13D MONITOR ACTIVIST MEDIA CENTER
Breaking news and more: Your media center for shareholder activism and corporate governance.
Despite encouragement from Starboard Value, Macy's (M) has been slow to make money from its valuable brick-and-mortar buildings. Its reluctance has prompted intervention from the Securities and Exchange Commission, which on Friday released correspondence asking why the retailer keeps discussing the importance of monetizing real estate but does not adequately detail real-estate sales in its financial filings. Instead of listing property sales as real-estate gains in a separate line item on its income statement, the agency noted, Macy's has been accounting for such sales by slashing its selling, general, and administrative expenses—giving investors the impression that it is reducing its overhead rather than simply unloading real estate. Meanwhile, it has been more than a year since Starboard first suggested that Macy's take half its stores and form a separate joint venture with a mall operator, ultimately using cash from property sales to repurchase stock, pay down debt, or reinvest in its business. Since then, Macy's stock has fallen by 44%; and investor frustration is rising. Although Macy's recently said it would close about 14% of its stores, the company could command more for its brick-and-mortar buildings—which Starboard Value says are worth at least $21 billion.
Abstract News © Copyright 2016 INFORMATION, INC.
Investors Sour on Activists but Won’t Shift Strategy
" Financial Times (08/26/16)"
According to a Preqin survey, 100% of institutional investors said performance by activist strategies fell below their expectations in the first half of this year; but only 9% intend to decrease their exposure to the strategy. “Performance, along with fees, looks set to be a key driver of change in the industry over the rest of 2016,” said Amy Bensted, the group’s head of hedge fund products. Hedge fund managers are hoping the improved performance between March and July “may help win back the favor of investors, and help the industry gain fresh capital inflows in the second half of the year.” According to Preqin, activist strategies lost investors 5.6% from July last year to this past June. Although activists have generated 4.1% year to date compared with 3.7% for all hedge fund strategies, activist strategies have gained only 0.7% over the past 12 months, compared with 1.6% for the broader sector, Preqin data show. Public sentiment toward hedge funds has also turned in recent quarters: investors withdrew a net $34 billion from the hedge fund industry in the first half of the year, Preqin estimates.
Abenomics' Third Arrow Spurs Dan Loeb and Others to Shake Up Japan
" Institutional Investor (08/22/16) Delaney, Jess"
Foreign shareholder activists have for decades found little success in Japan but, partially due to the corporate governance reforms of Prime Minister Shinzo Abe, they now are experiencing unprecedented success. Third Point founder and CEO Dan Loeb, for example, has been campaigning for greater shareholder returns in Japan since 2013 and has acquired holdings in robot maker Fanuc Corp., Suzuki Motor Corp., IHI Corp., and Sony Corp. “We effectively give them a dare-to-be-great speech that connects them to the principles around governance that their own government has articulated as part of the third arrow strategy,” Loeb says. “It's subtle, but I think it's more palatable because the companies don't have to do something that an outsider wants them to do; they are following the leadership of their own government.” Abe's reforms aim to drive greater corporate discipline and push boards to show more concern for shareholders, and Japan is starting to mend its ways. In October 2015, Loeb announced the hedge fund firm had taken a stake in Seven & i Holdings Co. and ultimately scored a rare victory after invoking the corporate governance code in an open letter to the board. The success was hailed in the Japanese media as the beginning of a new era in corporate governance.
In Praise of Hedge Funds: Why Short-Term Activists Create Long-Term Value
" City A.M. (08/16/16) Edmans, Alex"
Activist hedge funds often get a bum rap, but academic research examines "all the evidence" and presents a more positive view, writes Alex Edmans, a professor of finance at London Business School. A decade of research led by professors at Duke University and Columbia University shows that activist hedge funds create value in both the short term and in the long run. The pivotal study found that activism boosts company value 7%, with no long-term reversal, while also improving operating performance and payout to investors. CEO turnover also rises. A second paper investigated the source of the increase in operating performance. It found that productivity climbs in plants sold by hedge funds, suggesting that they drive reallocation of assets to buyers that can make better use of them. The professors' newest paper studies innovation, finding that hedge funds do cut R&D. However, despite lower innovation input, it actually improves in terms of both the number and quality of future patents, the authors found. Ultimately, "investment is absolutely critical for the twenty-first century firm," Edmans concludes.
Abstract News © Copyright 2016 INFORMATION, INC.
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Last month’s Activist Report
||Activist investors targeting Time Inc.?
Source: CNBC Video - August 16, 2016
||Misunderstood activist investors?
Source: CNBC Video - May 19, 2016
||Betting on Zero: Bill Ackman vs. Herbalife
Source: CNBC Video - April 15, 2016
||No Joy for Hedge Funds in 2015
Source: Bloomberg TV - December 23, 2015
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