Yesterday, hedge-fund activist investor Daniel Loeb did for aesthetic-laser maker Candela (Nasdaq: CLZR) what its management has so far been unable to do: He moved the stock up nearly 10%. The Third Point LLC CEO reported yesterday that he had acquired an 8.7% stake in the laser manufacturer. Expect things to get interesting from here.
If you're familiar with any of Loeb's tirades, you know that Candela's management can't be sitting too comfortably right now. Loeb has a penchant for moving in on a distressed company and shaking things up.
PDL BioPharma (Nasdaq: PDLI) recently got a dose or two of Loeb's acerbic wit when he chastised management for its profligate spending and inept management. As Motley Fool Rule Breakers biotech analyst Charly Travers reported, Loeb wrote, "How can [PDL BioPharma CEO Mark] McDade purport to effectively run a public biotechnology company with a market capitalization of over $2 billion when he cannot even manage his own Microsoft Outlook inbox?"
A few years ago, Loeb chewed out the CEO of Star Gas (NYSE: SGU) for appointing his mother to the board of directors, doling out overly generous bonuses, and attaching his name to a scholarship:
Sadly, your ineptitude is not limited to your failure to communicate with bond and unit holders. A review of your record reveals years of value destruction and strategic blunders which have led us to dub you one of the most dangerous and incompetent executives in America. (I was amused to learn, in the course of our investigation, that at Cornell University there is an "Irik Sevin Scholarship." One can only pity the poor student who suffers the indignity of attaching your name to his academic record.)
Loeb called for his ouster, and the CEO subsequently resigned. This past February, Loeb also chastised Pogo Producing (NYSE: PPP) for its inability to achieve stated goals or remain on budget:
While we are disappointed in the results achieved under your leadership, we continue to believe the Company's assets are valuable and under-utilized. Hiring Goldman, Sachs & Co. and TD Securities Inc. to help the Company explore strategic alternatives is a positive step, but we have no faith in the current board's ability to oversee such a process.
One can only imagine the great fun Daniel Loeb could have with Candela's CEO. As anyone who's read the coverage of Candela here knows, Gerard Puorro has a knack for bluster, and for playing fast and loose with the facts. He's urged analysts to wait for "white hot" laser sales that never materialized; he's used some fuzzy math to claim Candela was stealing market share, even as its sales were declining; and he's denied that Palomar Medical Technologies (Nasdaq: PMTI) had ever notified Candela about infringing on its patents, only to have Palomar say it had been telling Candela exactly that for seven years.
Increasing rumblings among investors and observers argue that Candela's management must change in order for the company to advance. As a shareholder in the laser maker, I'd certainly support a change. Loeb could make it happen, though he might also opt for another of his tactics by installing friendly board members. He did that recently with Nabi Biopharmaceuticals (Nasdaq: NABI), when he railed against the company's apparent policy of "burning the furniture to heat the house."
By making his sizeable acquisition of shares, however, Loeb has signaled to management that he has focused his attention on the laser maker. While the filing indicates it's a "passive" investment, I imagine Candela has taken notice of his activist tendencies, and they'll be watching with interest. As will we all.
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Fool contributor Rich Duprey owns shares of Candela but does not have a financial interest in any of the other stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.
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