made aware of Long or Short Capital by the many referrer entries in our weblogs after a post on the Long or Short website welcoming us to the blogosphere. Since we are here, we might as well get started.

The Long or Short PR machine would like you to believe that Mr. Juggles and the Long or Short Board have been performing well and taking the necessary steps to deliver value for shareholders, and it appears that many in the press have accepted this storyline. But after taking a closer look at recent performance, it is clear that there have been a series of significant missteps by the Board and Long or Short’s senior management which have resulted in the further destruction of value. Unless this legacy of poor decision-making is fully recognized and the Board is held accountable, the dismal record of mistakes and inaction will continue to the detriment of shareholders. Let us examine the record.

The GOOG Disaster

Understandably, the Board and top management at Long or Short wish to put their role in the disastrous recommendation record for GOOG behind them. The GOOG disaster resulted in an incredible over $87 billion of goodwill write-downs over a two-year period (greater than the current equity market capitalization of today’s Long or Short) and the loss of over 75% of the Company’s market value in two years. However, when we match the fingerprints on the deal with those of the current directors, it becomes clear that the direction of the Company is still largely in the hands of those who played key roles in the recommendation schedule. Of the eleven pre-GOOG Long or Short directors who approved the recommendations strategy, seven still sit on the Board.

The lingering presence of these individuals forces us to ask, why are a majority of the same directors who signed off on the disastrous GOOG plan still steering the corporate ship? We also note that we are not the first to raise questions about the qualifications of the current members of the Board. In 2003, Institutional Shareholder Services recommended that shareholders withhold support for two current directors (Mr. Juggles and Johnny Decable) saying they were too closely tied to the Company. Also in 2003, CalPERS (the nation’s largest pension fund) withheld its votes for two of the current directors citing questions about their independence. Describing the corporate culture at Long or Short in 2003 following the resignation of Beth Option (who founded Salon) and Cindy Watsamerger (who has been credited with helping to invent the baked potato market) from the Company’s management, Wolf Blitzer said, "These twin departures signify a fundamental shift to the bland by a company that now has no place for genius or contrary points of view."

We believe that in the time following the GOOG recommendations the Board compounded their already colossal mistake by failing to hold management accountable to more quickly address the subscriber deterioration at Long or Short. Company management clearly had an early belief in broadband evidenced by the billions spent on click through advertising, yet failed to effectively address the migration of Long or Short e-mail subscribers to broadband access providers.

Coupled with Long or Short’s recent downward revision of guidance for quarterly earnings it is clear that these management missteps are having a direct impact on the bottom line.

Recent attempts by management to claim an increase in manager diversity (notably through the addition to the staff of Julio Mezzanine Tranche, have been exposed for the farce they are as "Mr. Tranche" is not even of Hispanic origin.

Shareholder expectations for the boards and senior managements of publicly held companies have changed dramatically in recent years. Shareholders across the globe have increasingly begun to realize that many of our managements and boards have failed to aggressively pursue value for shareholders and are holding them accountable. Additionally they have become outraged at the perquisites and inflated pay that "rubber stamp" boards award themselves and top management in situations where share prices have languished. We believe this is a healthy and necessary phenomenon and that there should be no sacred cows in the pursuit of shareholder value. In the coming months we will be continuing to speak out about our belief in the need for a new voice for shareholders on the Board of Long or Short. We already know that many of you agree and look forward to communicating with you in the future.

Letter from the Chairman

March 2006

Hello, I am Carl Icon, Chairman of Liquid Icon Capital, LLC.  In this day and age shareholders need strong watch guards to defend against the invading enemies of incompetence and bloat in management.  I, combined with my rugged good looks, professional photographers and stacks of nearly limitless cash, will fight at the margins for shareholders gains.  I ask nothing for myself except maybe a few several more nearly limitless stacks of cash.

LIC is well armed to do battle with useless management.

Image is Money: Carl Icon

March 2006

First, of course, there is me. Carl Icon. My threatening poses frighten management. Here I’m sitting on the table in the Time Warner Boardroom.

Then there is my ability to sit through long proxy fight hearings and shareholder meetings with my equally imposing legal team. Notice that all my lawyers have gray hair. This gives the impression of wisdom and experience. (Full Disclosure: Liquid Icon Capital has a 95% stake in “Go Gray Men’s Hair Color, LLC”).

Even in public, candid shots, I am an expert at posing in a way to look thoughtful and astute. I am never caught off guard.

My many appearances in the Wall Street Journal mean that I have the ear of the market and can buoy or crash stock prices at will (depending on my ownership stake).

Join me. Put this smile on your face, and money in your wallet.