Hello, and welcome to the latest edition of Knowledge+. In August, we tracked 53 active 13D campaigns, as reflected in the most recent filings and updates. These campaigns showcased a range of successes and challenges encountered by different activist investors. Notably, there were 7 new 13D campaigns initiated during the month. Let’s dive into the details of each one.
DEF14's Activist Alpha® provides real-time updates on the performance and positions of active campaigns filed by renowned activist groups.
Pershing Square Capital’s August Activist Campaign
(I): Seaport Entertainment Group Inc.
Pershing Square Capital Management, L.P., led by Bill Ackman, has reported acquiring a 37.9% stake in Seaport Entertainment Group Inc., an entertainment and hospitality company, amounting to 2,094,673 shares. This acquisition was part of a distribution from Howard Hughes Holdings Inc. (HHH), with no direct payment involved. The investment aligns with Ackman's strategy of identifying undervalued companies, as Pershing Square believes Seaport's stock is currently undervalued. The firm has also secured rights to nominate board members and has entered into agreements related to future stock offerings and registration rights, further solidifying its influence over Seaport's direction.
In a related move, Pershing Square is considering taking HHH, the $3 billion real estate company, private. The firm has enlisted Jefferies to evaluate the deal and may seek co-investors, marking a significant escalation in Ackman’s involvement with HHH, where he already holds a 38% stake. These developments come amid a challenging period for Ackman, following the withdrawal of Pershing Square USA’s IPO. Ackman’s longstanding relationship with HHH includes serving as chair and contributing to major development projects like the South Street Seaport in New York. Despite stepping down from the board, Ackman remains deeply involved, leveraging his substantial equity positions to drive strategic changes and unlock value in both Seaport Entertainment and Howard Hughes.
Elliott Investment Management’s August Activist Campaign
(I): Southwest Airlines Co.
Elliott Investment Management has increased its equity stake in Southwest Airlines Co. to 9.7% and is intensifying its campaign by nominating 10 new board candidates, including former CEOs from Virgin America and Ryanair, aiming to overhaul the airline's leadership. With a $1.9 billion stake, Elliott criticizes Southwest’s current board for the airline's poor performance in 2024 and is advocating for more drastic changes, despite the airline's recent efforts to revamp its business model. In response, Southwest emphasized its ongoing board refreshment efforts, noting that it has appointed eight new independent directors over the past three years and has plans for further changes, with full details expected during an investor event in late September. The outcome of Elliott’s campaign could significantly reshape Southwest’s leadership and strategic direction.
Engaged Capital’s August Activist Campaign
(I) Portillo
Activist investor Engaged Capital has filed documents indicating that it owns at least 9.9% of shares in the Chicago-based hot-dog chain Portillo’s. Engaged Capital, led by Glenn Welling, is pushing for operational and branding improvements as Portillo’s aims to expand nationally. The firm is replicating its successful strategy used with Shake Shack, where the stock doubled since its 2023 investment. Rather than seeking leadership changes, Engaged suggests focusing on optimizing operations and reducing real estate ownership to boost returns. The firm believes Portillo’s could be worth 100% more and is urging accelerated national growth.
Teleios Capital Partners’ August Activist Campaign
(I) Quanex Building Products Corp
Teleios Capital Partners GmbH has acquired a 9.8% stake in the manufacturing company Quanex Building Products Corporation, totaling 4,621,879 shares. The firm has initiated a dialogue with Quanex's management to enhance shareholder value through ongoing discussions on capital allocation, strategy, and governance. Additionally, under the Board Observer Agreement, Teleios Capital holds a board observer seat, allowing it to closely monitor the company's decisions and operations.
Nierenberg Investment Management LP’s August Activist Campaign
(I) Riverview Bancorp Inc.
David Nierenberg, through his firm Nierenberg Investment Management Company (NIMCO), disclosed a 5.02% stake in Riverview Bancorp Inc. (RVSB), representing 1,060,600 shares.
Saba Capital Management’s August Activist Campaign
(I): Morgan Stanley India Investment Fund, Inc.
Saba Capital Management, L.P. acquired approximately $16.56 million worth of common shares in the Morgan Stanley India Investment Fund, Inc., representing a 6.13% stake, as per their latest filing.
(II):Gabelli Dividend & Income Trust
Saba Capital Management, L.P. has revealed that it holds a 5.06% stake in Gabelli Dividend & Income Trust.
Other Significant Activist Campaigns Worldwide in August 2024
Intel Seeks Morgan Stanley’s Help to Fend Off Activist Investors
Intel has engaged advisors, including Morgan Stanley, to defend against potential activist investors as the company struggles to regain its footing in the semiconductor industry. Despite losing nearly 60% of its value this year and facing significant challenges in AI technology, Intel has yet to encounter a formal activist campaign. The company, which recently announced a 15% workforce reduction, continues to lose ground to rivals like Nvidia and AMD. Adding to the turbulence, semiconductor veteran Lip-Bu Tan resigned from Intel’s board after just two years, citing personal reasons.
Masimo Subpoenas Proxy Advisors Amid Intensifying Proxy Battle with Activist Investor
Medical device company Masimo has taken the rare step of subpoenaing proxy advisory firms ISS and Glass Lewis for their private communications with investors regarding Masimo’s ongoing proxy fight with activist investor Politan Capital. This move follows Masimo's decision to delay its annual meeting and file a lawsuit against Politan, whose representative, Quentin Koffey, is pushing to add two more seats to Masimo’s board. The proxy advisors have criticized CEO Joe Kiani’s leadership, recommending that shareholders support Politan’s nominees. The legal dispute has escalated, with Masimo accusing Politan of misleading shareholders, while Politan disputes these claims. The battle has been marked by aggressive tactics and legal maneuvers, highlighting the deepening rift between the two parties.
Investor Activism Intensifies at Aurinia Pharma Amid CEO and Board Leadership Criticism
Aurinia Pharmaceuticals, a biopharmaceutical company, faces renewed investor activism as an activist investor, owning 2.2% of the company’s shares, demands significant leadership changes. The call comes after CEO Peter Greenleaf and several board members failed to secure majority support for their roles and executive pay packages during the June 14 annual meeting. The investor, Lucien Selce, criticized the company's leadership, citing "unchecked spending and lack of strategic direction." Selce is pushing for the immediate removal of Greenleaf and former CEO Robert Foster from the board, the addition of two new members, and a board size reduction. This follows a similar campaign last year that ousted the former chairman, George Milne. Selce is also advocating for an extraordinary general meeting to address concerns over Aurinia’s commercial and R&D performance. Aurinia has previously challenged Selce’s transparency and credibility, questioning his suitability to lead shareholder interests.
Autodesk Raises Earnings Outlook Amid Activist Pressure from Starboard Value
Autodesk Inc. has increased its full-year earnings forecast, a move that comes after activist investor Starboard Value LP pressured the software maker for changes. The company now expects profit, excluding certain items, to range between $8.18 and $8.31 per share for the fiscal year ending January 2025, surpassing previous estimates. This revision follows scrutiny over delayed financial filings and an ongoing accounting investigation. Over recent months, Autodesk has replaced its CFO, and Starboard has pushed for margin improvements and the possible removal of CEO Andrew Anagnost. Despite these pressures, Anagnost emphasized the company's strong efficiency and industry-leading margins, which he believes will drive long-term shareholder value. Following the announcement, Autodesk's shares rose by 5% in extended trading. Starboard, which revealed its stake in Autodesk in June, continues to call for greater accountability after the company's accounting issues came to light
Activist investor Jana built stake in BlackLine Systems in second quarter
Activist investor Jana Partners has acquired a nearly 2% stake in U.S. enterprise software company BlackLine Systems during the second quarter, according to a recent regulatory filing. While Jana has not yet disclosed its intentions regarding the Los Angeles-based company, the hedge fund’s history of pushing for strategic changes suggests potential future actions. The filing also reveals Jana's significant positions in other companies, including a push for the sale of cybersecurity firm Rapid7 and a recent reduction in its stake in diagnostics company QuidelOrtho. Jana’s influence has been notable, as demonstrated by its successful engagement with Freshpet, which saw a 300% stock return following the hedge fund’s involvement. Jana has a long history of driving change in companies, including Frontier Communications and Whole Foods Market, which ultimately sold itself to Amazon.
Bill Ackman Snaps Up Nike Shares Amid Stock Slump
Bill Ackman’s Pershing Square Capital Management seized the opportunity to buy 3 million Nike shares worth $229 million during the brand’s steep decline in the second quarter of 2024. Nike stock, which plummeted nearly 30% in the first half of the year, experienced its biggest one-day drop since 1980 after missing revenue expectations in fiscal Q4. Ackman, no stranger to Nike, previously profited from a similar investment in 2017. While Nike’s sales growth has stalled, analysts have adjusted their ratings and price targets, with some speculating on a potential CEO change.
Ancora Holdings Pushes Forward Air for Strategic Review and Potential Sale Amidst Struggles
Activist investor Ancora Holdings, which owns a 4% stake in Forward Air, is urging the freight forwarding company to initiate a strategic review, including a potential sale, citing concerns about the company's operations, debt load, and market challenges. Ancora warned that if the board ignores calls for action, a proxy fight to replace board members could ensue. This push comes after Forward Air's stock has dropped nearly 50% since January, exacerbated by the criticized $3.2 billion acquisition of Omni Logistics. Ancora, along with other major shareholders, is advocating for independent advisors to oversee the review process.
Value Base Pushes for Change at Cognyte with Neuberger Berman’s Backing
Value Base Ltd., which holds a 9.33% stake in security analytics software provider Cognyte Software Ltd., has secured backing from Neuberger Berman, a 7.16% shareholder, to oppose the re-election of Chairman Earl Shanks and the current CEO compensation plan at the upcoming annual meeting. Both firms criticize Cognyte for a lack of transparency and weak performance, noting that the company's shares have dropped over 70% since its IPO in 2021. Value Base is also pushing for the election of Tal Yaacobi to the board, stressing the need for directors with relevant industry experience to help turn the company around.
BlackRock Reduces Support for Environmental and Social Proposals to Record Low
BlackRock, the world’s largest asset manager, reduced its backing for shareholder proposals related to environmental and social issues to a new low of 4.1% during the most recent annual general meeting season, according to its 2024 Global Voting Spotlight report. This marks a continued decline from the 6.7% support in 2023 and a sharp drop from the 47% backing seen in 2020-21. Despite an increase in the number of such proposals, BlackRock cited concerns that many were "over-reaching," lacked economic merit, or addressed risks already being managed by companies. The asset manager has faced criticism for its handling of ESG issues, particularly from U.S. Republican politicians accusing it of "woke capitalism." In contrast, BlackRock's support for governance-related resolutions rose to 11%, focusing on enhancing minority shareholder rights. The firm also highlighted that it did not support any of the 88 proposals aimed at reversing companies' sustainability initiatives.
Starbucks Faces Activist Pressure Amid Struggling Performance
Starbucks is under pressure from activist investors Elliott Investment Management and Starboard Value, both pushing for changes to boost the company's performance. Elliott, holding a $2 billion stake, is seeking a board seat, while Starboard recently acquired an undisclosed stake, driving SBUX shares up. The company is grappling with macroeconomic challenges, competition, and weak Chinese sales, leading to an 18.7% drop in its stock this year. Starbucks is implementing a turnaround plan focused on store expansion, digital investment, and supply chain improvements. However, disappointing Q3 results and opposition from Chairman Emeritus Howard Schultz complicate the situation.
Carl Icahn and Icahn Enterprises Fined $2 Million by SEC Over Undisclosed Margin Loans
Billionaire activist investor Carl Icahn and his company, Icahn Enterprises (IEP), were fined $2 million by the U.S. Securities and Exchange Commission (SEC) for failing to disclose billions in personal margin loans pledged against IEP stock. Icahn and IEP settled without admitting or denying wrongdoing, agreeing to pay $500,000 and $1.5 million in fines, respectively. The SEC highlighted that Icahn pledged up to 82% of IEP shares for loans without proper disclosure, leading to a 6% drop in IEP shares. This issue was initially brought to light by a report from Hindenburg Research, which accused IEP of misestimating its holdings' value.
C&C Reaches Agreement with Engine Capital to Appoint New Director Amidst Ongoing Pressure
Engine Capital, a significant shareholder in C&C, the maker of Bulmers cider, has been urging the company to explore all options to "maximize value," including the potential sale of assets, due to ongoing issues like accounting errors and frequent leadership changes. In response, C&C has reached an agreement with Engine Capital to appoint a new non-executive director to its board from a mutually agreed shortlist. As part of the deal, Engine Capital will withdraw its two board nominees and support all resolutions at the upcoming AGM. This agreement comes amid mounting pressure on C&C, highlighted by the recent resignation of CEO Patrick McMahon following the restatement of three years of earnings due to accounting problems.
Oasis Management Targets Kobayashi Pharmaceutical for Corporate Overhaul Amid Scandal
Kobayashi Pharmaceutical, a leading Japanese company in pharmaceuticals and consumer products, is under scrutiny from activist investor Oasis Management, which recently acquired a 5.20% stake. The company has faced significant challenges, including a scandal involving its red koji-related products, leading to a 20% drop in stock value. Oasis, known for its successful activist campaigns in Asia, is pushing for major changes at Kobayashi, including improved operational performance, better corporate governance, and potential board restructuring. Although the resignations of CEO Akihiro Kobayashi and Chairman Kazumasa Kobayashi are seen as positive steps, their continued involvement raises concerns about the board's commitment to shareholder interests. Oasis may seek a board seat to drive these changes, though achieving this in Japan’s corporate landscape remains challenging. The firm’s track record in Japanese corporate governance suggests that if anyone can effect change, it’s Oasis, but the path forward may involve a proxy fight.
Australian Anti-Gambling Group Pushes for TV Ad Ban Through Shareholder Activism
The Alliance for Gambling Reform (AGR), an Australian advocacy organization which works to prevent and minimize the harm from gambling, is leveraging shareholder activism to push for a ban on gambling advertisements on two major Australian television networks, Nine Entertainment and Seven West Media. By acquiring shares in these media giants, AGR, alongside activist platform SIX, plans to introduce a shareholder resolution at the companies' upcoming AGMs. The resolution demands the removal of all gambling ads from their TV, radio, streaming, digital, and publishing platforms. AGR’s move follows dissatisfaction with the Australian government’s proposed ad restrictions, which fall short of a complete ban. AGR chief advocate Reverend Tim Costello emphasized the urgency of this action, citing broad public support and the staggering AU$25 billion lost to gambling annually in Australia. The initiative challenges institutional investors to align with community interests and support the ban, despite government resistance and concerns about the financial impact on free-to-air media.
Key Takeaways from August’s Activist Campaigns
TLDR, here are the key themes in August:
Strategic Reviews and Potential Sales:
Intel and Forward Air faced pressure to initiate strategic reviews, with Forward Air also being urged to consider a potential sale.
Ancora Holdings pushed Forward Air for changes due to operational struggles and a heavy debt load.
Board Changes and Leadership Accountability:
Activist investors targeted several companies for board changes, including Southwest Airlines, C&C, and Aurinia Pharma.
Elliott Investment Management nominated 10 candidates for Southwest's board to drive strategic change.
Engine Capital reached an agreement with C&C to appoint a new non-executive director amidst ongoing leadership challenges.
Proxy Battles and Legal Disputes:
Masimo engaged in an intense proxy battle with Politan Capital, leading to legal actions and aggressive tactics.
Aurinia Pharma faced renewed activist pressure to overhaul its leadership and board structure.
High-Profile Investor Moves:
Carl Icahn and Icahn Enterprises were fined $2 million by the SEC for undisclosed margin loans, impacting their stock value.
Bill Ackman made a significant investment in Nike, purchasing 3 million shares during a stock slump.
Focus on Corporate Governance:
Activists emphasized the need for transparency and governance reforms in underperforming companies, as seen in the campaigns against Cognyte Software and Portillo's.
Global Activism Trends:
Activism extended globally, with Oasis Management targeting Japan's Kobayashi Pharmaceutical for corporate overhaul.
The Alliance for Gambling Reform in Australia used shareholder activism to push for a ban on gambling advertisements on major TV networks.
August witnessed a surge in activist investor activity across various sectors. The overarching theme was a strong demand for corporate governance reforms, reflecting a growing trend of shareholder activism aimed at driving value and accountability. Companies must be increasingly transparent and responsive to investor demands or risk facing significant restructuring and leadership challenges.
Keep an Eye Out for More Updates On Activist Campaigns and Trends!
We've reached the conclusion of today's edition of Knowledge+. We hope you found the updates insightful and thought-provoking.
As always, the campaign insights and performance metrics we've shared today are just a small part of the extensive information in our Activist Alpha database. If you're interested in exploring further, feel free to reach out to us.
Comments