Activism This Week: Wells Fargo Long; HCG Short

Updated on

Via Activist Insight

Wells Fargo’s shareholders meet today to cast judgement on the bank’s directors, who stand accused of failing to take whistleblowers alleging account fraud seriously enough and not holding ex-CEO John Stumpf to account soon enough. Stumpf and other executives have already lost their jobs and been subjected to some of the most stringent compensation clawbacks ever used in the S&P 500 Index, but the verdict of Institutional Shareholder Services and Glass Lewis that shareholders vote against 12 and six of the 15 directors respectively has turned the situation into a test of the influence proxy voting advisers have over investors. Californian pension funds CalPERS and CalSTRS have declared they will vote against nine directors – that announcement alone is no indication as to the results, but if the board is forced into a major turnover, it will be an almost unique occurrence without an activist running a competing slate. For more, read this excellent analysis by Reuters’ Ross Kerber, featuring data from our friends at Proxy Insight.


Our most-read story last week 

Arconic CEO tries out pen, ends up on sword (Activist Insight Online login required).

What we’ll be watching for this week

  • We have two proxy contests this week: at Consolidated-Tomoka Land on Wednesday and GAM Holdings on Thursday. Activists face tough odds at both.
  • AkzoNobel is under more pressure, with PPG increasing its hostile bid to just under $29 billion. Will it cave?
  • Arconic has published what it claims are Elliott Management’s demands for a settlement, in a move reminiscent of CSX’s defense against Mantle Ridge earlier in the year. Whether it work better than at CSX remains to be seen.

Short update

Last week the Ontario Securities Commission formally accused Home Capital Group of fraud, alleging that the company reported that a drop in sales was a result of “external vagaries such as macroeconomics, seasonality and competitive markets,” when, in fact, it had been busily firing brokers who had been falsifying orders. Marc Cohodes, a short seller who says he has been betting against the stock since 2015, had been followed into the trade by a host of bears. Today, they’re having a picnic: company founder Gerald Soloway, who has most recently been serving as chief financial officer (an office that resembles a merry-go-round in recent years), will leave that role shortly and the board as soon as a replacement has been found. Shares have now lost 45% year-to-date, and are trading at levels not seen since 2009.

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