Hello, and welcome to the latest edition of Knowledge+. In July, we observed 33 active 13D campaigns, based on the most recent filings and updates. These campaigns highlighted a mix of triumphs and obstacles faced by various activist investors. Among them, there were a total of 6 new 13D campaigns. Let's take a closer look at each one.
DEF14's Activist Alpha® provides real-time updates on the performance and positions of active campaigns filed by renowned activist groups.
Wynnefield Partners ’s July Campaign
(I): TechPrecision Corporation
Wynnefield Partners Small Cap Value, L.P. I, along with affiliates, holds approximately 7.0% of TechPrecision Corporation's outstanding common stock. The campaign aims to rebuild TechPrecision's credibility among shareholders. Wynnefield has issued a public letter to shareholders advocating for new independent voices on the board and highlighting the need for strategic changes to improve stockholder returns and address recent M&A issues. Wynnefield has also launched a campaign website and nominated two new directors, General Victor Eugene Renuart Jr. and Robert D. Straus, for election at the upcoming annual meeting.
Starboard Value ’s July Campaign
(I): Match Group
Starboard Value, led by Jeff Smith, has acquired a 6.6% stake in Match Group and is urging the company to improve margins through cost cuts and product innovation or consider going private. In a letter to Match CEO Bernard Kim and the board, Jeff Smith emphasized that enhancing operational efficiency and product development could drive revenue growth. The company, which owns dating apps like Tinder and Hinge, has struggled with leadership turnover and declining users.
Smith believes CEO Kim is capable of leading a turnaround but insists on the necessity of margin improvements, suggesting that Match could raise its adjusted operating margin with proper cost-saving measures. Additionally, if the company cannot achieve a broader turnaround, going private should be considered. Starboard also recommends share buybacks to leverage the company’s balance sheet effectively. Match Group is in communication with Starboard and other investors, including Elliott Management and Anson Funds, who have also exerted pressure on the company this year.
Notably, In March 2024, Elliott Management facilitated the addition of Laura Jones and Spencer Rascoff to the Match Group Board of Directors. Elliott has been advocating for strategic restructuring, including potential divestitures and enhancing shareholder value through operational improvements and financial strategies such as share buybacks and cost optimizations.
Anson Funds Management’s July Campaign
(I): Lovesac Co
Anson Funds Management LP has acquired a 5.20% stake in Lovesac Co, a furniture company known for its innovative, high-quality modular furniture systems. The campaign is geared towards driving growth through innovative product offerings, expanding market reach, and improving operational efficiencies. The campaign has been successful up till now, with a 9.07% increase in stock performance and a 21.24% abnormal return, reflecting investor confidence in the strategic initiatives.
Cevian Capita’s July Campaign
(I) Smith & Nephew
Activist investor Cevian Capital has disclosed a 5.11% stake in Smith & Nephew, significantly boosting shares in the London-listed medical device manufacturer. Known for its joint implants and surgical devices, Smith & Nephew has faced supply issues and high executive turnover, with three CEOs in five years. Cevian aims to create long-term value by improving operational performance, exploring strategic alternatives, and enhancing shareholder value through restructuring efforts. Despite a decline in market capitalization from £17bn in 2019 to £8.6bn, the company remains a significant player in sports management, advanced wound management, and hip and knee implants.
Friederike Helfer, a partner at Cevian, highlighted that Smith & Nephew owns attractive businesses in growing markets but has failed to generate shareholder value for years. The company's sluggish growth and lower-than-expected revenue in early 2024 have been concerning. In response, Smith & Nephew awarded its US-based CEO, Deepak Nath, a 30% pay rise to retain talent, despite opposition from 43% of shareholders. Cevian, managing over €14bn in assets, is known for taking long-term positions in companies like UBS, Vodafone, and Aviva, often simplifying complex organizational structures to improve performance.
Saba Capital Management’s July Campaign
(I): abrdn Global Dynamic Dividend Fund
Saba Capital Management acquired a 5.06% stake in abrdn Global Dynamic Dividend Fund. The campaign focus is on improving the fund's performance by pushing for better management practices and potentially restructuring the dividend payout strategy.
(II):Gabelli Healthcare & WellnessRx Trust
Saba Capital Management, L.P. has also acquired a 10.20% stake in Gabelli Healthcare & WellnessRx Trust. The campaign's goal is to push for strategic realignment within the trust, focusing on optimizing the portfolio for better returns and possibly altering the investment strategy.
Other Activism Highlights Worldwide in July
Macy’s Ends $6.9 Billion Takeover Talks with Activist Group Over Financing and Value Concerns
Department store Macy has announced that it has unanimously decided to end negotiations with activist investors Arkhouse and Brigade Capital, who had proposed taking the retailer private for approximately $6.9 billion. The board cited insurmountable issues regarding financing certainty and the value of the offer. Despite Arkhouse and Brigade's attempts to increase their bid to $24.80 per share and their extensive due diligence access, Macy’s determined the proposal did not deliver compelling value. The company, currently undergoing a turnaround led by CEO Tony Spring, faces challenges such as high inflation and competition from online and off-price retailers.
Solventum Sees Stock Surge Following Trian Partners Investment
New York-based Trian Partners, a high-profile hedge fund, has acquired shares in Solventum, the spinoff of 3M’s healthcare business. Trian believes it can drive Solventum towards accelerated growth by re-accelerating organic growth, restoring margins, and simplifying the company’s portfolio. As a newly independent company, Solventum is focused on executing its strategy to drive revenue growth, expand margins, and optimize its portfolio. Trian’s involvement comes as Solventum investors anticipate potential business streamlining and debt repayment over the next 24 months.
Howard Schultz Opposes Starbucks Settlement with Elliott Investment Management
Howard Schultz, former CEO and current sixth-largest shareholder of Starbucks, is opposing a potential settlement between the company and activist investor Elliott Investment Management. Schultz, who owns approximately $1.6 billion in shares, has voiced his concerns to some board members, criticizing the leadership despite not holding a formal role. Elliott, known for its aggressive investment tactics, has built a sizeable minority stake in Starbucks and is pushing for changes, including board representation, to improve the company's performance. Starbucks has seen a 20% drop in share price since the start of 2024, with Schultz attributing the company's struggles to inadequate execution by the current leadership.
Activist AREX Capital Wins One Seat in Proxy Fight at Enhabit
Shareholders of the Home Health Care Services company Enhabit Inc. have elected one of AREX Capital Management's director nominees, Mark Ohlendorf, to the board following a proxy fight where the activist investor sought to replace seven directors to improve financial performance. Ohlendorf, who brings experience as a public company CFO, will replace Susan LaMonica. Despite AREX's push, eight of Enhabit's nine legacy directors, including the CEO, were re-elected. The election saw significant backing from major index funds like BlackRock, Vanguard, and State Street, which sided with management’s candidates over AREX's, despite recommendations from proxy advisory firms ISS and Glass Lewis to elect three AREX nominees. Enhabit's share price, down 60% since its 2022 spinoff from Encompass Health, saw a nearly 4% rise in midday trading on Thursday following the election results.
Masimo Sues Politan Capital Over Proxy Statements
Medical device maker Masimo Corp has filed a lawsuit against activist investor Politan Capital in a California federal court, accusing it of making "material misstatements and omissions" in its proxy materials. Politan, holding nearly a 9% stake in Masimo, has criticized the company's capital allocation and board oversight, particularly its $1 billion purchase of Sound United. Politan has nominated two candidates for Masimo's five-member board, following last year's successful election of their nominees, including Quentin Koffey. Masimo has postponed its annual shareholder meeting to September 19, which Politan condemns as an attempt to stifle shareholder input. Politan maintains there are no misstatements and labels the lawsuit baseless.
JPMorgan Promotes Porretti and Novak to Co-Head Shareholder Engagement Amid Activist Campaign Surge
JPMorgan Chase has appointed veteran bankers Alfredo Porretti and Darren Novak to co-head its global shareholder engagement and M&A capital markets group, reflecting the increasing demand for corporate defense against activist investors. Porretti and Novak, who joined JPMorgan in 2021 to lead shareholder activism defense in North America and EMEA, will oversee the group alongside David Freedman. Freedman, who previously led the bank's capital markets unit, has headed the global activism defense efforts since JPMorgan restructured its approach in 2020. The bank has recently defended high-profile clients like Walt Disney, BlackRock, Bath & Body Works, and Hasbro against activist campaigns. With activist campaigns expected to increase in the latter half of the year, JPMorgan aims to maintain its strong position, having risen to the No. 2 spot in league table rankings in 2023.
Southwest Airlines Adopts Poison Pill to Counter Elliott Management's Activist Push
Southwest Airlines has implemented a shareholder rights plan, commonly known as a "poison pill," to fend off activist investor Elliott Management's efforts to oust CEO Bob Jordan and Chairman Gary Kelly. The poison pill will activate if Elliott or any other investor acquires at least 12.5% of the company, allowing all other shareholders to purchase additional shares at a 50% discount. Elliott, which recently disclosed an 11% stake worth $1.9 billion, criticized Southwest's underperformance compared to larger rivals and has been pushing for significant changes. Southwest's board supports the current leadership, citing constructive engagement with Elliott and a willingness to explore ideas for long-term value creation. The airline has faced challenges including an oversupplied domestic market and delays in receiving new planes from Boeing, prompting it to consider changes to its business model.
Elliott Accuses Santander of Using Auto-Deleting Messages to Hamper Lawsuit
Elliott Investment Management has accused Banco Santander SA of using an auto-deleting messaging platform, Signal, to discuss a take-private deal, which they claim is obstructing their lawsuit. Elliott sued Santander in 2022 over allegations of rigging a $12.7 billion buyout of its US auto loan business. They uncovered the destruction of relevant evidence via Signal messages, used by top executives Ana Botin and Mahesh Aditya. The case highlights regulatory concerns over banks' use of secure messaging apps. A trial is set for September 16.
L Catterton Reportedly Bids to Acquire Barbie Owner Mattel
L Catterton, a private equity firm backed by LVMH, has reportedly submitted an acquisition bid for toy maker Mattel, the owner of Barbie. Sources for Reuters indicate that while the bid has been made, it is uncertain if Mattel will pursue a sale. Despite the commercial success of the Barbie movie last year, Mattel has faced financial struggles, with a 23% drop in share value over the past year due to declining toy demand. The company has focused on media partnerships and fashion collaborations for Barbie but posted a loss in Q1, leading to calls for strategic changes. L Catterton, which has been expanding its portfolio of consumer brands since 1989, partnered with LVMH and Bernard Arnault's family firm in 2016.
SEC Charges Andrew Left and Citron Capital with Fraud
The U.S. Securities and Exchange Commission (SEC) has charged activist short seller Andrew Left and his firm, Citron Capital LLC, with fraud, alleging a $20 million scheme involving false and misleading stock trading recommendations. The SEC accuses Left of using the Citron Research website and social media platforms to make at least 26 public recommendations on 23 companies, then quickly reversing his positions to profit from stock price movements, which averaged a 12% change. Left allegedly bought back stocks after advising readers to sell and sold stocks after recommending buys, resulting in $20 million in ill-gotten gains. The U.S. Justice Department's fraud unit has also announced criminal charges against Left. This case follows the SEC's June settlement with Anson Funds Management for similar conduct involving Left.
Oasis Management Increases Stake in Greencore to 10%
Hong Kong-based activist fund Oasis Management has increased its stake in UK-listed sandwich maker Greencore from just over 5% to 10%, according to recent filings on the London Stock Exchange. Oasis believes that Greencore, which supplies private-label convenience foods to major UK retailers, can significantly enhance its margins and create value for shareholders. Despite reporting a 4.1% revenue increase on a like-for-like basis for the fiscal first half, Greencore has faced challenges, including weaker performances in salads and sushi categories and a 16.9% revenue decline in its convenience foods segment due to the sale of its edible oils business and exiting low-margin contracts. Oasis is supportive of Greencore’s current management and strategy but sees potential for accelerating performance improvements.
Oasis Management Sues Kusuri No Aoki Executives Over Governance Failures
Hong Kong-based activist investor Oasis Management has filed a lawsuit against Kusuri No Aoki's president, Hironori Aoki, and vice president, Takanori Aoki, alleging significant governance failures. Kusuri No Aoki, a Japanese drugstore operator, offers a range of products, including pharmaceuticals, cosmetics, and daily necessities. Oasis claims that in 2020, the Aoki brothers issued stock options to themselves at a steep discount, disadvantaging minority shareholders. The lawsuit seeks approximately 7.2 billion yen ($45.21 million) in damages and urges shareholders to vote against the re-election of the Aoki brothers and director Ryoichi Yahata at the shareholders' meeting on August 16.
As the third-largest shareholder with a 9.7% stake, Oasis has been engaging with Kusuri No Aoki since 2022 and launched a campaign against the firm in 2023. This lawsuit is part of Oasis's broader strategy to improve corporate governance in Japan, where it has also targeted other companies like Ain and Kao this year. Kusuri No Aoki has declined to comment on the matter.
South Korea Challenges PCA Ruling in Favor of Mason Capital Over Samsung Case
South Korea is challenging a ruling by the Permanent Court of Arbitration (PCA) that ordered the government to pay Mason Capital Management $32 million in compensation for investment losses related to a 2015 merger of Samsung Group affiliates. The Ministry of Justice filed a complaint seeking to overturn the decision, citing judicial errors and misinterpretation of the South Korea-US free trade agreement. Mason Capital had accused the government of improperly influencing the merger approval, which they claimed led to significant financial losses. This move follows similar litigation by South Korea against Elliott Management over another Samsung-related case.
Marvel Ex-Chairman Ike Perlmutter Sells Entire Disney Stake for Nearly $3 Billion
Ike Perlmutter, former Marvel Entertainment chairman, sold all his Disney stock, about 25.6 million shares, for nearly $3 billion following an unsuccessful board fight. According to the Wall Street Journal, Perlmutter sold his shares between early April and mid-July at an average price of just under $115 per share. Perlmutter, who had been a significant individual shareholder, pooled his holdings with activist investor Nelson Peltz's Trian Partners, which failed to secure two seats on Disney's board after a costly proxy fight. Following the shareholder vote on April 3, Peltz also cashed out, making $1 billion from his Disney stock.
July Activism: Key Takeaways
So, here are the key themes in July:
Corporate Governance and Transparency
Governance Overhauls: Oasis Management sued Kusuri No Aoki executives for governance failures, and South Korea challenged PCA rulings over Samsung-related cases, emphasizing the push for transparent and accountable governance.
Proxy Fights: AREX Capital's proxy fight at Enhabit Inc. and Masimo Corp’s lawsuit against Politan Capital highlight the contentious battles for corporate control and better governance practices.
Strategic Alternatives and Sales
Push for Strategic Changes: L Catterton's bid for Mattel and Starboard Value's push for Match Group to explore strategic alternatives reflect the common activist strategy of unlocking shareholder value through potential sales and restructuring.
Campaigns for Sale or Privatization: Starboard Value urged Match Group to consider going private if necessary, while South Korea faced activist pressure to revoke PCA rulings involving Samsung mergers.
Resistance and Legal Challenges
Defense Mechanisms: Southwest Airlines adopted a poison pill to counter Elliott Management's push to oust top executives, showcasing defensive tactics against aggressive activist campaigns.
Legal Battles: The SEC's charges against Andrew Left and Citron Capital for fraud, and Masimo’s legal action against Politan Capital, underscore the legal complexities and challenges in activist investing.
Global Impact
International Activism: Oasis Management's increased stake in UK-listed Greencore and its lawsuit against Kusuri No Aoki in Japan highlight the global reach of activist campaigns.
Cross-Border Activist Strategies: South Korea's legal challenges against Mason Capital and Elliott Management's involvement in Samsung mergers demonstrate the widespread impact of activist strategies across different markets.
In summary, July saw a diverse range of activist campaigns focusing on enhancing corporate governance, exploring strategic alternatives, and navigating resistance and legal challenges. Key movements included high-profile lawsuits, strategic bids, and defensive mechanisms, reflecting a dynamic and contentious landscape in both domestic and international markets.
Stay Tuned for More Updates!
That brings us to the end of today's edition of Knowledge+. We trust you found the updates both engaging and enlightening.
P.S. The campaign insights and performance evaluations presented today are just a snapshot of the extensive data housed in our Activist Alpha database. For a more detailed exploration, feel free to get in touch with us.
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