Following a quiet 2017, activist investor Starboard Value has entered the new year with a bang. On Monday, Jeff Smith’s fund unveiled a 10-person slate for election to the board of consumer products manufacturer Newell Brands. Among the fund’s nominees are three former executives at Jarden, which was bought by Newell a year ago, and two Starboard executives. The activist said the company had underperformed under its current leadership, emphasizing Newell’s failure to integrate its acquisition of Jarden. Starboard also stated that it is ready to embark on a long-term operational turnaround, in a strategy that resembles the campaign at Darden Restaurants around four years ago, rather than accelerate the rollup strategy that Jarden and Newell pioneered up until this point.
Newell is the fourth company Starboard has targeted this season. The activist is seeking a full board replacement at Israeli chipmaker Mellanox Technologies, three board seats at real estate company Stewart Information Services, and four positions at Times New Roman owner Monotype Imaging.
Welcome to our latest issue of issue of ValueWalk’s hedge fund update. Below subscribers can find an excerpt in text and the full issue in PDF format. Please send us your feedback! Featuring hedge fund assets near $4 trillion, hedge funds slash their exposure to the big five tech companies, and Rokos Capital's worst-ever loss. Read More
What we'll be watching for this week
- Will Qualcomm agree to hostile bidder Broadcom’s latest takeover proposal at the companies’ Wednesday meeting?
- Will Nestlé give in to activist pressure to sell its L’Oréal stake now that the French cosmetics company has offered to buy back the investment?
- Will Geospace Technologies agree to remove its CEO and CFO at Lemelson Capital Management’s request?
Activist shorts update
Short seller Muddy Waters Research revealed on Thursday that it authored the anonymous 2015 report about China Zhongwang that accused the company’s founder Liu Zhongtian of committing “the largest and most complex China fraud ever uncovered.” The fund’s founder Carson Block told the Wall Street Journal that Muddy Waters used the pseudonym Dupre Analytics to allege that Liu used billions in loans from Chinese banks to secretly buy China Zhongwang’s aluminum and ship it overseas to facilities he controlled to make the company look more profitable than it was. Ultimately, the short seller’s report helped catalyze federal investigations and highlight trade imbalances with China.
Block explained that his fund wrote the report in a disorganized manner so people wouldn’t connect Dupre Analytics to Muddy Waters. After the short seller released the report in 2015, trading in China Zhongwang’s shares was halted for about two weeks in Hong Kong. Block said his fund made a “very small profit” from its short position – which Muddy Waters has since exited – but he still considers it to be “the best work we’ve ever done.”
In fact, anonymous short sellers have been behind some of the most successful calls in recent years and have outperformed their known peers, according to Activist Insight Shorts. Stocks targeted by anonymous short sellers have declined by an average of 28% in the two years after the campaign became public compared to 20% over a comparable period for known short sellers, Activist Insight data shows.
Stat of the week
So far this year (as of February 9), 102 investors have publicly subjected companies to activist demands, up from 89 in the same period last year.
Article by Activist Insight