Shareholder activism is on the rise. And guess what? Elon Musk — loudmouth proponent of electrical vehicles, gas-guzzling rockets and a number of different contradictions — is its new protagonist.
Musk’s much-discussed bid for Twitter, the social media platform he has used for all his selection pronouncements, has outmoded what briefly regarded like a extra regular activist funding according to the Elliotts and Icahns of the world. On April 4, it was disclosed that the maverick entrepreneur had turn out to be Twitter’s largest shareholder, with a 9 per cent stake. Within days he had been provided, and accepted, a seat on the board with an obvious mission to play the position of an out of doors agitator.
Traditional moulds, after all, aren’t for Musk. And befitting an iconoclast in a rush, he quickly modified his thoughts, deciding to not be a part of the board in any case, as an alternative accumulating the monetary backing to launch a full-blown $43bn bid for Twitter. How the story ends is anybody’s guess, given uncertainty over the solidity of the funding, the toxicity of Twitter’s “poison pill” defence and the historical past of Musk’s clashes with regulators, notably the Securities and Exchange Commission which has jurisdiction over acquisitions.
But the case has highlighted with a uniquely Muskish fluorescence that underperforming firms are susceptible to activists of 1 form or one other. (Twitter’s share value in March was down greater than 50 per cent from its 12-month excessive).
As financial pressures, surging inflation and rising rates of interest threaten inventory market valuations, there may be an added incentive for buyers to be extra interventionist in an effort to outperform a possible downward development in common share costs.
At the identical time, one other motive is at work: mainstream energetic buyers are turning extra activist, as they lastly really feel the strain to differentiate their efficiency from low cost index-hugging passive funds. Lately, numerous teams, such because the UK’s abrdn, have tried to push upmarket into higher-fee, higher-performance fund fashions.
Sure sufficient, within the first three months of the yr, there have been 73 activist campaigns launched globally, a quarterly file based on a new assessment by Lazard. In Europe, the place inventory markets have been far much less frothy than within the US, activists’ seek for undervalued investments has been notably eager. There have been 15 new campaigns launched within the first quarter, up 50 per cent on a yr earlier.
In half, this displays the rising preparedness of established names to take vocal positions in opposition to firm managements on particular points. Abrdn has been amongst the activists at Vodafone, for instance, becoming a member of established campaigner Cevian in urging drastic restructuring and a boardroom overhaul.
There has even been activism from the sovereign wealth fund group, historically a rarity. Temasek final month is reported to have pushed for Bayer chief government Werner Baumann to go away the German healthcare group.
Another development, evident in Italy, has seen home rivalries play out — par for the course in some sense, however clearly pushed now by arguments about inventory market underperformance. At Generali, this week’s annual assembly will witness a showdown between the Italian insurer’s board backed by main investor Mediobanca and a rival shareholder contingent led by enterprise tycoons Leonardo Del Vecchio and Francesco Caltagirone. Both sides have manoeuvred to maximise the burden of their shareholdings — following a sample extra related to activist hedge funds.
Activist campaigns even have turn out to be notably influenced by the ESG agenda, with activists driving firms to pursue extra progressive environmental, social and governance insurance policies. Carl Icahn, for instance, has focused McDonald’s over how its suppliers deal with pigs. Hedge funds Snowcap and Clearway have pushed, respectively, for a shift away from coal and a transfer out of Russia, at vitality teams AGL and Total.
Lazard information present that the variety of annual assembly proposals associated to surroundings and social points within the first quarter of the yr (438) nearly equalled the file full-year quantity logged final yr.
Campaigns that push for a merger or acquisition have declined (from the 41 per cent common of the previous 4 years) to only 30 per cent, with board change now the intention in 40 per cent of instances, up from 31 per cent. As ordinary, then, in his take-private plan for Twitter, and his spurning of a board seat, Elon Musk is preventing in opposition to the tide.