Bramson calls on Higgins to end the cycle of disruption

Activist investor Edward Bramson called on Barclays Chairman Nigel Higgins to end the “cycle of disruption” at the British lender as CEO Jes Staley faces yet another regulatory probe. The 5.5% shareholder in Barclays said in a letter to investors seen by Activist Insight Online that the bank’s leadership should take the latest investigation into Staley’s conduct “seriously.” Barclays last week revealed that the Financial Conduct Authority (FCA) had launched a probe into Staley’s relationship with Jeffrey Epstein, the disgraced financier who died last year in prison.

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Activist Urges Barclays Chairman To End This Cycle Of Disruption

The probe is “another example of governance weakness that has led, inevitably, to the recurrent public disappointments and embarrassments which have plagued Barclays for so long,” Bramson wrote. FCA’s ongoing query follows a 2018 scandal over Staley’s attempts to unmask a whistleblower that led to regulators slapping both the executive as well as the bank with hefty fines. The activist did not call for Staley’s dismissal but urged Chairman Higgins to “indicate what long-term governance changes the board will make to end this cycle of disruption.”

Staley is reportedly considering leaving the top role by the end of 2021, following years of criticism from Bramson regarding his plan for spurring growth at the lender. The activist renewed that idea in the latest letter, saying the investment bank business should be scaled back because it produces low returns and hinders the ability of other units to bring the lender’s overall profitability “anywhere near to its cost of equity.” Staley has moved to expand the investment bank unit ever since he took the helm in 2015.

The activist also hinted at a new campaign after last year’s unsuccessful board challenge. Bramson said he hasn’t met with Higgins in about a year and expects the chairman to come up with a design to address the bank’s “strategic weaknesses.” According to the letter, funds managed by Bramson have become the bank’s second-largest shareholder. “We have the necessary resources to engage constructively with the company for as long as necessary,” the activist concluded.

What We’ll Be Watching For This Week

  • Will Johnson Controls International take notice of SMART’s exempt solicitation to vote against the company’s say on pay proposal at the meeting on Wednesday?
  • Will ex-chairman of Spar Group, Robert Brown, find success in his attempt to change the firm’s bylaws at the meeting on Thursday?
  • With its deadline on Friday, will Texas Pacific Land Trust decide to convert to a C-Corp structure?

Activist Shorts Update

Muddy Waters short target NMC HEalth’s shares experienced a 9% spike in value on Thursday after Richard Chandler’s Clermont Group revealed a 3.2% stake in the embattled hospital operator. Singapore-based Clermont reportedly expressed hope that NMC can be put on a stronger footing if the concerns flagged by Muddy Waters “are addressed thoroughly.” The company’s stock has been battered over the last two months following a short report from Muddy Waters that accused it of manipulating its balance sheet to hide a serious debt problem.

NMC rebuffed the allegations but earlier this month faced another scandal as its main investors, including founder BR Shetty, left the firm over a query into their shareholdings. Muddy Waters said the investigation was in fact further proof that the firm has undisclosed debt. On Wednesday afternoon, NMC announced it has fired its CEO, granted its finance chief “extended sick leave” and suspended a member of its treasury team after finding discrepancies in its financial statements. Chief operating officer Michael Davis will take the helm as CEO on an interim basis, the statement noted.

The company said that an investigation that started in January identified $335 million of supply chain financing arrangements with possible connections to BR Shetty and his partners that have not been disclosed to or approved by the board, nor disclosed in the firm’s financial reports. In mid-January, NMC hired former FBI director Louis Freeh to carry out a probe into the alleged financial misconduct flagged by Muddy Waters.

NMC added that it will unwind the unveiled facilities and continue to review its cash position, which may have been misstated. Also, the company said it would be unable to publish its full-year 2019 results until at least the end of April. Clermont acknowledged the “valuable role” played by the short seller “in highlighting several corporate governance concerns at NMC” but argued the company could turn its fortunes around by slowing its growth until it can reduce its debt load.

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Chart Of The Week

The number of Asia-based companies in the consumer cyclical sector publicly subjected to activist demands in the 12 months ending February 28, 2019 and February 28, 2020.

Chart Of The Week cycle of disruption

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Since 2012, Activist Insight has provided its diverse range of clients with the most comprehensive information on activist investing worldwide. Founded by Nick Arnott and Kerry Pogue with the objective of providing unmatched intelligence to professionals in the global activist investment space, Activist Insight made its entry into the market with online information product, Activist Insight Online. Activist Insight Monthly, the world’s only monthly magazine dedicated to shareholder activism, soon followed, granting its readership access to the thoughts and opinions of key industry professionals, while providing an editorial vehicle for the data trends uniquely aggregated from Activist Insight Online. In 2013, Activist Insight’s sister business, Proxy Insight, was co-founded by Nick Dawson and Nick Arnott.