Economics

Arconic Down 10.4% Despite Unveiling A New CEO

What the activism world is talking about

Shares in Arconic were down 10.4% Monday, despite the company unveiling a new CEO and growing revenues. The company said Chip Blankenship, a 51-year-old former General Electric executive, would take over January 15. Elliott Management, the activist whose 2017 proxy fight played a role ousting the previous CEO, Klaus Kleinfeld, had wanted the job to go to Larry Lawson, the former CEO of Spirit AeroSystems, but welcomed Blankenship’s appointment nonetheless. Compensation for the activist was that former TRW Automotive CEO John Plant will become the chairman of the Arconic board immediately, replacing Pat Russo. Russo, who was interim chair, came in for special criticism during Elliott’s campaign. Third quarter profits were down on a year earlier on higher aluminum prices, restructuring charges, and inventory delay. Shares are up 31.3% year-to-date.

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Warren Buffett: Shorting Overvalued Stocks Offers More Opportunities Than Value Investing

What we’ll be watching for this week

  • Will the official count of Trian Partners’ contest with Procter & Gamble throw up any surprises when the result – the first based not only on the company’s but also on Trian’s records of the votes cast – is announced this week?
  • Will ISS join Glass Lewis in endorsing Pershing Square Capital Management’s nominees at Automatic Data Processing?
  • Will Land & Buildings shed additional light on its plan to call a special meeting of Hudson’s Bay, perhaps outlining how many and which directors it will seek to remove?
  • Which targets of activists long and short will have earnings reports to forget?

Short update

Financial Information Publishers To Be Biggest Winners From MiFID II

A curious dynamic is developing between activist short sellers Gotham City Research and Anonymous Analytics, after the latter criticized a Gotham report for the second time. Four months after Anonymous – a spinoff of the hacking group – accused Gotham of inaccuracies in an attack on Hong Kong-listed AAC Tech, it said Gotham’s theses on Criteo were “highly flawed and misleading.” Anonymous says Gotham “lacks a practical understanding of how the digital advertising industry operates,” based on its thesis that Criteo was charging for click-throughs it did not facilitate, and operating in gray areas of privacy protection rules. The stock is up since the short attack on September 15, which helps. Anonymous’ attack was also notable for chiding Gotham City for assuming the French company’s clients had no idea what was going on. Most short sellers highlight a lack of awareness or research in one form or another in their reports. Short seller Marc Cohodes recently wrote on Twitter "Bottom line is noone [sic] does research like the Shorts." That may now be up for debate.

Chart of the week

So far this year, 18% of Asia headquartered companies publicly subjected to an activist demand operated in the technology sector, up from 9% in the same period last year. *

Arconic

*All figures are as of October 20 2017.

Article by Activist Insight