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| http://www.bizjournals.com/birmingham/blog/2013/03/walter-energy-blasts-audley-nominees.html#i1 |
Many companies have their annual meetings in the spring and early summer. However, preparation begins now, and so activist investors also begin to execute on campaigns for the proxy season.
While markets have done well over the last few years, it has never been clear how robust the underlying economic recovery has been. The Fed took a very long time to finally raise rates a quarter of a percent. The sharp drop in the markets at the beginning of the year reveals the underlying anxiety in the markets.
In the pursuit of financial return, activist investors have been increasingly significant in the last few years (think Ebay, Microsoft, Yahoo, Macys, Dupont), as investors look for enhanced returns. In fact, while the big names have seen large increases assets, they have increasingly been funnelled to ETF's or portfolio managers having to pursue a strategy of "closet indexing". Thus, in the pursuit of superior returns, even the largest investors have been known to request activists to get involved with companies in which they have large holdings, despite their own mixed track record (Activist investors' funds aren’t beating the S&P - Fortune)
It is likely that in an uncertain market over the upcoming months, these activists could well receive strong support for their shorter term financial plays. The incentives of Wall Street, paid for by both the companies and the activists, are more lucrative in the acquisitions and break ups that this activism drives (Wall Street's Little Secret: It wins both at acquisitions and breakups). Even the long only investors are finding the bird in the hand most attractive.
But I think that is because companies, and their Boards, are not articulating the long term arguments strongly enough....
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Activist investors' funds aren’t beating the S&P - Fortune: According to data compiled by research firm HFR, activists beat the S&P only three years out of the past eight, including by a narrow margin so far in 2015. “They can dish it out, but they can’t take it,” says Yale School of Management professor Jeffrey Sonnenfeld, who for years has been sounding the alarm about funds he thinks squeeze companies for short-term gains.
Peltz tells Sonnenfeld to get his facts straight: Lashing back at critical comments from management expert Jeffrey Sonnenfeld, Trian Fund's Nelson Peltz said Thursday the Yale "professor should do a little bit more digging" and get his facts straight.
Wall Street's Little Secret: It wins both at acquisitions and breakups by Allan Sloan. "In both breakups and inversions, Wall Street is giving corporate customers what they want, meanwhile reaping a rich harvest of financing fees and trading profits from these deals. You have to love the way Wall Street works. What other industry do you know of that can happily profit from two mutually contradictory trends, both of which it promotes with unbridled zeal?"
Nov 13th Lex column, "Breaking up an empire can be as selfish as building one"
"P&G is utilising a tricky form of the spin. Mr Buffett gives back his shares of P&G to the company. Those shares are valued at $4.7bn. Duracell comes back to him preloaded with $1.8bn of P&G’s cash, a pile that the business doesn’t need. And that excess cash is tax-free."
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