Within a week, two of Engaged Capital’s portfolio companies announced big changes.
Q1 hedge fund letters, conference, scoops etc, Also read Lear Capital: Financial Products You Should Avoid?
Last Monday, Rent-A-Center said it will sell itself to private equity fund Vintage Capital for $15 per share. The news - which came a week after the firm concluded a strategic review without a transaction - capped an 18-months long activist campaign waged by Engaged. The activist, which owns nearly 17% of the company’s stock, won three board seats following a heated proxy contest in January of last year and later took control of the board.
At the 2021 SALT New York conference, which was held earlier this week, one of the panels on the main stage discussed the best macro shifts coming out of the pandemic and investing in value amid distress. The panel featured: Todd Lemkin, the chief investment officer of Canyon Partners; Peter Wallach, the managing director and Read More
Separately, Hain Celestial announced that it had initiated a search for a new CEO. The organic foods company said yesterday that its founder and chief executive, Irwin Simon, will step down from the top role once the company finds a new CEO. Hain initiated a strategic review in September after settling with Engaged Capital, which has an 11% stake in the company. Engaged launched a proxy contest for seven board seats, but later gained the right to nominate six new directors as three incumbents stepped down.
What we'll be watching for this week
- Will Kroger investors support a shareholder proposal urging the grocery chain to install an independent chairman at its annual meeting Thursday?
- Will shareholders elect Page One’s five-person slate to the board of JP-Holdings at the Japanese company’s annual meeting Thursday?
- Will “mysterious shareholders” Cabs Platform and Slevin succeed in gaining control of Petropavlovsk’s board at the gold miner’s annual meeting Friday?
Activist shorts update
Tesla sued a former employee last week for allegedly stealing gigabytes of data, including "dozens of confidential photographs and a video of Tesla's manufacturing systems,” according to a report by CNBC. Before filing the lawsuit, Tesla CEO and Chairman Elon Musk told workers that a disgruntled employee broke into Tesla’s manufacturing operating system and sent sensitive information to outside parties.
“As you know, there are a long list of organizations that want Tesla to die,” Musk wrote in an internal memo, referencing short sellers “who have already lost billions of dollars.” Tesla has been targeted by a host of short sellers in recent years, including Greenlight Capital and Kynikos Associates. In October, David Einhorn’s Greenlight said it believed the auto manufacturer’s stock was overvalued. A month later, Jim Chanos’ Kynikos predicted Musk will step down as chief executive by 2020 to focus on other projects.
According to Activist Insight Shorts, both Greenlight and Kynikos have lost money on their bets, with campaign returns of negative 8% and negative 44%, respectively. Shares in Tesla have dropped 11.6% over the past year.
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Chart of the week
Australia-headquartered companies publicly subjected to activist demands.
*YTD figures from Jan 1 - June 22 each year.
Article by Activist Insight