The Activist Investor Blog
The Activist Investor Blog
2014 in Review - Where to Begin?
Everyone thought 2013 was the “golden age” of activist investing. We activists found a way to top that in 2014. By most measures and accounts, we did very well.
An asset class?
We don’t necessarily agree, and think activism represents an assertive version of value investing. But, as long as others think enough of the idea to call it that, we’ll take it. And, as an asset class, it did pretty well in 2014.
As we close 2014, estimates of activist fund AUM range from $100 billion (Hedge Fund Research) to over $200 billion (Activist Insight, which includes non-US assets). Most observers agree that AUM doubled during the year.
These assets did ok, too. For 2014, HFR estimates that activist hedge funds are up 3.5% (through November), better than other event-driven funds and other hedge funds, although not as good as the broad market indices.
Too many companies to count
Shark Repellent reports almost 500 separate activist projects in 2014, at about 400 separate US companies. In 2013, they reported about 425 projects at about 330 companies.
And, what companies!
❖Pershing Square teamed with Valeant in a novel and ultimately successful effort to persuade Allergan to do a deal
❖Third Point restructured the BoD at Sotheby’s, and replaced the CEO
❖Starboard Value elected a new BoD at Darden, and started a comprehensive restructuring at the company
❖Carl Icahn pressured Apple to distribute more cash to investors, and eBay to spinoff PayPal
❖JANA Partners, with support from Longview, forced Petsmart into a the largest PE deal of the year.
Numerous other investors asserted their rights at less well-known underperformers, too. New funds like Voce Capital and Sachem Head made their mark. Other PMs, like Ralph Whitworth at Relational Investors, transitioned their funds to new leadership - we wish him well as he recovers from illness.
Overall, activist investors did a little better in 2014 than in 2013. Shark Repellent assesses whether companies or investors “won” a proxy situation. This past year, management “won” only three out of 54 situations, compared to 13 out of 97 in 2013.
Corp gov improved a bit, too.
Investors also pursued the typical range of corp gov reforms, with similar success as 2013. Georgeson reports in its always-useful corp gov summary that shareholders submitted about the same number of corp gov reform proposals to companies in 2014 as in 2013, with fewer exec comp proposals since say-on-pay took hold, and more other corp gov proposals. Shareholders had a similar success rate in 2014 as 2013, too.
A quiet year at the SEC
We expected more from the SEC than we received this year. No further exec comp or political contribution disclosure rules (fine with us). The SEC did publish new rules for proxy advisors, more of a burden for the advisors than for shareholders to follow.
Some great research
Two studies impressed us:
❖A comprehensive analysis of exec comp from the IRRCi
❖A new take on the costs and benefits of proxy access from the CFA Society.
Both promise to help redefine the debate on these two important subjects. Earlier, we highlighted a number of interesting, new academic papers.
Wither Delaware?
Hard to believe, but Delaware might either become a bit more friendly toward shareholders, or risk damaging its golden goose, corporate litigation. Companies capitalized on two legal developments, fees-shifting and exclusive forum bylaw amendments, to limit shareholder litigation. Some observers think that Delaware courts went too far.
Engaging shareholder value
Among many other trends, companies claim to want to hear from investors more, really. We doubt their sincerity, although one program, iiWisdom promises to allow shareholders better access and communication.
Shareholder value as a concept took some hits this year, as various observers published muddled or wrong critiques, just to cite two out of many we saw. We remain a fierce defender.
TAI stuff
We continued to build the toolkit for activist investors, with guides to attorneys for activist investors and activist investing information sources. We also put together an inventory of investor white papers, and a first draft of what we hope becomes a useful paper on agency problems of a board of directors.
We continue our work at Comarco and other companies, and look forward to corresponding with you in 2015.
Tuesday, December 23, 2014