General Electric Cuts Dividends; Trian Partners Moves In

General ElectricBy General Electric Company (w:File:General_Electric_logo.svg) [Public domain], via Wikimedia Commons

General Electric shares fell yesterday on the news that the company was halving its dividend to align the payout to cash flow generation. The “will they, won’t they” that preceded the announcement may not have helped new CEO John Flannery, who has otherwise been seeking to project an air of decisiveness. A dividend cut, like that which opened toy maker Mattel up to a takeover bid from a rival just last week, might be a spur for an activist investor were it not for Trian Partners already claiming a significant portion of the stock and a seat on the board of directors. Activists are not known for advocating payout reductions, so the move by GE’s board must sting almost as much as the stock price, which has declined 24% in the two years since Trian released its white paper. Trian is evidently just getting started, but has so far been wrong in its view that the company could increase earnings and return more capital to shareholders. It may even have been wrong that the company had the right mix of businesses, given the number of asset disposals Flannery appears to be planning. Unless the plan for its board seat is merely damage control, it may be time for a new white paper.

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What we’ll be watching for this week

  • Will TheStreet’s move yesterday to retire its preferred shares embolden an activist to push for a takeover, or will the two private equity investors on its share register steady the ship?
  • Has one-time ValueAct Capital target Smiths Group done enough to address shareholder dissatisfaction? The U.K. industrial company has its annual meeting Tuesday.
  • Will The Advisory Board’s special meeting on Wednesday approve the sale of its healthcare consulting business?
  • Will Twenty-First Century Fox shareholders deliver a significant protest at the annual meeting Wednesday, knowing that the board is weighing a sale of its most valuable assets?
  • Will Hain Celestial, which settled with Engaged Capital earlier this year, get shareholders to approve an advance notice bylaw on Thursday?

Short update

By Monday, activist short sellers had targeted 168 companies worldwide year-to-date, despite rising markets and low volatility. This week sees the launch of Activist Insight Shorts, a product providing market-leading information on activist short selling. Featuring live news and alerts, comprehensive activist short seller profiles, and stock performance tracking functionality, the product is a fantastic addition to the suite of well-established Activist Insight products. Since Activist Insight’s acquisition of Activist Shorts Research in July 2016, we have been busy developing Activist Insight Shorts by maintaining everything clients loved about the old platform and integrating features enjoyed by subscribers to Activist Insight’s proprietary product suite. To arrange a free trial, click here or view our product brochure to find out more.

Chart of the week

So far this year, 27% of U.S.-headquartered companies publicly subjected to activist demands had a market cap of over $10bn, up from 21% in the same period last year.

General Electric

*All figures are as of November 10 in the respective year.

Article by Activist Insight

About the Author

Since 2012, Activist Insight has provided its diverse range of clients with the most comprehensive information on activist investing worldwide. Founded by Nick Arnott and Kerry Pogue with the objective of providing unmatched intelligence to professionals in the global activist investment space, Activist Insight made its entry into the market with online information product, Activist Insight Online. Activist Insight Monthly, the world’s only monthly magazine dedicated to shareholder activism, soon followed, granting its readership access to the thoughts and opinions of key industry professionals, while providing an editorial vehicle for the data trends uniquely aggregated from Activist Insight Online. In 2013, Activist Insight’s sister business, Proxy Insight, was co-founded by Nick Dawson and Nick Arnott.