Economics

Carl Icahn Headed For A Proxy Contest At SandRidge Energy

Just when we thought SandRidge Energy had successfully avoided an activist campaign, veteran activist Carl Icahn announced that he is headed for a proxy contest at the U.S. shale producer. Last week, the activist investor sent an open letter to the company Chairman, John Genova, praising his decision to terminate the Bonanza Creek merger yet criticizing his leadership that put the company in such a position in the first place. “We believe the current directors were remiss in attempting to ram through a dilutive, overpriced and value-destroying acquisition without at the very least reaching out and discussing this with the company’s shareholders,” Icahn wrote. The activist then pushed for the replacement of two directors and the removal of a poison pill that bars shareholders from accumulating more than 10% of the oil and gas company’s stock.

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Since Icahn revealed his demands, shares in SandRidge only traded up approximately  0.4%. Analysts, however, say Icahn is not the cause of the near hold on the company’s stock. Rather, the muted share reaction is due to a lack of direction in the business. Even if Icahn is right to push for change, new board members would be tested. After all, shareholders want to see the company keep its “post-bankruptcy promises to protect the balance sheet, reduce operating costs, generate free cash flow, and develop SandRidge’s significant remaining inventory in the Northwest Stack and North Park Basin in a disciplined manner,” as Icahn expressed in his letter.

What we'll be watching for this week

  • Will Strata Skin Sciences adhere to activist investor Sabby Management’s demand and provide a strategic review update by the January 22 deadline?
  • Will shareholders of CanniMed Therapeutics vote in favor of the merger with Newstrike Resources instead of Aurora Cannabis’ takeover bid now that Institutional Shareholder Services and Glass Lewis both back the deal?
  • Will car rental company Avis Budget Group come to an agreement with large shareholder and activist investor SRS Investment Management even though it recently adopted a 15% threshold poison pill?

Activist shorts update

Anonymous short seller Viceroy Research caused quite a scare in South Africa following the December 6 release of its negative report about troubled furniture retailer Steinhoff International. Last week, stocks in some of the country’s largest corporations plunged on speculation that Viceroy will target another Johannesburg-listed company. The stark drop – which included a crash of more than 20% for some – prompted South African regulators like the Financial Board Services (FSB) and Johannesburg Stock Exchange (JSE) to scrutinize trading activity and determine whether a formal probe is necessary.

“Any form of market abuse that is identified will be appropriately dealt with,” said Shaun Davies, the JSE’s director of market regulation. He told Bloomberg on Friday that the JSE is highly concerned with “the material price movements in recent days that appear to be unrelated to any information disseminated by the relevant companies.”

Viceroy, however, gave no hint as to whether it will actually target another South African group. “Viceroy encourages people not to speculate on the identity of any companies we are researching and we advise caution in trading on gossip,” the short seller said. “Viceroy complies with the laws and does not release research or discuss our focus prior to publication.”

Article by Activist Insight