Marc Lasry fumbles the ball on inaugural activist investing play

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Billionaire Marc Lasry tried to launch his first campaign as an activist investor last month — but fell on his face when he failed to fill out the basic paperwork, The Post has learned.

Avenue Capital – the hedge fund run by Lasry, who is also a co-owner of the Milwaukee Bucks NBA team – bought a 17-percent stake in Diamond Offshore Drilling this spring with plans to install three of its people on the board to agitate for changes at the Houston-based energy company.

Lasry didn’t get a chance to make his case, though, because Avenue’s broker bought the shares in Diamond, but never transferred them into Avenue’s name — a basic step investors must take to become owners of record, according to people familiar with the matter.

So when Avenue tried to nominate its three board members on Nov. 18, Diamond replied on Nov. 23 that the hedge fund wasn’t listed as a shareholder – and therefore had no standing as an activist under the drilling firm’s bylaws. In fact, the shares were still being held in the name of Avenue’s broker.

Marc Lasry attends a Bucks game in 2018
Lasry, seen here at a 2018 Bucks game, owns 17 percent of Diamond Offshore Drilling.
Charles Wenzelberg/New York Post

Now, Avenue is pleading with a Delaware court to allow its three board nominees to move forward anyway. But in this case, it seems to be a matter of “ya snooze, you lose,” Bruce Goldfarb, an expert in proxy battles and chief executive at Okapi Partners, told The Post.

“If you don’t comply with those bylaws, you can be disqualified from nominating board members,” Goldfarb said. “The impact of this mistake can be frustrating and potentially costly.”

Avenue said in a statement to The Post that Diamond is trying to renege on an agreement to hold an annual meeting where board nominees would be considered “by asserting a technicality.”

Marc Lasry sits courtside at a Bucks game
Lasry’s mistake was not on the court but rather on the the paperwork.
NBAE via Getty Images

“We are confident in the merits of our case and look forward to a hearing by the court,” which is scheduled for Jan. 7, the company said.

Still, Avenue’s lawyers admitted the mistake in a court filing Dec. 7. “Avenue acknowledges that the statement in its nomination form that Avenue Energy was a record owner of its shares was an error,” the filing said.

The snafu comes just a few months after Lasry’s tenure as chairman of Ozy, the media company that spectacularly flamed out; Lasry resigned in September after a New York Times report said the company’s chief operating officer impersonated a YouTube executive on a call with potential investor Goldman Sachs.

Marc Lasry sits with friends at a Bucks game
Forbes estimates Lasry’s wealth at $1.8 billion.
Icon Sport via Getty Images

Meanwhile, It’s not clear what changes Avenue’s board members would be agitating to make at Diamond, which filed for Chapter 11 in April 2020. The company emerged this April with Lasry owning the 17-percent stake.

Goldfarb, an attorney, said based on recent Delaware precedent, Lasry and Avenue aren’t likely to prevail. “But since he is deep-pocketed, he can pursue the issue,” Goldfarb added. Forbes estimates Lasry’s net worth at $1.8 billion.

“Even billionaires make errors, too,” Goldfarb said.

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