The rise of activist investors over the last decade has given boards at many of the world’s leading companies plenty to think about. Apple, eBay and PepsiCo’s boards have all been subjected to challenges from minority shareholders trying to change their directions.
One recent example suggests that even major financial institutions are not immune to such activity from their shareholders.
Waiting gameActivist investing hedge fund ValueAct Capital Management has revealed it has taken a significant stake in Morgan Stanley, to the tune of $1.1bn, equalling about 2% of the company, writes Olivia Oran for
Reuters.
In an email to
Reuters, ValueAct showed support for Morgan Stanley CEO James Gorman. Despite having bought a share in the business, ValueAct doesn’t have plans to take a seat on Morgan Stanley’s board or to make major changes to strategy, as it has done at other businesses, reports Oran.
Referring to the views of analysts, Oran writes that this is because activists with this sort of investment have “little choice but to place a bet, express support and wait".
She says that activists have shown interest in big banks for years, but few have taken the leap to invest. Dan Loeb’s Third Point Management – which owns shares in Facebook and Google parent company Alphabet – has come and gone on two occasions with investments in Morgan Stanley.
In 2013, the firm bought Morgan Stanley shares, raised concerns about the level of executive pay, and then sold shortly after at a profit. It also invested late last year for a short period.
Reuters article
Less is moreTaking a less than 5% stake in firms is becoming more commonplace among investors, according to William Watts, writing for
MarketWatch, because such investments don’t have to be declared immediately.
Investors have 45 days after the end of the quarter in which the deal is made to file a 13F form to officially declare the arrangement. Investments of more than 5% must be registered with a form known as a Schedule 13D within ten days of the deal being secured.
2%
The size of ValueAct's stake in Morgan Stanley, worth around $1.1bn
Watts quotes Lucinda Guthrie, deputy editor of Activistmonitor, as saying: “Activists now realise they don’t need a 5% stake to have a successful campaign” and that the investment in firms is “more to do with the strength and durability of the campaign rather than the stake you hold".
Watts writes that the number of activists showing interest in mid cap companies has increased, based on data revealed by Activistmonitor for the first half of the year.
MarketWatch article
Activating pressureHowever, another firm that was recently the subject of an activist investor deal is being put under pressure to make significant changes, differing to the agreeable approach ValueAct is purported to be taking with Morgan Stanley.
German generic drug maker Stada Arzneimittel is facing renewed duress from Active Ownership Capital Sarl following the resignation of the former’s chief executive due to long-term illness, James Paton writes for
Bloomberg.
Active Ownership wants Stada to overhaul its supervisory board, which led to the latter proposing the replacement of three board members.
Paton quotes a note written to investors by a Frankfurt-based analyst for DZ Bank AG, Thomas Maul: “The central question is now whether activists can push through a completely new membership for the Stada supervisory board at the coming shareholder meeting.”
He says that a spokesman for the chairman of Stada’s supervisory board confirmed that it aims to enlarge Stada’s management board to four members from three after Retzlaff, who was with the firm for 23 years, resigned.
According to Paton, “people familiar with the matter said in June” that Stada has hired US investment bank Goldman Sachs Group to advise on strategy and relations with shareholders.
Bloomberg article
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