Eastern Railroad Discussion > OT: Our friends at Ancora

The Wall Street Journal has a short article on Ancora Investments of Cleveland, and its role in the investor universe. Basically, Ancora sees itself as the champion of the small investor, dislodging well paid but not always well performing managements to provide value for shareholders. The company starts from the premise that the shareholders own the firm, and it is their money. They want their money to produce value for them, and not be wasted. One difference between Ancora and other shareholder activists, the article says, is their close links with organized labor. They manage money for unions, and have close relationships with prominent politicians including JD Vance. 

Unlike some activist shops, they don't actively seek more investment. When they need money to buy into a firm, they have a network of relationships which produce cash quickly.They produce substantial returns, year in and year out.

https://www.wsj.com/finance/investing/one-of-wall-streets-fiercest-activist-investors-is-in-ohio-c53a30d8?mod=hp_lead_pos9
 

What private equity and hedge funds quickly forget is they are playing in the secondary market. Their owners are not the original investors unless they are buying into a startup situation.
Usually that is not the case.

All they do is analyze the current management. The initial investors are mostly gone.

They may produce substantial returns but they are killing the business in the process by leaving it without the resources to get its actual job, transportation in this case, done properly and done long-term. 

I will once again share my view on stock purchases. My opinion is that when you buy stock, that is a vote of confidence in the management and direction of the company. If you lose confidence, you sell your stock. It is not the stockholder's job, regardless how much stock you own to try to run the company. Outfits like Ancora are nothing more than parasites that devour host organisms for their own nourishment. If they think they are so damn smart, they should start their businesses instead of wrecking everyone else's. Parasites.

Posted from iPhone

junctiontower Wrote:
-------------------------------------------------------
> I will once again share my view on stock
> purchases. My opinion is that when you buy stock,
> that is a vote of confidence in the management and
> direction of the company. If you lose confidence,
> you sell your stock. It is not the stockholder's
> job, regardless how much stock you own to try to
> run the company. 

Until the 1950s in the US, that was the prevailing view.  The share owners voted for directors. It was the job of the directors to hire, oversee, reward or fire managers.  As managers became more powerful and directors became more removed, the balance of power changed.  The CEO influenced and sometimes even selected the new directors. Directors failed and continue to fail in their responsibility to  oversee managers,  Hundred million dollar and billion dollar pay packages emerged. Directors sat on each others' boards, and became reluctant to discipline where necessary.

A peek at an Official Guide from the 1930s will show most of the directors are New York City investment bankers, representing the bond holders and lenders to the railroads. They wanted their bond interest and the eventual return of their principal.

Lackawanna484 Wrote:
-------------------------------------------------------
> The Wall Street Journal has a short article on
> Ancora Investments of Cleveland, and its role in
> the investor universe. Basically, Ancora sees
> itself as the champion of the small investor,
> dislodging well paid but not always well
> performing managements to provide value for
> shareholders. The company starts from the premise
> that the shareholders own the firm, and it is
> their money. They want their money to produce
> value for them, and not be wasted. One difference
> between Ancora and other shareholder activists,
> the article says, is their close links with
> organized labor. They manage money for unions, and
> have close relationships with prominent
> politicians including JD Vance. 
>
> Unlike some activist shops, they don't actively
> seek more investment. When they need money to buy
> into a firm, they have a network of relationships
> which produce cash quickly.They produce
> substantial returns, year in and year out.
>
> https://www.wsj.com/finance/investing/one-of-wall-
> streets-fiercest-activist-investors-is-in-ohio-c53
> a30d8?mod=hp_lead_pos9
>  

"When they need money to buy into a firm, they have a network of relationships which produce cash quickly."

This ties in to the opinion I've voiced here on TO before--that Ancora is a sock-puppet for Blackrock, State Street, etc.

The big guys don't want the regulatory oversight that comes with being an "active" investor. So they claim to be "passive" investors while exerting their activism through sock-puppets like Ancora.

> It is not the stockholder's
> job, regardless how much stock you own to try to
> run the company. 

What happens when the people running the company are incompotent, such as Penn Central's management?  Should they just be allowed to keep stealing investor's money year after year?  Should there be no discipline from the market?

ctjacks Wrote:
-------------------------------------------------------
> > It is not the stockholder's
> > job, regardless how much stock you own to try
> to
> > run the company. 
>
> What happens when the people running the company
> are incompotent, such as Penn Central's
> management?  Should they just be allowed to keep
> stealing investor's money year after year? 
> Should there be no discipline from the market?

Indeed, stock is an equity position ... an ownership stake. If it is not the job of stockholders to run the company, whose job is it ?  How do you think management is chosen?
That is the whole foundation of equity ownership. Bondholders can also have a say too, especially in a reorganization or bankruptcy but they are debt holders. And why would I buy into an equity position with no say or input on running the company. 

PC was a mess and there are some good articles to digest:

Commercial Short-term paper scandal involving Goldman Sachs:  https://archive.triblive.com/local/local-news/how-goldman-sachs-killed-penn-central/
Short term paper is shr=ot term debt funding.

And a bigger treatise on the whole debacle dealing with both debt, equity (stock ownership) and government involvement: 

https://www.sechistorical.org/collection/papers/1970/1972_0803_CollapsePenn_1.pdf

Article related to Department of Defense Guarantees of $50 million in short term bank loans - June 1970 - https://www.nytimes.com/1970/06/10/archives/federal-backing-for-penn-central-on-loans-pledged-defense.html

Then the reversal of those plans reported on June 20, 1970 - https://www.nytimes.com/1970/06/20/archives/us-withdraws-backing-of-loan-to-penn-central-us-decides-not-to.html

That reversal was the final nail in the inevitable coffin that threw Penn Central into bankrputcy.



Edited 6 time(s). Last edit at 03/04/26 09:31 by train1275.

Bandito Wrote:

> This ties in to the opinion I've voiced here on TO
> before--that Ancora is a sock-puppet for
> Blackrock, State Street, etc.
>

That is an oversimplification Go down the rabbit hole sometime and chase down who owns what.  

The "Big 3" - BlackRock, Vanguard, State Street - manage around $21 Trillion in assets. $21,000,000,000,000   That's a big numbers.  Let's put that is prospective.  If the Big 3 was a country, they would have the second largest GDP behind only the US, just ahead of China.  $21 Trillion is bigger that the COMBINED GDP of #3 Germany, #4 Japan, #5 India, #6 UK, and #7 France.   

The S&P 500 - the Standard & Poors 500 - that is a stock market index tracking the performance of the 500 largest publicly traded US Companies - it takes the 500 largest companies traded on the NYSE and NASDAQ, based on size, liquidity, and sector representation.  Any one of us who has a 401K, Pension, Annuity, Insurance, or any other sort of investment vehicle short of hiding Benjamins under your mattress, is going to be invested in a S&P 500 index fund in some shape or form.   S&P 500 is considered THE proxy of the U.S. Equity market, the overall economy, and its near-term trends.  Falling out of this index has serious financial consequences to a company's cost of capital, so once you are in that index, you will do what you need to do to stay in that index.  Looking strictly at these 500 companies, one of the Big 3 is THE LARGEST SINGLE OWNER in 438 of the 500 companies.  Those 438 companies make up 82% of the S&P 500's market cap.  Then add #4 Fidelity into the mix, and those 4 companies control roughly 1 in 5 shareholder votes in every publicly traded company in the US.   This is Public Equity as opposed to Private Equity.

Ancora is a Private Equity firm.  Private Equity by the purest definition is investments in companies that are NOT publicly traded on stock exchanges.  But modern PE's are often more of an activist investor than the public equity folks.  Often, they raise capital from private sources or use debt financing to acquire on publicly traded companies or to take a significant stake in a publicly traded company, usually with the goal of increasing their value thorough active management and strategic improvements.  Those private sources often include institutional investors, insurance companies, banks, and high net-work individuals. The investment horizon for a PE varies - they vary from near-range (1-3 years), mid-range (4-6 years) , or long-term (7-10+ years)

Ancora started in 2003 as a "boutique" family wealth management firm for high net worth individuals, institutions, foundations, and families, predominantly in the greater Cleveland area.  Fred DiSanto is the CEO, has been since 2006.  Trivia on him is he his the ONLY Case Western University student athlete to letter in all four year is Football, Basketball and Baseball.   As a result, he is one of Case Western's largest benefactors.  He's also one of the one working with the Haslams in building a new domed stadium for the Browns.  Anyway, back to ownership - in 2021, Ancora was sold to/merged with Focus Financial Partner - this gave Focus better contact with Ancora's high net-worth Midwesterners, and gave Ancora greater back-office capabilities and ability to work with other Focus partner firms.  Focus Financial was then sold in 2023 for $7 billion to Clayton, Dubilier & Rice.  Ancora remains a subsidiary of CD&R.  CD&R is the 9th largest Private Equity firm in the world.  Just outside looking in, it seems that CD&R's uses Ancora to handle a lot of the near and some of the mid range stuff.  

Stephen Angel (of death) is CEO directly as a result of Ancora.   His salary is $1.5 million with bonus target of 175%, so if company make all goals for each year he gets a $2.625 million bonus. That is public information  He also has a severance and equity plan, which is more difficult to see the details publicly, but it was explained to me, it is a long term" incentive plan granting $13.5 million in stock which vest over the next few years (I've seen 3 years quoted but not sure how accurate).  If 3 years is correct, he is getting $4.5 million in stock a year for each of the next 3 years.  The "severance" portion reportedly is  the company is sold to another carrier, or is sold off piecemeal to multiple other entities, and CSX exists the railroad business, he gets a 3X salary/bonus severance, plus is able to sell his vested stock.  There's no way CSXT is going to sell AND have sale CLOSE in a year - very unlikely in two - simply not happening that fast.  Year 3 or beyond is more likely.  So, year 3 and beyond, if company hits all goals and he gets full bonus the year before the sale closes, he earns $1.5 million and $2.625 bonus for total compensation of $4.125 million for that year and is sitting on stock with a $13.5 million "cost" which is likely trading higher than when it was issued to him, so value is greater than $13.5 million  If company sells, and he gets his 3X bonus, he get $12.375 million compensations plus sells his stock - if sale is at market, probably 18-20 million easy. If he also gets the 3X bonus for his stock too (as some have said) - that's $54 plus $12 for a total of $66 million.   That's 32 million to 66 million or more reasons Angle is not looking for CSXT to be a long term going entity - he is goal is to raise short term return to maximize bonus and sell company - PERIOD. 

 

I'm not a fan of letting the stock holders run the company, or even supervise management. I do see advantages in letting a family run the company (like the Waltons did with Walmart), but there are a lot of disadvantages too. 

The railroads, in particular, have a nice middle ground in the US economic system. They are utilities in all but name, but not subject to utility like regulation. Think pipe lines and the extensive federal regulation.  Or banks and insurance companies with limits on dividends and buybacks until certain financial criteria are met. They are unregulated free market companies too (able to set rates, offer or withdraw service, provide shoddy service, etc) without serious penalties or risk of competition. 

The "Big 3" as scraphauler elegantly described, control enough of the voting shares of most large companies. We saw that with CP CSX CP+KCS etc. Get a few big owners on your side and screw everyone else. 



Edited 1 time(s). Last edit at 03/05/26 05:59 by Lackawanna484.

ctjacks Wrote:
-------------------------------------------------------
> > It is not the stockholder's
> > job, regardless how much stock you own to try
> to
> > run the company. 
>
> What happens when the people running the company
> are incompotent, such as Penn Central's
> management?  Should they just be allowed to keep
> stealing investor's money year after year? 
> Should there be no discipline from the market?

The discipline is to sell your stock. When the stock value drops to a certain point, the board will be forced to take corrective action. In the case of Penn Central, Saunders, Bevan, and some others should have been sued into oblivion for grossly misstating the complete financial health of the company, and most of the board should have been sued also for negligence in their duties. They might be able to be excused for being kept in the dark, but once the very real signs of trouble began to appear, only a couple were brave enough to ask the uncomfortable questions. The ones who didn't should have been thrown to the wolves.

Posted from iPhone

Regarding Bevan and Saunders, there is plenty of interestng reading out there ...

https://www.nytimes.com/1977/03/14/archives/exaides-of-penn-central-freed-in-misuse-of-funds-bevan-and.html

https://www.nytimes.com/1972/01/05/archives/21million-fraud-at-penn-central-is-charged-to-3-bevan-exfinance.html

https://content.time.com/time/subscriber/article/0,33009,908607,00.html

train1275 Wrote:
-------------------------------------------------------
> Regarding Bevan and Saunders, there is plenty of
> interestng reading out there ...
>
> https://www.nytimes.com/1977/03/14/archives/exaide
> s-of-penn-central-freed-in-misuse-of-funds-bevan-a
> nd.html
>
> https://www.nytimes.com/1972/01/05/archives/21mill
> ion-fraud-at-penn-central-is-charged-to-3-bevan-ex
> finance.html
>
> https://content.time.com/time/subscriber/article/0
> ,33009,908607,00.html

Amazing to me how everyone pretty much was allowed to walk with nothing but damaged reputations. Saunders may not have been in any criminal violation, but he should have been sued off the planet for his shell game to hide Penn Central's true financial situation, and in my opinion, Bevan was not only guilty of actually carrying out that shell game, but criminally liable for insider trading. How he skated on that one baffles me. And that doesn't even cover all the conflicts of interest with the board of directors, which while not illegal, was certainly unethical, and it doesn't seem like it would have been all that hard to make a civil case for them putting their own firm's interests ahead of the interests of the stockholders at large. If there was ever a case of fiddling while Rome burned, this would be it. Evidently nobody on the board EVER looked close enough at the financial statements to realize that Penn Central Transportation's balance sheet was ONLY being propped up by plundering subsidiaries, inflating the value of questionable properties, extraordinary write offs, and claiming payments pledged but not received as revenue until it was FAR too late. Never mind continuing to pay dividends and investing in other companies while the railroad hemorrhaged money. The whole episode SHOULD have been what triggered a whole new look at how large publicly traded corporations are are allowed to operate, but it seems like everyone was more interested in burying the bodies and moving on.

Posted from iPhone

junctiontower Wrote:

>
> Amazing to me how everyone pretty much was allowed
> to walk with nothing but damaged reputations.
> Saunders may not have been in any criminal
> violation, but he should have been sued off the
> planet for his shell game to hide Penn Central's
> true financial situation, and in my opinion, Bevan
> was not only guilty of actually carrying out that
> shell game, but criminally liable for insider
> trading. How he skated on that one baffles me.
> And that doesn't even cover all the conflicts of
> interest with the board of directors, which while
> not illegal, was certainly unethical, and it
> doesn't seem like it would have been all that hard
> to make a civil case for them putting their own
> firm's interests ahead of the interests of the
> stockholders at large. If there was ever a case of
> fiddling while Rome burned, this would be it.
> Evidently nobody on the board EVER looked close
> enough at the financial statements to realize that
> Penn Central Transportation's balance sheet was
> ONLY being propped up by plundering subsidiaries,
> inflating the value of questionable properties,
> extraordinary write offs, and claiming payments
> pledged but not received as revenue until it was
> FAR too late. Never mind continuing to pay
> dividends and investing in other companies while
> the railroad hemorrhaged money. The whole episode
> SHOULD have been what triggered a whole new look
> at how large publicly traded corporations are are
> allowed to operate, but it seems like everyone was
> more interested in burying the bodies and moving
> on.
>
> Posted from iPhone

"Too big to Fail" was a serious problem back then, too. Nobody wanted to plan for a post-PennCentral world. And many pension funds etc were trying to unload their bonds before the scope of the problem became widely known. Politicians didn't want that cow path of a branch in their district abandoned. No consensus on what should be done.

US securities laws are MUCH more stringent today than they were in the 1960s and 1970s. Disclosure of conflicts, etc.  But, even now, pardons can be purchased for people convicted on clear and convinvincing evidence.  Back then you could lie openly but carefully and not be guilty of any crimes.

Wreck of the PennCentral has a lot of eye opening inside details.  And Roger Grant's massive E-L book has a good outsider's view of the rival.

There's a lot of action in the "predictions" market, where well connected people made millions on Venezuela attack bets, Iran bombing bets placed a few hours before the info became public.Not strictly illegal under securities laws.

junctiontower Wrote:
-------------------------------------------------------
> in my opinion, Bevan
> was not only guilty of actually carrying out that
> shell game, but criminally liable for insider
> trading.

A jury disagreed.

pennsy3750 Wrote:
-------------------------------------------------------
> junctiontower Wrote:
> --------------------------------------------------
> -----
> > in my opinion, Bevan
> > was not only guilty of actually carrying out
> that
> > shell game, but criminally liable for insider
> > trading.
>
> A jury disagreed.

Either the prosecution was incompetent, or the jury was clueless.

Posted from iPhone

1977  NY Times article on the judge's dismissal of charges against Mr Bevan and others. No evidence of personal benefit was presented.

https://www.nytimes.com/1977/03/14/archives/exaides-of-penn-central-freed-in-misuse-of-funds-bevan-and.html

Him and his pals were buying stock in companies, and then guiding his employer to buy lots of the same stock, which at least in theory should have driven the price up. As it all played out, Bevan may not have ended up profiting that much, but that doesn't mean the intent wasn't there. The fact that they chose stocks that ended up being dogs doesn't absolve him of anything.

Posted from iPhone