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Activist Investors Go Dormant As COVID-19 Depresses Economy

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Activist Investors Go Dormant As COVID-19 Depresses Economy

Activist investors turned passive in the last month as the coronavirus threatened to claim corporate victims.

Activist campaigns fell from 42 in January and February to just 16 in March — representing the slowest growth rate since 2013, according to Lazard. Investments in such campaigns have contracted to 2016 levels, and previously launched efforts have been called off.

Land & Buildings pulled its director candidate for American Homes 4 Rent (NYSE: AMH). Elliott abandoned its resistance to the Capgemini-Altran merger.

Still, some activists capitalized on coronavirus sell-offs and accumulated stock in their targets.

Carl Icahn bought up shares of Occidental Petroleum Corporation (NYSE: OXY), Delek US Holdings Inc (NYSE: DK) and Hertz Global Holdings Inc (NYSE: HTZ), and he pushed Occidental Petroleum Corporation (NYSE: OXY) to appoint three new directors and a new chair. At the same time, he sold a large stake of Cloudera Inc (NYSE: CLDR). 

Starboard Value raised its stake in CommVault Systems, Inc. (NASDAQ: CVLT), won a concession from Box Inc (NYSE: BOX) to appoint three new independent directors, nominated nine directors to GCP Applied Technologies Inc (NYSE: GCP) and nominated four directors to eBay Inc (NASDAQ: EBAY). As of April 16, Starboard has withdrawn its eBay nominations, but the company nonetheless agreed to consider its candidates.

A New Form Of Activism

The pandemic-driven environment changed not only the quantity of campaigns but the substance as well. Spinoff and sale suggestions are standard for activist investors, but only five of the 16 March efforts encouraged M&A activity. Buyback requests are also typical, but only one first-quarter campaign made such a demand, according to Reuters.

When it does kick up again, corporate activism may have different targets. 

“We saw COVID-19’s impact on activism show up in March,” Lazard’s Jim Rossman told Reuters.

“Lower M&A activity and companies focused on conserving cash will mean that activists are likely to increase their focus on operational performance and how management teams react to the crisis as the basis for new campaigns.”

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