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Ask HN:Can I force a fortune 500 company to do business with me if I own stock?

7 points by mobl ↗ HN
It has always puzzled me to know if I own stock of a big company and myself own a business, can I use that to make the Big company do business with my not so big business?Would I need to buy more shares? How much is enough?

19 comments

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carbocation
Do you own a controlling stake?
mobl
No, but what if I did? Would that be different?
carbocation
To be fair, this is outside of the realm of my knowledge, but I think so due to the following:

Situation A: You own 10% of a company, and so does Joe Schmoe. You tell the company to do business with Anvil Corp. Joe Schmoe tells the company not to do business with Anvil Corp. Who wins?

Situation B: You own 51% of a company. You tell it to do business with Anvil Corp. The other 49% says no. Who wins?

I say this is outside of the realm of my knowledge because I'm no sure about Situation B (I mean, I could see you still not winning in that situation given your conflict of interest; it sounds like a question of corporate governance).

Taken to the extreme, one could buy one share of stock in a company and force it into transactions with another; since this would be hugely beneficial to that person, and since I don't see it happening in reality, I conclude that it's not how things work.

Purely speculating here in order to give you things to think about, since there were no comments; sorry if I'm totally wrong.

hugh3
I assume there have to be limits to what a 51% stockholder can make a company do. Otherwise I could do this move:

1. Find a company with $100 million in assets

2. Buy 51% of that company for, say, $60 million

3. Force the company to pay $100 million for, say, a nicely framed copy of my autograph.

The company dissolves, I pocket my $40 million, and the other 49% shareholders get annoyed. I assume this is why there are various complicated laws governing what companies can actually do, and why they're obliged to work on maximising shareholder returns rather than anything else.

In answer to the original question, though: No, of course you can't, what on Earth made you think you could?

carbocation
Absolutely agreed that it can't be as simple as proposed.

I'm just saying that even if it were that simple, well, you'd still have to own 51%.

hugh3
Of course. The OP is apparently off his damn rocker.
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nostrademons
This is basically what private equity does, and is otherwise known as a "hostile takeover". It's been done legitimately for decades - Warren Buffett's mentor Benjamin Graham made much of his money buying controlling interests in companies that are selling below book value, then forcing them to liquidate the company and return the money to shareholders.

The only protection that shareholders get is the market itself. If someone wants to perform a hostile takeover on a firm that's selling below book value, and the shareholders believe that the firm is worth more as a going concern, they should be able to convince a deep-pocketed investor to come in as a competing bidder and buy the remaining shares instead. Such an investor is called a "white knight" - examples include Kirk Kerkorian for GM or Warren Buffett for Salomon Brothers.

If the firm is not worth more as a going concern than under liquidation, it behooves the shareholders to see it liquidated.

(And in your particular example, where they pay $100M for an autograph instead of liquidating and returning the money to shareholders, that just invites a shareholder lawsuit for breach of fiduciary duty...)

whatusername
SO assuming you held voting stock -- isn't all you can really do vote in a new board/chairman/etc? Elect yourself + cronies to the board. Fire the ceo (or appoint yourself) and then you could do this.

BUT: Then you run into the maximizing shareholder value legislation -- which we normally put up as why big companies screw you over -- but are in place to prevent abuses like this.

dstein
Common stock only grants you a claim on the equity of a company. As a shareholder you usually get to vote who becomes a member of the board of directors and that's about it.

To gain decision control of a public company the OP will need to conduct a hostile takeover and probably take it private. Better get your checkbook out.

carbocation
This makes much more sense; thanks for the clarification. Conclusion: if you can buy the bigger company outright and take it private, then you can make it do business with the smaller company that you also own outright. Not particularly exciting.
fleitz
If you have a controlling share of the voting stock you can replace the board. The board can replace the officers. Thus with controlling shares you can effectively force the corporation to do business with whoever you want. However, if you have a controlling share in some states you have duties to minority shareholders to act in their interest.
bond
In which way doing business with you will help them?
brk
Think about how this would scale... Anybody could setup some lame business, buy a few shares of stock in a handful or large organizations and 'force' those companies to do business with them?

Sorry, but if you think this through, it's not even remotely logical.

mahmud
If that were possible, commerce would run with the efficiency of a nepotistic fiefdom.

Even if you held a controlling stake, the other shareholders might accuse you of having a conflict of interest, and funneling funds to your private coffers.

Forcing is usually a bad idea in relationships; private and professional.

[dead] erikb85
I think this happens every day. If you own stock in that big company you can talk to the other stock holders at stock holder meetings, learn to know them, build relationships and in the end can influence decisions in that company. Of course all that depends on the control you have over all the stock. That does not mean you have to own a lot of stock (because as somebody said earlier, there are still some protection rules in this situation that will be used by unpleased stock holders). But when you use a little stock to gain some relationship-like influence, they might be able to pressure the CEO to change his decision from a 'maybe' to a 'yes'. Of course all that is a tough call for a small business person, because a big company of course has a lot of stock holders and the most influential ones are probably pretty rich and don't really care about you or want to make friends with you. But when you can change your chances for a successfull deal from 0.1% to 0.5% it may not seem much, but actually it increases your chances five times! That is why I would answer your question with a 'yes'. You can not really force them but increase your chances dramatically. And I think that many people and companies already do this on a daily basis.
GiraffeNecktie
Yes, if you own a controlling interest in the company you could probably make it do pretty much anything within the law that you wanted (sucks to be a minority shareholder sometimes) but then, if you did own the majority of shares in a big company you are, by definition, a big player yourself.
asanwal
Shareholders and the Board appoint people (aka management) to run a company. Management has a fiduciary duty to do what is optimal for shareholders (maximimize value). If your company will help management do that, they may choose to work with you.

Owning shares has no direct influence as far as I can tell. Of course, owning a lot of the company might give you a voice they'll listen to.

RobGR
No. Owning stock in a Fortune 500 company generally doesn't even give you a vote, because those are "privileged" shares, or even a share in the profits of the business (dividend).

Even in the case of a smaller company, operating according to how joint stock companies are theoretically supposed to operate, this would generally not be legal. The board and officers have a fiduciary responsibility to all the shareholders, and they are not supposed to do something that benefits one shareholders other interests while costing the others through inefficiency.

In a system where all investors where roughly equal, the loss from cheating company the one company should roughly equal the benefit of the other, and crime would not happen often.