What the activism world is talking about
Fir Tree Capital Partners is urging Halcon Resources to sell noncore acreage and repurchase stock, contending that the firm cannot afford to fund drilling in two different locations. The shareholder believes Halcon Resources should focus on its Ward County acreage, saying the firm’s Pecos County acreage could attract a high enough price to pay off all of the company’s debt and repurchase 50% of its stock.
Fir Tree’s demand is further evidence that shareholder activism in the energy sector is growing. So far this year, nearly 9% of all U.S. companies targeted by activist investors were in the basic materials space, according to Activist Insight Online. Other investments include Carl Icahn’s stint at Energen and Goff Capital’s stake in Contango Oil & Gas.
In August, Activist Insight Monthly drew attention to the rising number of activist campaigns in basic materials companies. 41 companies in the oil and gas sector had been targeted at the end of July, up from 34 at a similar point in each of the two previous years.
What we'll be watching for this week
- Will Conagra Brands shareholders vote in favor of the firm’s purchase of Pinnacle Foods?
- Will Papa John’s amend its poison pill as ex-CEO John Schnatter requested?
- Will Carl Icahn take a stake in Sears as he hinted at last week?
Activist shorts update
Mako Research revealed a short position in Flexion Therapeutics last week, contending that the pharmaceutical company’s sole drug is not superior to current treatments. Flexion recently won approval for Zilretta, a drug used to mitigate osteoarthritis-related knee pain, but Mako said that the drug is not superior to current treatments. The short seller said Flexion’s valuation is wholly dependent on Zilretta sales, adding that the drug is unlikely to sell because it is overpriced.
Also, Kase Learning, announced that it will be hosting its second short selling conference on December 3. Readers of this newsletter can get a 10% discount on the conference – the only idea-led conference to focus exclusively on shorts – using the discount code ACTIVIST10. The code is valid whether you register to attend in-person or watch via the livestream.
Chart of the week
The number of Australian-based companies publicly subjected to activist demands between January 1 and October 19 in respective years.