Economics

The Top 10 Wildest Campaigns Of 2018: Starboard’s Stake In Symantec

This week’s column is a continuation of our 10 “wildest campaigns” of 2018. Find the first part here.

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Q2 hedge fund letters, conference, scoops etc

Wildest Campaigns
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Top 10 Wildest Campaigns Of 2018

5. How often does an activist win a proxy contest without support from either of the two main proxy advisory firms? (Nine times since 2013 at U.S. companies, according to Proxy Insight). That wasn't even the most notable thing about Nathan Miller and Peter O'Malley's board sweep at maternity-wear retailer Destination Maternity, where an all-male board was replaced with a 75% female slate after a three-month campaign. That the company settled with a French retailer which had tried to buy it in the past, then saw one of Orchestra-Prémaman’s two nominees resign after 10 days on the board due to health issues, only added to the drama. Shares have almost tripled over the past year, but it is still a long way back to the $62 million company's glorydays, when its stock traded in the low $30's.

4. Remember when Starboard Value's CEO Jeff Smith was "the most-feared man in corporate America" and we took that with a pinch of salt? Newell Brands didn't, because it opted to bring in Carl Icahn as a white knight when faced with a full board slate from Smith's fund. Carl Icahn! Newell ended up settling with Starboard anyway, which went on to release a 172-slide presentation critical of CEO Michael Polk to little effect. Just three of the 12 board members who stood for election this year were directors before 2018, amid fallout from the clash between Newell's management and that of its largest-ever acquisition, Jarden.

3. Speaking of Carl Icahn, his partnership with Darwin Deason in the campaign to oust Xerox CEO Jeff Jacobson was like a rock band with two lead singers. Turns out that Xerox's board had considered firing Jacobson and ordered him not to negotiate a merger with joint venture partner Fujifilm, before reversing its position and allowing him to continue. That made for embarrassing disclosure and helped convince a New York judge to reopen the nomination window so Deason could nominate a full slate. Xerox then settled with Icahn and Deason not once but twice, saying the first settlement expired when Deason did not withdraw litigation by an agreed deadline.

2.  Last year, Richmond Brothers won a seat on the board of Rockwell Medical in a hard-fought but ultimately unremarkable proxy fight. Fast forward to August 2017, when its nominee Mark Ravich complained of being isolated by the board and Richmond called for the head of Rockwell CEO Robert Chioini. After another settlement between Richmond and Rockwell, two board cliques formed; one claiming it had fired Chioini and successfully obtained a court order banning him from the premises, while the other claimed that the first group had breached its fiduciary duties. Last week the parties settled and the company found itself a new CEO. The stock, however, has yet to fully recover - possibly from too many locksmith-related expenses.

1. The proxy fight between HomeStreet and Roaring Blue Lion was described as "a train wreck for the activist" by Kai Liekefett, the lawyer who defended the Washington state-based bank, in a recent story which appeared on Activist Insight Online. Not only did the company reject the activist's nominations, but the withhold campaign Blue Lion ran in its place became a farce three days before the annual meeting when it was revealed that state regulators had issued an interpretative statement requiring the activist to make an application before it submitted proxies representing 25% of HomeStreet's voting shares. Blue Lion said it was unaware of the guidance, which had been publicly available on the regulator's website for more than two months. The activist urged shareholders to withhold on the management card, in vain.


Starboard Value’s new stake in Symantec marks at least its fourth investment in a company struggling with accounting problems since 2016, after previous investments in Marvell Technology Group, which faced a Department of Justice probe; Perrigo, which was looking into its tax calculations at the time of Starboard’s investment; and comScore, which failed to file financials in 2015 and 2016. Last June, Engaged Capital invested in Hain Celestial days as it completed  an internal investigation.

These campaigns suggest such problems provide not just a lower entry point but also leverage in settlement talks; comScore agreed to appoint four new directors immediately, and an additional Starboard nominee if it failed to file its financial statements within 30 days of its deadline.

Most of these investments have so far proven to be duds, although Marvell shrugged off concerns spectacularly. Both sides will be hoping Symantec, which hasn’t filed financial statements since February amid a whistleblower-inspired probe, deals with its problems quickly.


Quote of the week comes from Sen. Elizabeth Warren’s Wall Street Journal op-ed in support of her corporate governance reform proposal, the Accountable Corporations Act. Restricted executive pay, worker-elected directors and a stakeholder model – enforceable by law – present a far more incisive critique of markets than Hillary Clinton offered in 2016, while both have been critical of activists; Warren co-sponsored the Brokaw Act to amend the Schedule 13D disclosure rules. Neither are likely to become law, but as far as shaping the political climate goes, Warren is sure to attract attention.

“Before ‘shareholder value maximization’ ideology took hold, wages and productivity grew at roughly the same rate. But since the early 1980s, real wages have stagnated even as productivity has continued to rise.”