Recently, there have been several high profile examples of CEOs of major corporations coming under pressure from the press, some using investigative reporting to “the the president down” or have enough impact to make changes to the board. However, behind the scenes there are ways in which the investor base can have enormous impact by applying collective pressure. Here is how it works.
You as an investor have power, actually more power than you may think. Let’s say the you, and other members of your family, your friends down the street each put $500 dollars or 50,000 yen into a mutual fund. And on top of that, you are a member of a fire department in your town and your town has a pension fund that public workers participate in, just like teachers and airport workers. You see where this is going, right?
Hundreds of towns and cities, both private and public pension funds and mutual funds collect hundreds of billions of dollars, trillions of yen, and invest that money into into bonds, equity markets and other investments. The portfolio mangers in these funds have an obligation to you and your $500 dollar investment and to your 20 years of investing in the pension fund, he or she must make money for you. The 401K and the pension fund systems are pools of trillions of dollars – some of that money buys stocks, FAANGs and specifically, Facebook.
Remember there are thousands of fund mangers who sit on top of pools of money that belongs to individual investors like you and me and when they lose money – you and I threaten to take our investments elsewhere.
Facebook Makes Mistakes and Investors Are Punishing This Company – CEO Zuckerberg will suffer now.
We have talked about mismanagement of companies, especially those in the FAANGs space recently. Some of these names have suffered because of the lack of experience from the board of directors – have a look at our recent audiovisual presentations on Facebook – so the stock suffers when management drops the ball. People lose money and employees lose jobs.
In the past 4 months, Facebook stock has suffered because of the punishment of sellers, many times those portfolio managers mentioned above in this piece. When they sell collectively all investors see the stock price drop, 40 percent in the case of Facebook in 4 months, and each investor, every $500 investor makes noise. Currently, thousands of portfolio managers who are losing face because of their poor performance are calling the board of Facebook and asking for changes. It happened to Elon Musk at Tesla and now it is happening to CEO Mark Zuckerberg at Facebook – some investors are telling the board he must leave….
Today is November 27, 2018. Our prediction at Classiarius is that within 2 months, Mr Zuckerberg will be forced to leave or to place some senior managers around him to keep an eye on his team. If he doesn’t, investors may destroy the stock and inflict pain on Facebook from which it will never recover.