The ceasefire between Elliott Management and AT&T Inc.

0
The ceasefire between Elliott Management and AT&T Inc.
AT&T [Public domain], via Wikimedia Commons

The ceasefire between Elliott Management and AT&T Inc. highlights the different ways activists can “settle” their campaigns, a diversification that has accelerated with the increase in mega-cap targets.

On Monday, AT&T announced new three-year financial targets and capital allocations plans, including a $6 billion increase in earnings, together with rapid deleveraging and share count reductions through buybacks. CEO Randall Stephenson will likely step down in 2021 – later than expected in a possible blow for Chief Operating Officer John Stankey – and his eventual successor will not be given the chairman role. New board members will replace at least a couple of incumbents.

Get Our Activist Investing Case Study!

Get the entire 10-part series on our in-depth study on activist investing in PDF. Save it to your desktop, read it on your tablet, or print it out to read anywhere! Sign up below!

Q3 2019 hedge fund letters, conferences and more

David Einhorn At The 2021 Sohn Investment Conference: Buy These Copper Plays

david einhorn, reading, valuewalk, internet, investment research, Greenlight Capital, hedge funds, Greenlight Masters, famous hedge fund owners, big value investors, websites, books, reading financials, investment analysis, shortselling, investment conferences, shorting, short biasThere's a gold rush coming as electric vehicle manufacturers fight for market share, proclaimed David Einhorn at this year's 2021 Sohn Investment Conference. Check out our coverage of the 2021 Sohn Investment Conference here. Q1 2021 hedge fund letters, conferences and more SORRY! This content is exclusively for paying members. SIGN UP HERE If you Read More


Several of Elliott’s explicit and reported implicit concerns were glossed over, even if the flavor of AT&T Inc.’s new outlook is likely more to the hedge fund’s taste than the old one. A portfolio review that binds the company to only minor divestments worth between $5 billion and $10 billion – not the sale of DirecTV or big chunks of Warner Media – and lack of a new strategic oversight committee on the board means that Stephenson remains in control for now. Even as the AT&T boss lavished praise on Elliott, calling its contributions “constructive and helpful” and its staff “smart people,” the belated mention of the activist highlighted that these promises are AT&T Inc.'s to the shareholder base as a whole, not a reflection of Elliott’s leverage.

Elliott's Jesse Cohn and Marc Steinberg said they were “confident” the outcome would be a significant upside for the stock. For now there is nothing to suggest their faith is as misplaced as other partnerships between activists and companies, including Valeant Pharmaceuticals International or General Electric, where billions of dollars have been at stake but by not entering into a standstill agreement with its traditional non-disclosure, non-disparagement, and non-solicitation clauses, Elliott has retained a freedom of action that allows it to escalate its concerns if the three-year targets start to go off track or trade around its position as needed.

Recent years have shown non-standstill settlements to be a rising trend. At one point, Trian Partners had a board seat at each of its portfolio companies without a single standstill, including at Procter & Gamble. On the other hand, pre-settlements have also emerged to govern information flow, including at Citigroup where ValueAct Capital Partners is likely to propose a director soon, now that it is resolving a conflict involving another financial sector investment.

AT&T Inc. vs: Elliott other activist tactics

All activists vary slightly in the importance they place on board seats and other guarantees of influence but the provision of multiyear operating targets, including in the last year at Elliott targets Pernod Ricard and ThyssenKrupp, has helped management teams stave off more formal or restrictive arrangements.

Yet the passage of time can also increase an activist’s leverage, by illustrating both its patience and persistence. Two years ago, Elliott walked away from a fight at Marathon Petroleum after the company warned that its white paper would be difficult to implement. Yesterday, the company fulfilled many of the unsatisfied demands, leaving the activist to laud outgoing CEO Gary Heminger. No standstill or settlement was involved.


Institutional Shareholder Services (ISS) sued the Securities and Exchange Commission (SEC) on Thursday, claiming that guidance around the use of proxy voting advisers issued in August was unlawful. ISS believes the rules should have been recognized as a significant departure and put up for comment, as well as arguing that its recommendations should never be considered solicitations – an affirmation the SEC made that will expose ISS reports to anti-fraud risks. “We believe litigation to be necessary to prevent the chill of proxy advisers’ protected speech," ISS CEO Gary Retelny said in a statement.


Quote of the week comes from Legion Partners Asset Management’s relatively unusual shareholder proposal at Primo Water, seeking annual director elections in what may be another test case for “activism by the back door.”

Although this proposal is non-binding in nature, we believe it will serve as a referendum for stockholders to demonstrate their strong dissatisfaction with the company’s choice of maintaining a staggered board and encourage the company to take responsibility for improving its corporate governance regimen,” the activist argued.

Previous article Why Incorporating DHIP Could Help, Even Without Raising Taxes
Next article Starbucks CEO Kevin Johnson on Q3 earnings, AI and China
Financial news and data providers Activist Insight and Proxy Insight announced in October 2020 that they had merged to form Insightia, a leader in the field of public company information. Activist Insight was formed in 2012 and offers an extensive range of products including Activist Insight Online, Activist Insight Governance, Activist Insight Vulnerability, Activist Insight Shorts, Activist Insight Monthly magazine, and The Activist Insight Podcast. Proxy Insight has quickly become the world’s leading source of information on global shareholder voting, covering such hot topics as director and auditor elections, “say on pay” resolutions and environmental, social, and governance (ESG) proposals.

No posts to display