Josh Black, Managing Editor at Activist Insight, says in ‘Activist Investing – An annual review of trends in shareholder activism,’ that shareholder activism effectively received government sanction when SEC Chair Mary Jo White said the following at the 10th Annual Transatlantic Corporate Governance Dialogue in Washington D.C. on Dec 3, 2013:
“It was not a long ago that the “activist” moniker had a distinctly negative connotation. It was a term equated with the generally frowned-upon practice of taking an ownership position to influence a company for short-term gain. But that view of shareholder activists, which has its roots in the raiders of the 1980s takeover battles, is not necessarily the current view and it is certainly not the only view…As we meet here today, there is widespread acceptance of many of the policy changes that so-called “activists” are seeking to effect.”
Shareholder activism: Activist agendas
The main areas of interest to activists are:
- Board representation, preferably by way of a polite request
- Spin-offs to release value, such as real estate into a REIT
- Larger dividends
- Larger buybacks
- Sell the company (this is on the decline)
- Convert to a MLP (e.g. utilities)
- (2014: Obtain a premium from a third party takeover)
“Investor relations departments will have to become two-way streets in 2014, as companies start to take on board the concerns of activists,” says Black.
Shareholder Activism – the elephants in the game
For the first time, the report contains an interesting section on the top 10 shareholder activists.
“Activist Insight looks at which activists created the biggest splash in 2013. Using our bespoke data, we have given each of these well-known activists a ranking for categories such as the number of new investments in 2013, the average size of these investments, and the changes sought at companies during the year,” says the report.
Each activist is also tracked for returns generated using Activist Insight’s ‘Follower Return’ feature, designed to enable investors to coattail activist plays. It tracks the performance of activist-targeted stocks in 2013, providing an aggregated annualized return for each activist, showing the performance of a stock or multiple stocks after the activist has disclosed its position.
Shareholder activism: Icahn in pole position
Here’s the top 10 list with average investment size and annualized follower return shown in brackets:
- Carl Icahn ($1.2B)– Main campaigns were Dell Inc. (NASDAQ:DELL), Apple Inc. (NASDAQ:AAPL) and Transocean LTD (NYSE:RIG)- (40.8%)
- ValueAct Capital ($386M) – Microsoft Corporation (NASDAQ:MSFT), Allison Transmission Holdings Inc (NYSE:ALSN), Valero Energy Corporation (NYSE:VLO) and Gardner Denver, Inc. (NYSE:GDI)- (73.5%)
- Third Point Partners ($376M) – Sony Corporation (NYSE:SNE) (TYO:6758), Sothebys (NYSE:BID)-(73.4%)
- Clinton Group ($16.2M) – Stillwater Mining Company (NYSE:SWC), Violin Memory Inc (NYSE:VMEM), XenoPort, Inc. (NASDAQ:XNPT), ValueVision Media Inc (NASDAQ:VVTV), The Wet Seal, Inc. (NASDAQ:WTSL)- (67.4%)
- Starboard Value ($139M)- Office Depot Inc (NYSE:ODP), Smithfield Foods, Inc. (NYSE:SFD), DSP Group, Inc. (NASDAQ:DSPG), Wausau Paper Corp. (NYSE:WPP)- (43.4%)
- Elliott Management ($726M) – Emulex Corporation (NYSE:ELX), Hess Corp. (NYSE:HES)-(23.6%)
- Jana Partners ($445M) – Ashland Inc. (NYSE:ASH), QEP Resources Inc (NYSE:QEP), Safeway Inc. (NYSE:SWY), Agrium Inc. (NYSE:AGU) – (33.3%)
- Gamco Asset Mgmt ($68.1M) – Sevcon Inc (NASDAQ:SEV), Telephone & Data Systems, Inc. (NYSE:TDS) – (54.6%)
- Pershing Square ($961M) – J.C. Penney Company, Inc. (NYSE:JCP), Herbalife Ltd. (NYSE:HLF), Air Products & Chemicals, Inc. (NYSE:APD), Fannie Mae / Federal National Mortgage Association (OTCBB:FNMA), Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) – (13.8%)
- Bulldog Investors ($10.5M) – Firsthand Technology Value Fund Inc (NASDAQ:SVVC), Javelin Mortgage Investment Corp (NYSE:JMI)-(15.6%)
H/t David Benoit of WSJ