What’s New In Activism: Carl Icahn vs SWX
Carl Icahn recommended Southwest Gas Holdings Inc (NYSE:SWX) sell its construction business, Centuri Group, while continuing to call for the utility to abandon a planned pipeline deal.
In April, Li Lu and Bruce Greenwald took part in a discussion at the 13th Annual Columbia China Business Conference. The value investor and professor discussed multiple topics, including the value investing philosophy and the qualities Li looks for when evaluating potential investments. Q3 2021 hedge fund letters, conferences and more How Value Investing Has Read More
"If SWX really wanted to improve its balance sheet, it would cancel this absurd acquisition, sell Centuri, and use a portion of the proceeds to improve the balance sheet, allocating some portion of the proceeds towards the funding of future growth," wrote Icahn, in an October 20 open letter.
The 4.9% shareholder previously stated he would launch a proxy contest to replace the entire board in protest against the utility's planned $2 billion acquisition of Questar Pipelines. He also plans to commence a cash tender offer for Southwest Gas at $75 per share.
Southwest Gas has so far rejected Icahn’s recommendations, arguing that Questar Pipelines is an "especially compelling asset" that aligns with the company. Icahn responded by saying that management has not provided any "hard details...with equity dilution still being one of the largest variables."
Activism chart of the week
So far this year (as of October 22, 2021), globally, 74 companies were publicly subjected to environmental activist demands. That is compared to 58 in the same period last year.
Source: Insightia (Activist Insight Online)
What’s New In Proxy Voting: DoL New Rule
The U.S. Department of Labor (DoL) proposed a rule permitting pension plan fiduciaries to consider climate change and other ESG factors when selecting investments and exercising shareholder rights.
The October 20 proposed rule, "Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights," states that "climate change and other ESG factors are often material and that fiduciaries should consider climate change and other ESG factors in the assessment of investment risks and returns."
The announcement follows President Joe Biden's Executive Order 14030 on May 20, which directed the federal government to implement policies to help safeguard the financial security of U.S. families, businesses, and workers from climate-related financial risks. If approved, the new rule would overturn a Trump-era policy which required Employee Retirement Income Security Act (ERISA) plans to "select investments and investment courses of action based solely on financial considerations relevant to the risk-adjusted economic value of a particular investment."
Proxy chart of the week
U.S. investors supported Russell 3000 "say on pay" votes 84.8% of the time this proxy season (July 1, 2020 - June 30, 2021). European investors supported these proposals just 51.5% of the time.
Source: Insightia (Proxy Insight Online)
What’s New In Activist Shorts: NextPlay Shorted
White Diamond Research disclosed a short position in technology company Nextplay Technologies Inc (NASDAQ:NXTP), accusing it of having "very little functional business."
In an October 20 report, White Diamond said NextPlay used to be an over-the-counter stock until it was up-listed to the Nasdaq in July this year and, apart from its HotPlay subsidiary, the company makes very little revenue.
White Diamond alleged that there was a stock pump at NextPlay which bumped the stock from $1.26 per share to $3 per share during a period when there was no news.
The co-chairman and co-CEO of NextPlay, John Bonner, and his wife Nithinan Boonyawattanapisut were both fired from a previous company, Axion, and a court found that their dismissals were "warranted based on their conduct concerning their covert transaction to create NextPlay in concert with Monaker Group." Axion, which is now a penny stock, is also currently suing NextPlay for allegedly stealing its intellectual property for HotPlay.
Shorts chart of the week
So far this year (as of October 22, 2021), eight basic materials companies have been publicly subjected to an activist short campaign. That is up from six in the same period last year.
Source: Insightia (Activist Insight Shorts)
Quote Of The Week
“To Mr Loeb, toughen up and take some of your own medicine,, it’s not actually that bad. Who knows? You may even feel better, knowing that you have done the right thing for your investors.” – Richard Webb