MOSCOW, 16 sen — Dow Jones. Should the companies listen to each activist announced, regardless of the size of his stake?
The phenomenon of picky of the shareholders of the claimant to large companies and with small stakes, all the more applies since, in 2013, ValueAct made it to the register of shareholders of Microsoft. Carl Icahn, Third Point, Dan Loeb and Trian Fund Management Nelson Palitza — all of them in recent years, took a bead on bigger targets, while having a relatively small packets of shares.
A week ago, Elliott Management, Paul singer announced the investment of $ 3.2 billion in AT&T, Telecom giant with a market capitalization of 280 billion dollars, in the letter in which insists on a serious transformation. Share Elliott and his subsequent campaign will provide AT&T a bad reputation and, perhaps, in the coming months will distract its management. Elliott asks AT&T to consider the abolition of certain existing key projects, Director-General, which can be considered a radical change.
But in many cases it is not clear, would take a company decision on their own.
Unlike passive investors, active investors are agitating for changes in corporate structure and operations, and often ask the company to introduce their representatives to the Board of Directors. To obtain the desired control activists usually acquire a decent stake. So, activists, targeted at companies with a market capitalization above $ 500 million (number of campaigns in relation to which in 2013 reached almost 200 per year), buy an average of 6% of the shares, but often 8%. It follows from the data published by the consultative group Lazard’s.
Obviously, in the case of large corporations, the situation is much more complicated: it requires smaller stakes, such as the one in April 2013, ValueAct acquired a Microsoft — less than 1%. In the same year, Icahn bought about the same modest stake in Apple. In 2015, Trian Fund Management Palitza accumulated shares of General Electric at $ 2.5 billion, then, they accounted for about 1% of its market capitalization. On Valentine’s Day. Valentine in 2017 Trian “confessed his love” to Procter & Gamble by purchasing its shares nearly 3 billion dollars. Then the capitalization of Procter & Gamble was $ 225 billion. A few months Third Point of the Lobe received a share in Nestle about the same size. Share Elliott AT&T as a whole falls into this category.
During the first examination already held campaigns it seems that the activists had generally succeeded, and was heard, but their efficiency is not so obvious. Only a few months Mason Morfit received from ValueAct a seat on the Board of Directors of Microsoft. Of the Icahn investment in Apple was also a success, but the fact that the company started to buy back their shares — called Aykan — even before it arrives. Palitza investments in GE, definitely, was less successful. Meanwhile, P&G only recently have improved their performance.
In principle, does not hurt, if someone will keep the Board of Directors in tone, but the presence of activists in General is not always welcome. According to the analysis, published late last year by a group of researchers, including David Larcker from Stanford University, found that “long-term profitability before and after the actions of the activists insignificantly different from zero” in terms of the welfare of shareholders and the economy. Index Hedge Fund Index s Research’Activist annually for the last six years lagged behind the S&P 500, and its total yield in 2008 was only 31%.
Investors will be much easier to shoulder the responsibility on activists, if they have large blocks of shares and seats on the Board of Directors. Relatively little is known of the company, Abrams Capital, Knighthead Capital, and Redwood Capital have jointly acquired nearly 10% of the shares of PG&E. It happened in mid-January, when the Californian utility company has announced plans bankruptcy. They helped to replace the General Director and members of the Board of Directors by appointing in their place are mostly industry experts.
Elliot have a lot to do at at&T. Although its shares in General are among the Laggards, their yield from the beginning to the present day, after a long battle for the purchase of Time Warner, was approximately 30%. Elliott’s proposals, including the allocation of DirecTV, can be difficult. And the nomination of John of Stance as the most likely successor to CEO AT&T Randall Stephenson proves that the company is implementing his own succession plan. Elliott’s presence can become a distraction at this difficult time.
AT&T, maybe something to give Elliott without undermining the heritage of Robert Louis Stevenson. Investors, however, can ask a fair question: will the intervention Elliott tangible changes?
— Author Lauren Silva Laughlin, [email protected]; translation PRIME, +7 (495) 645-37-00, [email protected]
Dow Jones Newswires, PRIME
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