Activist Investors Winning Board Seats More Often

In a growing sign of the success of the activist investing strategy, activist campaigns for board seats are at a five year high, according to a report by Factset.

Activist Investors Seats won or lost

The tactic is off to a strong start in 2014, as activist investors were granted one or more board seats at 16 U.S. companies, again the most in five years.   Notable successful activist investor fights for board seats in early 2012 were waged by Elliott Management Corporation at Juniper Networks, Inc. (NYSE:JNPR) and Compuware Corporation (NASDAQ:CPWR); GAMCO Asset Management Inc. at Ampco-Pittsburgh Corp (NYSE:AP); and JANA Partners LLC at QEP Resources Inc (NYSE:QEP).

“While several factors may be contributing to this recent concessionary approach of U.S. companies, the wide spread support activists are getting from mainstream institutional investors is undoubtedly a key driver of the increased willingness of companies to offer up board representation,” the report said.

Activist investors’ win rate at highest level in 13 years

Perhaps the most significant trend is that when activist investors take their board fights to a vote, they win either a partial or outright victory in nearly 60% of the cases, according to the report, the highest win rate in 13 years.

“What makes the 60% win rate even more noteworthy is the fact that this statistic is artificially low,” the report said. “Companies and their advisers typically keep close tabs on preliminary vote tallies during a proxy fight and will often offer to settle if it appears that they may be on the losing side of the vote.”

Trend is to grant activists board seats before vote is needed

Activist Investors board seats campaigns

Another interesting trend is that company board of directors are more willing to grant activist shareholders board seats before a vote is taken.  Activists being granted board seats without going to a vote increased by 9% from 2012 levels and 41% from 2011 levels. Carl Icahn, who engaged in some rather public battles with board of directors, recently said in an interview even he was “surprised” by how often he is being invited to join company boards without having to launch a proxy fight.

These favorable conditions have lead to a significant increase in proxy fights for board seats. As of March 7, the report notes 49 proxy fights for board seats have been announced. In the same periods in 2013 and 2012 44 and 41 proxy fights had respectively been announced.



About the Author

Mark Melin
Mark Melin is an alternative investment practitioner whose specialty is recognizing a trading program’s strategy and mapping it to a market environment and performance driver. He provides analysis of managed futures investment performance and commentary regarding related managed futures market environment. A portfolio and industry consultant, he was an adjunct instructor in managed futures at Northwestern University / Chicago and has written or edited three books, including High Performance Managed Futures (Wiley 2010) and The Chicago Board of Trade’s Handbook of Futures and Options (McGraw-Hill 2008). Mark was director of the managed futures division at Alaron Trading until they were acquired by Peregrine Financial Group in 2009, where he was a registered associated person (National Futures Association NFA ID#: 0348336). Mark has also worked as a Commodity Trading Advisor himself, trading a short volatility options portfolio across the yield curve, and was an independent consultant to various broker dealers and futures exchanges, including OneChicago, the single stock futures exchange, and the Chicago Board of Trade. He is also Editor, Opalesque Futures Intelligence and Editor, Opalesque Futures Strategies. - Contact: Mmelin(at)valuewalk.com