Activist investing is staging a recovery of sorts but not all forms are coming back with equal vigor.
By the number of U.S. companies publicly subjected to activist demands, activism was down 10% at the end of May, having been down as much as 12% two months ago. It is no longer the weakest showing since 2014 but since 2017 – a year notable for ending with proxy fights involving Trian Partners, Pershing Square Capital Management, and Jana Partners.
Like the stock market, that is better than expected. Also like the stock market, it’s unclear how much activism is genuinely forward-looking.
On the one hand, activists have fewer levers to pull. M&A and breakup-related activist demands are, unsurprisingly, down 47% in absolute terms, as an appetite for deals has dried up. M&A and breakup-related activism as a proportion of all demands between January 01 and May 31 fell from 13% in 2019 to 8% this year. That is second only to business strategy (operational) activism, down 52% in absolute terms compared to the same period last year Beyond cost cutting, what can you say when operations are or have been shuttered?
Public demands for board representation, which might indicate a degree of confidence in the ability of companies to weather a storm over the next year or two, are down 35% on last year and 49% on the peak, in 2016. This week, Firefly Value pulled its solicitation when one of its two nominees joined the management slate, meaning it did not need to accept a binding standstill.
Proxy Fights Involving Several Companies Coming To An End
However, the respectable number of proxy fights indicates that there are causes on which dissidents will stand their ground. Next week will see proxy fights involving Mack-Cali Realty, First United, and GameStop come to a conclusion.
One surprise is the relative strength of balance sheet activism, which has held steady. Even when one strips out debt restructuring, recapitalization, and opposition to equity issuance, the enthusiasm for returning capital to shareholders is slightly up. If both activists and chief financial officers believe cash is king, the rest of the year could see some testy squabbles.
A Week Of Incremental Gains For Elliott Management
Elliott Management had a week of incremental gains amid an altogether quieter year for the normally prolific activist. First, SoftBank Group said it would increase transparency around investments made outside of its Vision Fund, one of several recommendations the activist said would help improve the valuation of Masayoshi Son’s conglomerate, which is now up year-to-date. Then came rumors that Bank of East Asia could sell its China or Hong Kong banking operations, swiftly dampened by the issuer but not before the stock shot up on the news. Elsewhere, Twitter announced a former Google chief financial officer as its new chairman, in what might be a sign that it will focus on operations as its part-time CEO does battle with the president of the United States.