Shareholder activism is on the rise at home and abroad; will it become the norm in share ownership?
Link copied to
Investment bank Lazard believes shareholder activism is going to become more rife in the future.
Shareholder activism occurs when existing shareholders publically attempt to influence a company’s behaviour.
To meet the criteria they have to be shareholders – this excludes shortsellers and political activists who do not own shares. This also excludes private discussions that remain private – a practice common enough that firms such as Regnan exist for this purpose.
Typically, activist investors are larger institutional investors and they may hold stakes in multiple firms. One example is Sir Ron Brierley and his firm Mercantile Investment Company (ASX:MVT) — until his retirement last year.
In 2014, the Abbott government changed the Corporations Act to stipulate investors needed a 5 per cent stake to call a requisitioning meeting in their own right.
This makes it hard, but not impossible, for smaller retail investors to do this.
While Lazard’s report did not mention Australia, Stockhead found that the incidence of shareholder activism on the ASX doubled in 2019.
Stockhead also found the most common demands were for the removal of a director and/or obtaining a board seat, each accounting for half of these incidents at least in part.
Additionally, unsuccessful attempts were pipped by the fully successful. But if you add partially successful attempts to the tally, the latter overtakes the former.
One ongoing case is online market place Redbubble (ASX:RBL), which is being targeted by Emancipation Capital. A letter was served to the board just two days after Christmas expressing concerns about Redbubble’s performance and calling for a strategic review and someone to takeover the company.
This came only two weeks after a solid few months of share price growth came to a halt with a negative trading update.
|Code||Company||Activist Group||Start Date||Objectives||Return during Period||Market Cap||Stake at Announcement||Outcome|
|RBL||Redbubble Ltd||Emancipation Capital LLC||27/12/19||Strategic Review; Sale of Company||9.11||$183.6M||1.32||Ongoing|
|VRL||Village Roadshow Ltd||Mittleman Brothers LLC||23/12/19||Oppose Merger (Target); Break Up; Sale of Company; Strategic Review; Cost Cutting||1.45||$511.8M||5.13||Ongoing|
|RSH||Respiri Ltd||Requisitioning Shareholders (Peter Karl Braun and others)||30/10/19||Remove Director/Withhold Votes; Board Representation||39.34||$23.0M||7.07||Success|
|AEE||Aura Energy Ltd||Pre-Emptive Trading Pty Ltd||22/10/19||Remove Director/Withhold Votes; Board Representation||-13.75||$6.3M||5.89||Success|
|CMW||Cromwell Property Group||ARA Real Estate Investors XI Ltd||17/10/19||Board Representation||-3.8||$2.3B||20||Ongoing|
|WOR||WorleyParsons Ltd||Dar Group Co||15/10/19||Board Representation||25.67||$4.6B||20||Ongoing|
|LCT||Living Cell Technologies Ltd||Pacific Channel Ltd, Masfen Holdings Ltd, T R Harrison Security Trust, and Ogilivie A/C||27/9/19||Board Representation; Remove Director/Withhold Votes||-3.3||$7.0M||5.26||Success|
|MRN||Macquarie Media Ltd||Wilson Asset Management International Pty Ltd||22/9/19||Oppose Merger (Target); Sale of Company; Strategic Review||1.13||$168.4M||4.7||Unsuccessful|
|MLX||Metals X Ltd||APAC Resources Ltd||3/9/19||Board Representation; Remove Director/Withhold Votes||-29.54||$64.8M||8.8||Success|
|DNA||Donaco International Ltd||Tan Eng Hoe "Gerald Nicholas" and Tan Teck Lee Patrick||28/8/19||Board Control; Remove Director/Withhold Votes||14.94||$40.6M||5.59||Ongoing|
|VRS||Veris Ltd||Craig Chapman and Brian Francis Mangano||7/8/19||Board Representation; Remove Director/Withhold Votes||5.54||$15.3M||5||Ongoing|
|PNN||PepinNini Lithium Ltd||Cuprum Holdings Ltd and Jai Shankar Krishnan||23/7/19||Remove Director/Withhold Votes; Board Representation||-43.92||$3.1M||5||Unsuccessful|
|APG||Austpac Resources NL||Robert Claxton and others||15/7/19||Remove Director/Withhold Votes||96.82||$2.0M||0.81||Ongoing|
|OEQ||Orion Equities Ltd/fund||Thunderdome Pty Ltd and JIT Investments Pty Ltd||4/7/19||Remove Director/Withhold Votes||Ongoing|
|RFN||Reffind Ltd||Savvas Hatsisavvidis and Ryan Yearsley||20/6/19||Board Representation||-39.68||$1.8M||5.53||Unsuccessful|
|GBG||Gindalbie Metals Ltd||Sandon Capital Ltd||19/6/19||Sale of Company; Other; Oppose Merger (Target); Return Capital/Buybacks||8.27||$27.8M||Unsuccessful|
|DNA||Donaco International Ltd||Spenceley Management Pty Ltd||27/5/19||Remove Director/Withhold Votes||-1.32||$47.3M||5.04||Ongoing|
|AGR||Aguia Resources Ltd||Requisitioning shareholders (Kemosabe Capital, Henderson International Pty Ltd, Messrs David, and Harry Shearwood)||11/4/19||Board Control; Remove Director/Withhold Votes||-39.03||$20.5M||5.39||Ongoing|
|MTH||Mithril Resources Ltd||Northern Star Resources Ltd and Bodie Investment Group Inc||21/3/19||Board Representation; Remove Director/Withhold Votes||-2.71||$1.8M||8.6||Success|
|AWY||Australian Whisky Holdings Ltd||Quality Lifestyle Support Pty Ltd||18/3/19||Board Control; Remove Director/Withhold Votes; Board Representation; Management Changes||-22.14||$50.9M||10.1||Partial Success|
|MXR||Maximus Resources Ltd||Dr Michael Ruane||18/3/19||Board Representation; Remove Director/Withhold Votes||-39.45||$1.6M||6.99||Ongoing|
|MYO||MYOB Group Ltd||Manikay Partners LLC||5/3/19||Oppose Merger (Target); Sale of Company; Strategic Review||-0.95||$1.4B||9.99||Unsuccessful|
|XIP||Xenith IP Group Ltd||IPH Ltd||12/2/19||Acquire Company; Oppose Merger (Target)||73.8||$88.5M||19.9||Success|
|FMS||Flinders Mines Ltd||Requisitioning Shareholders||11/1/19||Remove Director/Withhold Votes; Board Representation; Other||85.31||$70.1M||6.03||Ongoing|
|1AG||Alterra Ltd||Sandon Capital Ltd||12/12/18||Other; Acquire Company||-24.83||$4.9M||18.6||Unsuccessful|
|HAV||Havilah Resources Ltd||Requisitioning Shareholders (Dr Keith Robert Johnson)||4/12/18||Remove Director/Withhold Votes; Board Representation; Remove Director/Withhold Votes||-38.08||$30.4M||5||Success|
|SMR||Stanmore Coal Ltd||Golden Energy & Resources Ltd||19/11/18||Other; Board Representation; Return Capital/Buybacks; Remove Director/Withhold Votes||30.32||$153.3M||19.9||Partial Success|
|YBR||Yellow Brick Road Ltd||Mercantile Investments||20/08/18||Acquisition Attempt||$31.5M||Unsuccessful|
|AMP||AMP Ltd||Merlon Capital Partners Pty Ltd/Australia||27/10/18||Other; Board Control; Return Capital/Buybacks||-19.2||$5.0B||Unsuccessful|
|AOG||Aveo Group||Metrica Partners||24/8/18||Break Up||-11.01||$956.8M||Unsuccessful|
|GTY||Gateway Lifestyle||Challenger Boutique Choice - Perennial Value Management Australian Equity Fund||13/6/18||Sale of Company||16.73||$422.1M||9.4||Success|
|HT1||HT&E Ltd||Viburnum Funds Pty Ltd||26/4/18||Strategic Review; Break Up||15.43||$519.1M||Success|
|WTP||Watpac Limited||Sandon Capital Ltd||26/3/18||Strategic Review; Other; Board Representation; Management Changes; Break Up||11.69||$107.0M||3||Partial Success|
|CCX||Specialty Fashion Group Ltd||Sandon Capital Ltd||28/2/18||Other; Other||553.6||$35.2M||3||Unsuccessful|
Meanwhile, among global large caps (all stocks globally with market capitalisations above US$500m), 187 companies were targeted.
While this was down on 2018’s number, Lazard noted a record number of investors launched campaigns, including 43 “first timers” with no prior activism activities. This was nearly double the number from two years ago.
Japan became the most targeted jurisdiction (other than America) for the first time.
Lazard shareholder advisory practice managing director Dennis Berman said investor activism was on the rise to the extent that the very nature of share ownership was changing.
“This is a somewhat remarkable growth rate, and lays bare some of my earlier observations that the very nature of share ownership is changing,” he said on LinkedIn.
“There is grist to the idea that to be an actual human selecting actual stocks in the year 2020 pushes owners to be an ‘activist’.
“It’s even interesting to think that over the next decade the term ‘activist’ will disappear, and will be subsumed into the generic term ‘shareholder.’
“It calls to mind great retronyms such as horseless carriage, film camera and ground warfare.”