On becoming an activist board!

Corporate boards must be vigilant during the Covid-19 pandemic and anticipate activist engagement that could impact the fate of the company as a whole. K2 Intelligence FIN’s Lisa Silverman suggests boards have a response plan and communicate more with shareholders as a start. With the Covid-19 pandemic, general economic activity is at best limited and at worst shut down, companies fear for the health of their workforce, and workplace interactions look like the opening credits of The Brady Bunch. Although many companies are focused on stemming the financial free fall as they see both their earnings and valuations plummet to unfathomable depths, they must also begin formulating a plan for a post-pandemic world that not only lays out a blueprint for recovery but also addresses the possibility that activist investors may come knocking.

The coronavirus shutdowns are forcing companies to cancel dividends and deals and look to governments for help. None of this is good news for activist investors. But boards that don’t handle the crisis well could find themselves the next targets. The start of 2020 was busy for hedge funds that try to generate returns by pushing for corporate change. They deployed $2.8 billion of capital on average each week in February, including Elliott Management’s $2.5 billion stake in SoftBank Group and Third Point’s roughly $2 billion investment in insurer Prudential PLC. But as the Covid-19 outbreak went global in March, the weekly average dropped to $300 million, according to Lazard’s first-quarter review of shareholder activism.

SoftBank’s use of risky debt to fuel its tech powerhouse Vision Fund will leave it paying its Middle Eastern investors billions in crippling interest payments, analysts have warned.

It may seem like a long time ago, but back at January’s annual gathering of the World Economic Forum, there was little mention of coronavirus. At the time the outbreak was already prevalent across mainland China, and yet, as senior political and business leaders from our biggest economies debated prominent global threats such as climate change and weapons of mass destruction, the virus barely got a look in.

Fintech deals and dollars are falling quarter over quarter, reflecting broader market uncertainty and potentially tough times ahead. We examine where startups in the space go from here.

ABB, Nestlé, Thyssenkrupp: Activists are increasingly targeting European companies. Some demand drastic measures from their targets’ executives and supervisory boards. They typically depend on allies to push their demands for strategic change. Activists can often achieve the required majorities by informally teaming up with institutional investors, making them important potential partners. [...] At a time where many companies are struggling for sheer economic survival and where the market is extremely volatile due to the global spread of coronavirus, major activists have declared a kind of “truce”. However, this state of affairs will not last. Instead, activists could use the low valuations to build up or extend their positions. Management boards, investor relations and communication departments are therefore well advised to deal with this topic right now.

Bill Ackman’s Pershing Square Capital Management has raised its stake in the parent company of Tim Hortons. While both Pershing and Restaurant Brands International Inc. (RBI) are expressing admiration for one another, a prominent Bay Street lawyer is questioning the hedge fund manager’s approach. In a filing late Monday afternoon, Ackman and Pershing Square disclosed they now hold a combined 9.6-per-cent stake in RBI, and stated they view the company's shares as being "undervalued" and "an attractive investment." "We bought a lot more stock in the company because we’re big believers in the company and its management," said Pershing Square spokesperson Francis McGill in an email to BNN Bloomberg.

Shareholder activists launched fewer campaigns in the first quarter than they have in some time, but companies are bracing themselves for that to change. Shareholder activists have hit the pause button in the midst of the coronavirus crisis, with campaigns in the first quarter falling to their lowest levels since 2014.  But advisers expect these investors to come roaring back when the dust settles — and companies are adopting more poison pills than they have in a decade, according to new research from data provider Activist Insight.  [...] This year, however, companies adopted 23 so-called poison pills — also known as shareholder rights plans, which are intended to fend off activists — through the beginning of April, including 17 in March alone. That’s compared with 19 for the entire previous year.

In little over three weeks, COVID-19 put up formidable obstacles to everyday life. The new coronavirus is by no means only a financial story and our first concern is for the health and wellbeing of all of our readers and their loved ones. We hope you are all staying safe. Like everything else, we know shareholder activism has been dramatically affected by this new reality, even if we don’t always know how, or for how long. If the novel coronavirus is more than just a financial story, it is the financial story of 2020. [...] This report is a snapshot of Activist Insight’s attempts to answer those questions. Included are articles our subscribers have had access to for weeks, highlighting the chilling effect of COVID-19 on the 2020 proxy season, the opportunities it has unleashed for both long and short investors, and the hurdles that will have to be surmounted if activists are to remain an influential part of corporate life.

Washington, D.C. – In response to the liberal left’s outsized influence over corporate proxy ballot matters, the Free Enterprise Project (FEP) today debuted its first annual Investor Value Voter Guide to educate investors who want to vote in line with conservative and religious values. "For far too long, the left has dominated discussions within the shareholder activism arena with little to no pushback. Now conservative and faith-based investors have the necessary information, backed by meticulous research, to make their voices heard in corporate America,". "While the left has been tremendously successful at bringing corporate America into its lane, our Investor Value Voter Guide will empower the right with the confidence to engage as well."

The first earnings season of the COVID-19 pandemic and the filing of proxy statements sees corporate executives under a level of pressure unfamiliar since the Global Financial Crisis. Although activists look poised to give companies a pass at least for the first half of this year, poor communications work could have a more lasting impact than in normal times.