Activist shareholder Land & Buildings criticized a proposed split by Apartment Investment and Management Company (Aimco), saying the company’s Tuesday press release “laid bare” that shareholders will incur a tax of as much as $8 per share.
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!
Amico Overvaluing Its Assets
Aimco wants to keep its development business and assets worth about $1.3 billion, and fold a portfolio of 26,599 apartments worth around $10.4 billion into a real estate investment trust. Land & Buildings says that the two resulting entities are unlikely to trade anywhere near the underlying value of the company’s assets, which Aimco itself put at $59 per share.
It also took particular issue with the scheme’s tax implications, saying that it is essentially a taxable spin-off of 90% of Aimco's enterprise value, which the activist believes "creates unnecessary friction costs and could destroy substantial shareholder value." In an apparent answer to Land & Buildings’ concerns, Aimco said the transaction would entail stock and cash distributions expected to be treated as a taxable dividend, which the activist does not agree with. The stock has lost a third of its value so far this year.
What We'll Be Watching For This Week
- How will Calfrac’s vote on a recapitalization go today after both ISS and Glass Lewis recommended shareholders vote against it?
- Will New Mountain Vantage Advisers gain board seats at Virtusa’s shareholder meeting today?
- How will the Securities and Exchange Commission’s recent vote in favor of changes to rules regarding shareholder proposals affect U.S. companies?
Activist Shorts Update
The Friendly Bear predicted a 65% downside for automotive software company Cerence. In a Tuesday report, the short seller argued that "investors who thought that it was a cutting-edge company were in for a rude awakening."
The Friendly Bear suggested the company’s pre-spin parent company, Nuance, did not pursue a strategic exit which strongly suggested that logical buyers could not find Cerence attractive at price levels of $15 per share, versus price levels of $55 per share at the time of the report. The Friendly Bear concluded that the company would follow in the path of Telenav, a car navigation stock that saw its stock collapse in the face of identical competitive pressures.
Chart Of The Week
The percentage (as of September 25 2020) of Europe-based companies publicly subjected to activist demands that were U.K. based, compared to the same period last year.