Just last year, Third Point LLC, a New York-based hedge fund, won two seats on Massey Energy Company’s board of directors in a heated proxy battle.  But last week, Daniel Loeb, the fund’s CEO, and Todd Swanson, its analyst, resigned from the board, based on their disagreement with the company’s decision to stay independent, following an eight month analysis by Goldman Sachs on how to increase the value of Massey’s stock. 

    In their letter of resignation, Loeb and Swanson informed Don Blankenship, Massey’s CEO, that the board of directors’ insistence on keeping him as CEO ruined a merger opportunity for Massey.  They also told him that Massey’s handling of environmental and regulatory matters, combined with his presence as CEO, created a "Blankenship discount" in Massey’s stock price.  Third Point owns 4.8 million shares of Massey, which represents 2.8% of its stock and are worth approximately $132.5 million. 

    In response to Loeb and Swanson’s resignations, Massey’s board voted yesterday to amend its by-laws and reduce the number of directors from ten to eight.  So those vacancies won’t be filled.  I think Loeb and Swanson’s assessment of Massey’s situation, and particularly Blankenship’s role, was accurate.