1/15/2022
Hedge Funds Launched 89 Campaigns in 2021. Here's How They Fared
CNBC (01/15/22) Squire, Kenneth
13D Monitor President Kenneth Squire reports that hedge fund investors lobbied for meaningful corporate change in 2021, with a total 89 campaigns. "These investors also used different methods to improve outcomes for shareholders, including waging campaigns despite owning less than 5% of a company's common stock," he mentions. "This is known as 'under the threshold' [UTT] activism." Total activism numbers were very consistent from 2020 to 2021, with both years seeing 89 new campaigns. "Last year stood out by being "the first year since we began covering [UTT] activism in 2014 that the number of UTT situations exceeded the number of 13D situations," according to Squire. He cites 41 material 13D campaigns and 48 UTT campaigns compared to 48 material 13D campaigns and 41 UTT campaigns in 2020. "We believe this reflects two main things: (i) activists increasingly being able to be more effective with lower percentage holdings and (ii) activists using swaps and derivatives to circumvent 13D requirements while exceeding 5% economic exposure," he contends. 13D filings have declined each year since 2017, with just 41 new activist 13D filings last year, from 48 in 2020, 61 in 2019, 65 in 2018, and 71 in 2017. The average market capitalization for engaged companies is the highest since 2015. "Moreover, despite fewer 13D filings, the amount of total dollars invested in new 13D campaigns ($10.5 billion) is roughly the same for the 41 such filings from last year as it is for the 48 13D filings in 2020," Squire writes. Meanwhile, 2021's UTT campaigns indicated a reversion to its 2018 levels of 48 engagements after seeing 41 engagements in 2020 and 2019. Some major shareholders also returned in 2021. Elliott Management and Starboard were among the most aggressive, with Starboard launching seven campaigns compared to eight in 2020. JANA Partners helmed seven in 2021 from just one in 2020, while Carl Icahn ran four in 2021 versus two in 2020. Consistency with 2020 is also reflected by the 13D filer base's diversity, with 34 unique filers in 2021 and 33 in 2020, compared to 49 in 2019. The information technology, consumer discretionary, financials, and healthcare sectors were the top four industries pursued by investors in 2021, accounting for 56.18% of all campaigns. IT last year surpassed consumer discretionary as the sector attracting the most activism since 2016. Settlements, full wins, and losses were fairly consistent. "In 2020, 68% of 13D engagements settled versus 38% of UTT situations," Squire notes. "Moreover, only 18% of 2020 decided 13D situations have resulted in a loss versus 34% of decided 2020 UTT campaigns while 15% of 13D engagements have resulted in a full or partial win versus 28% of UTT situations. Moreover, this is consistent with the aggregate number of 13D and UTT campaigns between 2014 and 2020."
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