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Featuring all breaking news and in depth articles and editorial press coverage pertaining to shareholder activism and corporate governance.

Japan Minister Denies Officials Asked Adviser to Contact Toshiba Shareholders
Norway's Equinor Must Lift Its Climate Ambitions, Minority Investors Say
Glaxo Pressing Ahead With Consumer Split, Unit’s Chief Says
Billionaire Drahi Takes On Bruised British Icon
Toshiba Sought Ministry Help to Swing Key Vote, Probe Finds
UK's Morrisons Faces Investor Heat Over Unhealthy Food
Women Take Half of New UK Board Seats
Ackman Music Deal Spurs Pushback From Vivendi Shareholder
Rebuke for UK's Morrisons as Investors Reject Pay Report
GameStop Falls 27% on Potential Share Sale
Twitter Appoints New Board Member to Replace Elliott's Cohn
CVR to Pass Delek Shares to Investors After Failed Activist Fight
GameStop Set to Complete Board Overhaul With Ryan Cohen’s Election as Chair
GameStop's New Boss Says Company Has a Lot of Work to Do
GameStop Remakes C-Suite, Board in Turnaround Push
Sustainability Standards Groups Merge
Aviva Investor Is Part Outrider, Part Salesperson
Cevian Takes Aviva Stake, Seeks 5 Billion Stg Capital Return
What to Know About Genesco’s Battle Ahead of Annual Shareholder Meeting
Legion Partners Files Definitive Proxy Statement and Sends Letter to Genesco Shareholders
Glass Lewis Opposes Lawyer Election to SoftBank Board
Investor Wants Heads to Roll After $6.2 Billion Cyberpunk Fiasco
Genesco Files Definitive Proxy Materials and Issues Letter to Shareholders
Shareholders Up Demands for Workplace Diversity Data Seen by Few
Barington Pushes for Change at Chico's, Again
SEC Chair Calls for New Restrictions on Executive Stock-Trading Plans
GameStop's Most Loyal Shareholders Are in It for the Long Haul, Not the Memes
Bill Ackman’s SPAC Will Be Three SPACs
William Ackman SPAC Nears $40 Billion Universal Music Deal
After Pressure, All-Male Boards Have Now Vanished From S&P 500
SoftBank’s Son Turns to Female Gaming Pioneer to Shake Up Board
Ackman's SPAC Slumps After Universal Music Deal Irks Investors
How These Activists Find Ways That ESG Can Enhance Returns
Activist Investors are Both Greening and Greying
Exxon's Board Shakeup Could Force Review of Billions of Dollars in Spending
Everyone Wants 100% Returns But There's a Snag
Hong Kong-Listed Companies Added Women to Boards in 2020 at Highest Rate in Four Years, Report Says
Exxon’s Board Defeat Signals the Rise of Social-Good Activists
Exxon Investor's Win 'Eye Opening' Says Jeff Smith: Deals Update
How Boards Should Prepare for Updated ESG Standards Under New SEC Leadership
Study: Racial Diversity Stagnated on Corporate Boards
Starboard's Smith Says ESG Activists Need to Deliver for Credibility
BlackRock Won't Save You From Blackstone
Opinion: Is Engine No. 1's Climate-Linked Coup of Exxon's Board a Case of "Greenwashing?"
Surprise: Women and Minorities Are Still Underrepresented in Corporate Boardrooms
UK Remains High on Investor Agenda
Institutional Investor Survey 2021
Corporate Change in Japan Will Need More Than Pregnant Pandas
BlackRock's 'No. 1' Goal in 'Woke' Investing: Huge ESG-Funds Haul
Why Doing Good Is No Longer Bad Business
Commentary: Why Executives Should Always Listen to Unreasonable Investors
New Generation at Wall Street's Old Guard Rattles Corporate America
Cloud Software's Low-Hanging Fruit Is a Tempting Target

6/11/2021

Japan Minister Denies Officials Asked Adviser to Contact Toshiba Shareholders

Reuters (06/11/21) Yamazaki, Makiko

Japan's trade minister on Friday denied his officials directed an adviser to lean on Toshiba Corp's (TSYY) foreign shareholders to ensure management won a key vote on board membership last year. The denials follow a shareholder-commissioned investigation released on Thursday that accused the government of colluding with Toshiba to pressure foreign investors to fall in line with management's wishes. Among its findings, the investigators' report said Toshiba, working in unison with the trade ministry, "effectively asked" a government adviser to negotiate with Harvard University's endowment fund to change its voting behavior. "Ministry officials have informed me that it's not true that any request was made to engage with individual investors," said Trade Minister Hiroshi Kajiyama. He added that the ministry was waiting on Toshiba's response to the report. Sources have previously told Reuters that Hiromichi Mizuno, a ministry adviser at the time, had told the Harvard fund it could be subject to a regulatory probe if the fund did not follow management's recommendations at last year's annual general meeting. The fund subsequently abstained from voting. Mizuno, a Tesla Inc. (TSLA) board member and who previously oversaw Japan's $1.4 trillion Government Pension Investment Fund, is currently the United Nations Special Envoy on Innovative Finance and Sustainable Investment. Some activist investors said that the successful push by shareholders for the independent investigation in a landmark vote this year and the report's findings showed progress was being made in Japan corporate governance. "It's a direct result of Japan trying to really have a world class governance structure. It doesn't mean they're perfect yet," said Brian Heywood, CEO of Taiyo Pacific Partners, an activist fund that has operated in Japan for 20 years. "All of Japan Inc isn’t rushing to Toshiba's defense," he said, adding that he saw the debacle as a "last gasp" of Japan's trade-ministry controlled capitalism.

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6/11/2021

Norway's Equinor Must Lift Its Climate Ambitions, Minority Investors Say

Reuters (06/11/21) Adomaitis, Nerijus

Minority shareholders called on Norwegian energy major Equinor (EQNR) to set tougher near-term targets for reducing the company's climate impact when it presents a new strategy next week. Chief Executive Anders Opedal, who took the helm late last year with a promise to speed up the state-controlled firm's renewable investments, also faces demands for climate action from opposition politicians favored to win power this year. The June 15 strategy update is Opedal's best chance to make his mark on a company that more than anything has come to symbolize the half century of oil and gas production that made Norway one of the world's wealthiest nations. The CEO has said he wants to achieve net zero emissions from Equinor's operations and the final use of its energy by 2050, but current strategy still involves raising oil and gas output at least until 2026. "With the urgency we feel and experience on the climate related issues, we definitely expect the strategy to be bold and to be detailed on how to reach the net zero targets," said Jan Erik Saugestad, head of Storebrand Asset Management. "We expect them to set short-term (2025), medium-term (2026-2030) and long-term targets (2030-2050)," he said. Storebrand's funds own a 0.5% stake in Equinor, according to Refinitiv Eikon. Norway's largest pension fund, KLP, which holds a 0.6% stake, said Equinor's carbon neutrality strategy "still has potential to become more science-based considering how the company can achieve net-zero by 2050." The Norwegian government's 67% ownership shields Equinor from activist shareholder pressure but state-controlled firms still need to listen to their owner about strategy. Equinor has sold a chunk of its onshore oil and gas business in the United States and might retreat further from its international upstream fossil fuel business and expand its renewable activity abroad, RBC analyst Biraj Borkhataria said.

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6/11/2021

Glaxo Pressing Ahead With Consumer Split, Unit’s Chief Says

Bloomberg (06/11/21) Ring, Suzi

GlaxoSmithKline Plc (GSK) will press ahead with a plan to split off and list its consumer health division as a standalone company after Elliott Management Corp. took a stake in the drugmaker, the unit’s chief said. “We’re on the path to separation, so that’s the plan,” said Brian McNamara, who’s led the division since 2016 and only learned of Elliott’s investment in April when it appeared in the press. “We think that is the best way to really unlock the value of this business and have shareholders benefit.” The timing and approach to the split will be set out at the June 23 investor day, McNamara said Friday. Glaxo hasn’t disclosed whether it will opt for a spinoff to shareholders or an initial public offering of the business. The decision by Elliott to invest has led to speculation Glaxo might revise its plans, muddying the waters at a pivotal moment for the company. The British drugmaker is about to set out on a path focused on pharmaceuticals and vaccines, fulfilling a shift Chief Executive Officer Emma Walmsley outlined in 2018 when the consumer division entered a joint venture with Pfizer Inc. (PFE). Four years into Walmsley’s tenure, investors are keen to see progress. The drugmaker has lagged behind peers and has also disappointed on its Covid contribution to date, opting to partner with rivals on a shot rather than making its own. Walmsley is planning to complete the consumer health split by mid-2022, and Glaxo is expected to release 10-year sales forecasts this month, as well as details on the areas of therapy where it will focus following the separation. Elliott has revealed little about its ambitions for the drugmaker, but it has a history of agitating for change.

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6/10/2021

Billionaire Drahi Takes On Bruised British Icon

Bloomberg (06/10/21) Webb, Alex

Patrick Drahi has announced his obtainment of a £2.2 billion ($3.1 billion) interest in BT Group Plc. (BTGOF), the former U.K. national carrier, which is trading at a discount to its major European counterparts. This is an unusual move for Drahi, who typically acquires a minority stake in any company that he pursues. He has so far only acquired a minority share in BT, and has vowed not to launch a takeover bid within six months, with certain exceptions. An acquisition by an overseas investor would have to address significant regulatory challenges, and if these issues can be overcome, Drahi may see an opportunity in BT's capacity for more debt to launch a takeover, even though the carrier has an £8 billion pension deficit. Yet even lacking a bid, he can still can still wield significant clout, and is sure to take an active, if not yet activist, interest in BT's management. Drahi is BT's biggest investor with his 12.1% stake, and he could reasonably be expected to appoint a board member like second-biggest shareholder Deutsche Telekom AG (DTEGY). If BT's management proves unresponsive, Drahi could openly call for change. This raises speculation on what his goal is, which may include helping BT operationally, not just by expediting the rollout of high-speed fiber, but by encouraging customers to pay for it. Drahi's intentions for BT's infrastructure are likely to be more important. Investors have long urged CEO Philip Jansen to sell a stake in BT's Openreach unit, which some analysts value at more than £20 billion; BT has a total enterprise value of £37 billion. Drahi's experience with Altice (ATUS) suggests such a deal may be appealing: he has raised some €7.5 billion ($9.1 billion) over the past three years by selling network assets in France and Portugal. Some of the proceeds of any sell-off would be placed in BT's pension fund, but there may still be enough of an advantage to benefit Drahi.

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6/10/2021

Toshiba Sought Ministry Help to Swing Key Vote, Probe Finds

Bloomberg (06/10/21) Reidy, Gearoid; Lee, Min Jeong

An independent investigation found evidence that Toshiba Corp. (TOSYY) sought government help in swinging a key shareholder vote that installed its slate of directors. The investigating law firms said the voting, which opposed nominees from Singapore-based Effissimo Capital Management, was unfairly managed, with Toshiba orchestrating "a plan to effectively prevent shareholders" from exercising their rights, collaborating with Japan's trade ministry to block activist investors. The collaborators exerted pressure on 3D Investment Partners, Toshiba's third-largest shareholder, which shaped its voting decisions, and to influence how Harvard University's endowment fund would vote. The probe thus concluded that "the AGM [annual general meeting] was not fairly managed." Then-CEO Nobuaki Kurumatani met with Yoshihide Suga, former chief cabinet secretary and now Japan's prime minister, prior to the AGM to explain the situation. Senior Toshiba executive Masaharu Kamo also met Suga, who the report said supported "aggressive" action to use the Foreign Exchange and Foreign Trade Act. Suga has rejected the report's findings, insisting "I know nothing of this" when reporters pressed him about comments attributed to him in the report. "The company is at a fork in the road," said Justin Tan at United First Partners in Singapore. "Had shareholders not voted in favor of Effissimo's resolution, this malfeasance would have been swept under the carpet. Going forward, we would like to see management work constructively towards increasing shareholder value."

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6/10/2021

UK's Morrisons Faces Investor Heat Over Unhealthy Food

Reuters (06/10/21) Davey, James

Morrisons (MRWSY) on Thursday became the latest British supermarket group to be targeted by activist shareholders over the amount of unhealthy food it sells. Responsible investment group ShareAction said it, along with seven institutional investors managing $1.1 trillion between them, had written to Morrisons Chairman Andrew Higginson ahead of the grocer's annual shareholders' meeting calling on it to boost sales of healthier food and drink products. Last month market leader Tesco (TSCDY) agreed to increase healthy food options at operations in Europe and Britain to appease investors coordinated by ShareAction who had filed a landmark shareholder resolution to force the issue. ShareAction has also previously targeted Barclays (BCS) and HSBC (HSBC) on the issue of climate change. The Morrisons investors signing the letter included NEST, Guy’s & St Thomas’ Foundation, JO Hambro Capital Management, and Castlefield Investment Partners. They pointed out that Morrisons has a target to increase the number of healthier own-brand products to 65% of all own-brand products by 2025 but said this did not go far enough. The investors want Morrisons to disclose the share of total food and non-alcoholic drink annual sales by volume made up of healthier products, and to publish a long-term target to significantly increase that share. They also want Morrisons to update on its progress towards targets in its annual reports from 2022 onwards. "We are committed to helping our customers make healthier choices and we are supportive of measuring performance and setting meaningful targets," said a Morrisons spokesperson. "We already publish the proportion of our own brand products which are classed as healthy and have a commitment to increase this."

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6/10/2021

GameStop Falls 27% on Potential Share Sale

Reuters (06/10/21) Saldanha, Aaron; Jaisinghani, Sagarika; Carew, Sinéad

Shares of GameStop Corp (GME) closed down 27.16% at $220.39 on Thursday, their biggest one-day percentage loss in 11 weeks. The drop came a day after GameStop said in a quarterly report that it may sell up to 5 million new shares, sparking concerns of potential dilution for existing shareholders. "The threat of dilution from the five million-share sale is the dagger in the hearts of GameStop shareholders," said Jake Dollarhide, chief executive officer of Longbow Asset Management. "The meme trade is not working today, so logic for at least one day has returned." Soaring rallies in the shares of GameStop and AMC Entertainment Holdings (AMC) over the past month have helped reinvigorate the meme stock frenzy that began earlier this year and fueled big moves in a fresh crop of names popular with investors on forums such as Reddit’s WallStreetBets. Many of those names traded lower on Thursday, with shares of Clover Health Investments Corp (CLOV) down 15.2%, burger chain Wendy’s (WEN) falling 3.1%, and prison operator Geo Group Inc. (GEO), one of the more recently minted meme stocks, down nearly 20% after surging more than 38% on Wednesday. AMC shares were off more than 13%. Wedbush Securities on Thursday raised its price target on GameStop to $50, from $39. GameStop will likely sell all 5 million new shares but that amount only represents a “modest” dilution of 7%, Wedbush analysts wrote. GameStop on Wednesday reported stronger-than-expected earnings, and named the former head of Amazon's (AMZN) Australian business as its chief executive officer. The company on Wednesday said the U.S. Securities and Exchange Commission had requested documents and information related to an investigation into that trading.

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6/9/2021

Twitter Appoints New Board Member to Replace Elliott's Cohn

Reuters (06/09/21) Herbst-Bayliss, Svea; Dang, Sheila

Twitter Inc. (TWTR) on Wednesday appointed development finance executive Mimi Alemayehou to its board of directors to replace Elliott Management partner Jesse Cohn, after the hedge fund helped create a blueprint for changes that led to a doubling of the social media firm’s share price. Alemayehou will join the board immediately and Cohn will step down, the company said in a release. Elliott, one of Twitter’s top 20 investors, will continue to engage with senior management and the board through an “information sharing and engagement agreement,” Twitter said. Cohn, who runs the $40 billion hedge fund’s U.S. activism practice, was appointed to the Twitter board in March 2020, as part of a deal with the social media company to let Chief Executive Jack Dorsey keep his job and allow Elliott to take a board seat. Cohn joined the board alongside Silicon Valley tech investor Egon Durban, co-chief of private equity company Silver Lake. Elliott had previously pushed to remove Dorsey after criticizing him for holding the CEO position at both Twitter and mobile payments company Square Inc. After a long period of languishing performance, in which Dorsey admitted Twitter had been slow to innovate and introduce new features, the platform has more recently made a slew of announcements to attract more users and advertisers. It has committed to doubling its annual revenue by 2023, and last week introduced its first subscription product, Twitter Blue, which lets users edit tweets and customize their app.

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6/9/2021

CVR to Pass Delek Shares to Investors After Failed Activist Fight

Houston Business Journal (06/09/21) Mann, Joshua

CVR Energy Inc. (CVI) is planning to pass its interest in Delek US Holdings Inc. (DK) down to its shareholders after a failed proxy fight. CVR attempted to place three of its nominees on Delek’s board of directors at Delek’s annual shareholder meeting on May 6, but that effort failed to get the requisite votes, according to a filing with the U.S. Securities and Exchange Commission. CVR had previously purchased a 15% stake in Delek, making it the company’s largest shareholder. Now CVR is planning a June 10 dividend that will distribute its interest in the Tennessee company — about 10.54 million shares of Delek stock — to its own shareholders, according to another SEC filing. CVR will also distribute enough cash that the total value of the cash and stock distribution will be $492 million, spread across all its shareholders. CVR was itself the target of activist investor action back in 2012, when Carl Icahn acquired a controlling stake. As of the start of 2021, Icahn still owned about 71% of CVR’s interest, and Icahn is listed alongside CVR in regulatory filings surrounding the Delek activist investor activity. CVR produced $3.93 billion in revenue in 2020, down about 38% from $6.34 billion in 2019, according to its latest annual financial report. The company reported a $320 million net loss in 2020, down significantly from net income of $362 million in 2019.

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6/9/2021

GameStop's New Boss Says Company Has a Lot of Work to Do

Wall Street Journal (06/09/21) Needleman, Sarah E.

New GameStop Corp. (GME) Chairman Ryan Cohen said the company has a lot of work to do to reverse its fortunes without detailing its strategy, according to attendees at its shareholder meeting Wednesday. He stated that GameStop is not planning to make many ambitious promises or reveal its strategy to competitors. Cohen assumes control of a revamped board as a majority of incumbent directors resigned. The company elected five others, including exiting CEO George Sherman. Three of the new directors have ties to Cohen from Chewy Inc. (CHWY), the online pet-supplies retailer he sold to PetSmart (PETM) in 2017. GameStop has been the focus of a social-media-driven trading frenzy for months. Its share price swelled after Cohen joined the board in January, with some investors thinking his success with Chewy could help the company. Shares peaked in January at $483 in intraday trading, but later plummeted to about $40 in mid-February and have fluctuated since. GameStop stock traded at $313.05 in midday trading, up 4% Wednesday and roughly 6,200% over the past year. Cohen assured attendees that GameStop has clear goals to satisfy clients and boost value for the long-term. He noted that "we have a lot of work in front of us, and it will take time," adding that the firm is attempting something that nobody in retail has previously tried. GameStop leaders have mostly avoided a discussion of the share price rally, which was the topic of a congressional hearing in February. GameStop declared in an April securities filing that recent stock price fluctuations have been "unrelated or disproportionate" to its operating performance. For the latest quarter, analysts surveyed by FactSet expect GameStop sales to increase about 14% from a year ago to $1.16 billion. They predict the company will contract its per-share loss to 49 cents from $2.57 a year earlier.

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6/9/2021

GameStop Remakes C-Suite, Board in Turnaround Push

Wall Street Journal (06/09/21) Needleman, Sarah E.

GameStop Corp. (GME) has reset its executive leadership team as the videogame retailer aims to leverage its recent popularity with investors to reverse years of strategic missteps and sluggish sales. The company named two Amazon.com Inc. veterans — Matt Furlong and Mike Recupero — as its CEO and CFO, respectively. In addition, shareholders voted Ryan Cohen as chair. The appointments came as the company posted better-than-anticipated sales in the most recent quarter. It also marks a new strategic direction. Cohen, co-founder of online pet supplies retailer Chewy Inc. (CHWY), has spent seven months pushing for GameStop to move faster into e-commerce and away from its bricks-and-mortar roots, among other initiatives. Furlong will take the reins on June 21. He has worked for Amazon.com (AMZN) for almost nine years, most recently heading its Australia business. Before that, he was a technical advisor to the head of Amazon's North America consumer business. For his part, Recupero started his career at Amazon 17 years ago. He most recently served as finance chief of its North American consumer business. GameStop also recently added its first-ever chief technology officer, along with a new COO, a new senior vice president of e-commerce, and several other executive roles. Several either come from Amazon or Cohen's Chewy. A GameStop press release on Wednesday stated: "The company is continuing to actively pursue senior talent with gaming, retail, and technology experience."

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6/8/2021

Cevian Takes Aviva Stake, Seeks 5 Billion Stg Capital Return

Reuters (06/08/21) Cohn, Carolyn

Cevian Capital reported its acquisition of an almost 5% stake in U.K. insurer Aviva (AVVIY), and said the firm should return £5 billion ($7.08 billion) of excess capital next year. Aviva, which has divested eight businesses since Amanda Blanc was appointed CEO in July 2020, announced in May that it had raised £7.5 billion from disposals and intended to return money to shareholders, without disclosing how much. "Aviva has been poorly managed for many years, and its high-quality core businesses have been held back by high costs and a series of bad strategic decisions," said Cevian's Christer Gardell. Analysts have estimated that Aviva would have between £3.7 billion and £6.6 billion excess capital following the completion of the asset sales. According to Cevian, Aviva should have a value of more than £8 per share within three years, and more than double its dividend to 45 pence. Company shares are currently trading above £4 a share and appreciated 3.5% on the Cevian statement. Cevian also noted that it sees room for further cost reductions, amounting to £500 million by 2023. Aviva in 2020 outlined a strategy including £300 million in cost cuts by then. Since it sold its assets, the insurer is refocusing on the British, Irish, and Canadian markets. Industry sources suggest Aviva could also sell books of life insurance business closed to new clients, while its Canadian unit might also attract buyers. "Aviva has made significant strategic progress over the past 11 months and we remain sharply focused on further improving our performance," reported an Aviva spokesperson. "We regularly engage with investors and welcome any thoughts which move us towards our goal of delivering long term shareholder value." Two sources said Cevian began accumulating its Aviva interest several months ago, with both parties maintaining cordial relations. Cevian stated that its chairman George Culmer and Aviva's Blanc are "committed to...delivering substantial shareholder value."

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6/7/2021

Legion Partners Files Definitive Proxy Statement and Sends Letter to Genesco Shareholders

Business Wire (06/07/21)

Legion Partners Asset Management LLC announced the filing of its definitive proxy statement with the Securities and Exchange Commission and submitted a letter to its fellow shareholders, urging that they elect its slate of four nominees to Genesco's (GCO) board at the 2021 annual shareholders meeting on July 20. In the letter, Legion Partners Managing Directors Chris Kiper and Ted White cited what they called "anti-shareholder actions over the past two months [that] have validated our case for shareholder-driven change in the boardroom. Notably, the Company appears to have delayed its Annual Meeting on the heels of our April nomination in order to search for director candidates to include in a defensive, reactionary Board refresh that does not seem to have been broadly undertaken. The Company subsequently rebuffed our good faith efforts to settle in exchange for one designee, provided that Matthew C. Diamond—a 20-year Board member who currently serves as Lead Independent Director and Chair of the Nominating and Governance Committee—step down in 2022. The Board and management apparently felt it was preferable to derail settlement discussions, disregard our calls for a universal proxy card, and spend $8.5 million in professional fees to try to preserve one entrenched director's position." Kiper and White further wrote that "the incumbents also tout their strategy and short-term performance without addressing Genesco's years of underperformance or its track record of overpaying executives as margins have deteriorated. It appears the current Board is willing to do and say just about anything to maintain the dismal status quo." In promoting board nominees Marjorie L. Bowen, Margenett Moore-Roberts, Dawn H. Robertson, and Hobart P. Sichel, Legion Partners plays up their "impressive corporate governance acumen, diversity and inclusion insight, retail expertise, strategic planning and turnaround know-how, and transaction experience."

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6/7/2021

Investor Wants Heads to Roll After $6.2 Billion Cyberpunk Fiasco

Bloomberg (06/07/21) Martewicz, Maciej

An investor in CD Projekt SA (OTGLY) wants to oust the top executives of Poland’s largest gaming studio for the botched release of the Cyberpunk 2077 title that wiped out more than half of the company’s value. Abri Advisors wrote to the studio’s board expressing “utter dismay and disbelief with developments at the company over the last 12 months” on behalf of all shareholders. CD Projekt hyped Cyberpunk as the next global blockbuster and one of the most sophisticated role-playing games ever, but the game's complexity appears to have overwhelmed the studio. Its release was postponed three times and when it finally came out in December, it was so riddled with glitches that Sony Group Corp. (SONY) was forced to remove it from its online PlayStation store and offer clients a refund. Nearly half a year later, the game still hasn’t been reinstated by Sony and the studio’s stock has lost 57%. “I don’t think you could have intentionally tried to make so many mistakes as these guys have made,” Abri’s CEO Jeffrey Tirman said in an interview. “It’s really shocking.” He said he’d solicit other shareholders to replace the supervisory board unless CEO Adam Kicinski and his deputy, Marcin Iwinski, are recalled immediately. Tirman said Abri is adding to its CD Projekt position and isn’t shorting the stock. Pushing through changes at CD Projekt is set to be a difficult task as the company’s bylaws specify that a three-fifth majority among shareholders is required to remove supervisory board members. Furthermore, the current executives jointly own at least 34% of CD Projekt and therefore play a large role in selecting the supervisory board. The biggest financial investor is NN Group NV’s Polish pension fund, with a 4.2% stake at end of last year. Tirman said Abri didn’t take part because he hoped the board would take actions to “correct the ship, instead of just hitting the replay button.” The last straws for him were the company’s first-quarter results and the board’s reinstating of the management team.

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6/6/2021

GameStop's Most Loyal Shareholders Are in It for the Long Haul, Not the Memes

Wall Street Journal (06/06/21) McCabe, Caitlin

GameStop (GME), AMC Entertainment Holdings Inc. (AMC), and other stocks popular with individual investors on social media have soared and swung wildly in recent sessions while the broader stock market has held steady. The S&P 500 posted a 0.6% gain last week, while GameStop climbed 12%, following the previous week's 26% rally. Many individual investors are betting that Chewy Inc. (CHWY) co-founder Ryan Cohen, an investor who within months ascended to the company's nominee for chairman, can replicate his success at the pet-supply retailer at GameStop by steering the company into the digital age and away from years of declining revenue. In his November letter to the board, Cohen stressed the need for GameStop to become a "technology-driven business" that offers competitive pricing, broad gaming selection, fast shipping, and robust customer service. The company acknowledged in a recent securities filing the need to respond to the shifting landscape. However, Michael Pachter, a research analyst at Wedbush Securities, said, "There is a disconnect between fundamentals and valuation. And Ryan Cohen still hasn't told us what his strategy is. This business is completely different than dog food." Nevertheless, many individual investors argue that Cohen's bold approach with GameStop leadership is what earned their trust. "It's obvious that he's been on the Reddit pages, he's posted stuff on social media, which shows he's engaging with investors and what they want," said individual investor Thushira Kumarage.

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6/4/2021

Bill Ackman’s SPAC Will Be Three SPACs

Bloomberg (06/04/21) Levine, Mark

Pershing Square Tontine Holdings (PSTH) is set to become three different entities. An affiliate of PSTH's sponsor, Bill Ackman, has formed a Cayman Islands Corporation that will be known as Pershing Square SPARC Holdings Ltd. The company is a Special Purpose Acquisition Rights Company, which does not intend to raise capital through an underwritten offering. Instead, SPARC intends to issue rights to acquire common stock in SPARC for $20 per share to PSTH shareholders (SPARs) which can only be exercised after SPARC enters into a definitive agreement for its initial business combination. Assuming all SPARs are exercised, SPARC will raise $5.6 billion of cash from SPAR holders. SPARC's structure has been designed to allow SPAR holders to avoid incurring the opportunity cost of capital of a typical special-purpose acquisition company (SPAC). The author notes that this format dispenses with almost all of the financial engineering of a SPAC: There are no warrants, no cash value, no shareholder votes, no time limits. Elsewhere, PSTH recently announced a potential deal for 10% of Universal Music Group. This is not a traditional SPAC deal, partly because Universal is not a hot startup or a “mature unicorn,” but a carveout from a public company. Moreover, the PSTH deal is not a vehicle for taking Universal public: Vivendi was already planning to spin off Universal to its shareholders, and it will go ahead with that plan. Instead, PSTH will just buy some Universal shares from Vivendi; once Universal goes public, PSTH will distribute those shares to its own shareholders. The PSTH shares won't become shares of the newly public Universal; instead, PSTH shareholders will keep their PSTH shares, and the entity will remain listed on the NYSE. PSTH expects to fund the transaction with cash held in its trust account from its IPO, and approximately $1.6 billion in additional funds from the exercise of its Forward Purchase Agreements with the Pershing Square Funds and affiliates. After funding the UMG purchase and related transaction expenses, PSTH will have $1.5 billion in cash and marketable securities. PSTH will satisfy its shareholders' redemption rights by tendering for its shares at a price equal to PSTH's cash-in-trust per-share, or approximately $20 per share. PSTH isn't doing a merger, it's just buying Universal shares, and it's not getting any Universal warrants.

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6/4/2021

William Ackman SPAC Nears $40 Billion Universal Music Deal

Wall Street Journal (06/04/21) Farrell, Maureen; Lombardo, Cara; Steele, Anne

William Ackman’s special-purpose acquisition company is reportedly nearing a deal with Universal Music Group that would value the world’s largest music business at about $40 billion. Both sides confirmed negotiations early Friday, but neither side gave detail of how advanced discussions were. A deal, if consummated, would be the largest SPAC transaction on record, exceeding the roughly $35 billion that Singaporean ride-hailing company Grab Holdings Inc. was valued at in a similar deal recently, according to Dealogic. It would have a so-called enterprise value, taking into consideration Universal’s debt, of about $42 billion. It isn’t guaranteed Universal and the SPAC, Pershing Square Tontine Holdings Ltd. (PSTH), will reach a deal. If they do, it could be completed in the next few weeks and isn’t subject to any additional due diligence, according to people familiar with the matter. The deal, which would hand Ackman’s entities a 10% stake in a newly public Universal, would have a €33 billion, or $40 billion, equity value and a €35 billion enterprise value, a measurement that takes into consideration the amount of debt and cash a company has on its balance sheet. Pershing Square said Friday it would pay about $4 billion for the 10% stake. Ackman has experience with SPACs, having helped flip Burger King Holdings Inc. public through one he co-founded in 2012, well before the current SPAC craze took hold.

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6/4/2021

SoftBank’s Son Turns to Female Gaming Pioneer to Shake Up Board

Financial Times (06/04/21) Inagaki, Kana

SoftBank’s (SFTBY) Masayoshi Son turned to a friend of four decades in April after he was presented with a list of 30 candidates to become the Japanese technology group’s new female board member. Keiko Erikawa, chair of Koei Tecmo Holdings, brings a management style that differed starkly from Son’s high-risk approach, which has taken SoftBank from a historic loss last year to the highest ever profit for a Japanese company. The $7.5 billion gaming company Erikawa co-founded with her husband, which is known for hits such as Nobunaga’s Ambition and Dynasty Warriors, has never made an employee redundant or made a loss in its 43 years.  It emerged from the Covid-19 pandemic with a capital adequacy ratio of 86%, underlining the strength of its balance sheet. Erikawa is expected to be appointed non-executive director at SoftBank this month pending shareholder approval. Her nomination comes after Yuko Kawamoto, a prominent corporate governance expert who was the group's first and only female director, stepped down last month after openly challenging Son on issues of internal control. Erikawa, a 72-year-old games designer, is also known for managing Koei Tecmo's $1 billion in surplus funds and other assets, and has been investing in stocks since she was 18. While Kawamoto had been critical of SoftBank's governance structure, Erikawa said she was not too concerned about volatility in the group's financial performance.  One challenge for Koei Tecmo has been the cultivation of female talent. Hirokazu Hamamura, a gaming expert and digital contents adviser at publishing company Kadokawa, said Erikawa could become a voice on SoftBank's board who could counter Son's influence.

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6/10/2021

Activist Investors are Both Greening and Greying

Economist (06/10/21)

Though the Covid-19 pandemic has reduced the number of activist campaigns, two big global trends mean they are sure to rebound. One is the growth of funds that track stockmarket indices. Such passive investments can let managers off the hook for poor performance; corporate activists help rectify that. The second is climate change, which is forcing companies to rethink their long-term strategies with potentially huge consequences for returns. Both trends are reflected in the fast growth of environmental, social, and governance (ESG) investing. Engine No. 1's recent feat of successfully installing three directors on the board of ExxonMobil (XOM) raised serious questions, including whether shareholder crusaders have morphed into climate campaigners, and whether a hard-nosed focus on returns will be replaced by social responsibility box-ticking? If anything, big activist hedge funds are getting nicer. Elliott Investment Management, whose founder, Paul Singer, was once described as “the world's most feared investor,” appears to have mellowed. Elliott has recently made peace with two high-profile CEOs, Jack Dorsey at Twitter (TWTR), and John Stankey at AT&T (T), despite formerly seeking their removal. It has taken a big stake in Dropbox (DBX), a software company, but has so far refrained from launching a public campaign against it. The bigger it gets, and the bigger its targets, the more it tries to take a “statesmanlike” approach, including by toning down its language. Though it has begun deploying ESG criteria in its campaigns, it is still mostly focused on boosting financial returns. Meanwhile, while the ESG-focused newbies argue that their horizons are longer, if you expect them to be cuddlier than their forebears, think again. Because they lack capital to buy large stakes, their attacks need to resonate broadly among investors big and small in order to have any impact. Engine No.1, which owned just 0.02% of ExxonMobil's stock, achieved this by honing in on the dearth of energy experience on the supermajor's board, which it blamed for the company's underperformance against its peers.

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6/9/2021

Exxon's Board Shakeup Could Force Review of Billions of Dollars in Spending

Reuters (06/09/21) Hiller, Jennifer

The recent overhaul of Exxon Mobil Corp.’s (XOM) board of directors could shift billions of dollars in spending and strategy over several years. A quarter of directors last month lost their seats to outsiders, and the March appointment of Jeff Ubben puts a third of the 12-member board in new and more cost-conscious hands. Investors who rejected Exxon’s view of a slow transition to lower-carbon fuels also want spending to be revisited, they said. The Exxon boardroom contest shocked the energy industry and came after years of weak financial returns at the largest U.S. oil producer. Shares are up by about 50% this year as oil prices have recovered from pandemic lows. Exxon’s board has been a prestige post for former CEOs, typically without any energy experience. Critics said the practice led Exxon to miss industry shifts and play catch-up at the expense of its balance sheet. New directors with energy experience likely will address Exxon’s spending “far more vigorously,” said Anne Simpson, investment director at shareholder California Public Employees’ Retirement System. Investors want a “fundamental rethink on strategy,” she said, with “the big measure” being its $16 billion-$19 billion annual project spending. The shakeup puts in play billions of dollars in shale, liquefied natural gas, refining, and chemical projects. Existing directors believe coupling oil and gas investment with a gradual shift to alternative energy is Exxon’s best path forward, long-time director Ursula Burns said last week. Exxon failed to communicate the importance of that phase-in to investors, she said. Investors, she said, “wanted a direct, in some cases, (and) in some ways, an impossible message to be given.” Burns added that “most of the board” thinks an energy transition is needed and that companies like Exxon need to be engaged in how that happens.

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6/9/2021

Exxon’s Board Defeat Signals the Rise of Social-Good Activists

New York Times (06/09/21) Phillips, Matt

The hedge fund Engine No. 1, which successfully waged a battle to install three director on the board of Exxon Mobil (XOM) with the goal of pushing the firm to reduce its carbon footprint, wouldn’t have had a chance were it not for an unusual twist: the support of some of Exxon’s biggest institutional investors. BlackRock (BLK), Vanguard, and State Street (STT) voted against Exxon’s leadership and gave Engine No. 1 powerful support. These huge investment companies rarely side with activists on such issues. Engine No. 1 is among a new breed of shareholder activists, ones driven by the idea that social good also benefits the bottom line, just as policy and public sentiment on the environment are evolving. Chris James, the founder of Engine No. 1, argued that Exxon’s management wasn’t making needed changes fast enough. The firm convinced the mighty BlackRock. “We believe more needs to be done in Exxon’s long-term strategy” on reducing climate risk, which threatens shareholder value, it said in a statement explaining why it had sided with Engine No. 1. Laurence D. Fink, the chief executive of BlackRock, has stressed the importance of climate in his annual letter to executives. Observers say Engine No. 1’s victory shows there is a path for shareholder activism to change how companies approach issues like racial diversity and the environment, often considered distractions from producing profits. “We’re finding that there are other components that factor into a company’s overall performance: social, cultural and, now, environmental,” said Andrew Freedman, a partner and co-head of the shareholder activism group at Olshan Frome Wolosky, a law firm in New York. “Shareholders are able to now find a way to run a campaign where there’s alignment on the initiative because it all feeds to the bottom line.”

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6/8/2021

Starboard's Smith Says ESG Activists Need to Deliver for Credibility

Bloomberg (06/08/21) Deveau, Scott

Starboard Value CEO Jeff Smith said Exxon Mobil Corp.'s (XOM) reconstituted board will have to deliver the changes that Engine No. 1 pledged during its proxy fight in order to certify its environmental, social, and governance (ESG) investing push. When it comes to previous investor campaigns for better corporate comportment, "you had to actually accomplish those goals in order to gain credibility," he said. "I think that we're in the infancy on the ESG side." Smith said Exxon will have to set clear goals and metrics, and disclose more on how it is meeting those objectives. Starboard faced a similar challenge with Darden Restaurants Inc. (DRI) in 2014, marking the first time a shareholder successfully replaced the entire board of a Fortune 500 company. Smith said Engine No. 1's accomplishment was "eye-opening but not all that surprising," and reflects how activism has evolved over the past decade. The size of one's stake is of less importance now than whether one has most shareholders' backing. "This just happens to be on an ESG issue," Smith stated. "The shareholder was speaking for the majority of shareholders, and representing the majority shareholders better than the board was." Starboard is now focusing on Box Inc. (BOX), where it launched a proxy battle for board seats. Smith said past attempts to work with the company over the past two years failed because Box did not deliver on its promises. The proxy fight was spurred by two recent financings, including a $500 million convertible share issuance to KKR & Co. (KKR). Box said it would use the proceeds from KKR to repurchase common stock, but Smith dismissed the terms as "garbage."

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6/8/2021

BlackRock Won't Save You From Blackstone

Bloomberg (06/08/21) Trivedi, Anjani

The article calls for big passive investors like BlackRock Inc. (BLK) and Vanguard Group to use their heft as shareholders and protect corporate governance standards amid a wave of deals. For example, Extended Stay America Inc. (STAY) announced in March that it was being acquired by Blackstone Group Inc. (BX) and Starwood Capital Group 1 for $6 billion. A group of smaller investors, which collectively own just over 14%, opposed the timing, valuation and low premium on the deal’s share price. One investor, Tarsadia Capital, suggested Extended Stay's board add directors that had lodging experience. ISS noted that two directors on the company's board also disapproved of the deal, an unusual outcome. Both ISS and Glass Lewis recommended shareholders vote against the deal. After all the noise, Blackstone and Starwood pushed the price up by $1 per share this month. Glass Lewis didn’t change its recommendation, while small shareholders said this was still too low, but the new terms were enough to flip the two directors and ISS. As this unfolded, Extended Stay America’s large passive investors were silent. BlackRock, Fidelity and Vanguard own over 18% of the company. Because smaller, less vocal shareholders would likely follow their lead, the costs of their inaction are even greater. Critics of passive fund managers say they tend to be deferential to executive teams, which sometimes turn out to be clients. So while many money managers have built small corporate governance teams and started taking their stewardship responsibilities more seriously in recent years, their efforts haven’t gone far enough. Big shareholders need to ensure they vote in favor of the best corporate governance standards.

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6/7/2021

Surprise: Women and Minorities Are Still Underrepresented in Corporate Boardrooms

New York Times (06/07/21) Gupta, Alisha Haridasani

A recent study by the Alliance for Board Diversity and Deloitte finds that corporate boards continue to be predominately male and white, at least as of last June. The study found that white women gained the most number of seats, increasing their presence at Fortune 100 companies by 15% and at Fortune 500 companies by 21%, but they still represent just a fifth of all board seats overall. Minority women represent the smallest slice of boardrooms at both Fortune 100 (around 7%) and Fortune 500 (around 6%) companies. More than half of directors newly appointed to board seats last year were white men. Other, more recent data from Institutional Shareholder Services (ISS) found that since last July, the number of Black directors on boards of S&P 500 companies surged by nearly 200%, representing 32% of all newly appointed directors, up from 11% in 2019.  Almost half of them were new to publicly traded company board services. ISS, which didn't break down the data by gender, attributed the shift to “the widespread racial justice protests last summer.” Even before the protests, there was growing pressure for boardroom diversity from financial institutions, driven in large part by a growing body of evidence showing that diverse leadership correlates with better business performance. The ABD and Deloitte report noted that, at the current rate of change, it would take decades for boardrooms to reach representation proportional to the demographics of the American population. Women of color, for example, make up 20% of the U.S. population, but it would take until 2046 for them to make up 20% of Fortune 100 board seats.

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6/5/2021

BlackRock's 'No. 1' Goal in 'Woke' Investing: Huge ESG-Funds Haul

New York Post (06/05/21) Gasparino, Charles

Charles Gasparino writes in the New York Post that Engine No. 1's acquisition of board seats at ExxonMobil (XOM) is being touted as proof that a progressive, environmental corporate agenda can be profitable. He cites BlackRock's (BLK) support as a key pillar of credibility for Engine No. 1. Gasparino writes that BlackRock CEO Larry Fink "has been a huge cheerleader for so-called ESG (environmental, social, and corporate governance) investing. ESG is all about ensuring that companies BlackRock holds in its multitudes of funds adhere to certain progressive edicts (like executives not paying themselves too much money)." But Gasparino says of particular concern is that "these funds lately haven't beat ­indices that are simply created to make you money and only do so when they pack themselves with high-flying tech names." He says the real advantage for Fink and BlackRock is the enormous profits they stand to reap by "creating a new type of fund dedicated specifically to ESG—and then charge more for it." Gasparino speculates that BlackRock could have as many as 150 ESG-themed exchange-traded funds (ETFs) by year's end. Although such products are supposed to charge less than normal funds by reflecting a typical basket of stocks like the S&P 500, the author writes that "with ESG screening methods, BlackRock has found a way to inflate management fees of this seemingly prosaic investment. In fact, studies show that management fees on ESG funds are more than 40% higher than other ETFs." Gasparino adds that "BlackRock currently manages about $200 billion in ESG client money, which means that number is likely to grow and add to BlackRock's profits. Now with Engine No. 1 likely to occupy three seats on Exxon's board, it isn't too much of a stretch to see the company passing Fink's ESG screens for his ETFs with flying colors." He concludes that ultimately, "Fink will look like a darl­ing to Democratic politicians, he'll get a lot of left-leaning rich people to put cash in what they feel are 'moral' stocks—and he'll laugh all the way to the bank."

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6/4/2021

Why Doing Good Is No Longer Bad Business

Wall Street Journal (06/04/21) Grant, Charley

Good corporate citizenship in the form of solid environmental, social, and governance (ESG) efforts is becoming obligatory rather than optional, as highlighted by Exxon Mobil (XOM) investors electing two directors nominated by hedge fund Engine No. 1, with a third nominee also likely to gain a seat. This is a major victory for the multiyear ESG movement, which urges shareholders to weigh company's overall impact on the world beyond revenue. Sentieo data indicates that 610 news releases mentioned ESG precepts from current S&P 500 members so far this year through May, more than twice as many in the same period last year. Investors are very supportive of ESG harmonization amid high stock prices and a profitable business environment. A change in the stock market's fortunes could dampen ESG's corporate popularity. Fewer supplies of traditional fuel sources are also likely to make subjects like clean energy of less importance to consumers. "We're not hungry for a cause. We're starved for a cause," said entrepreneur and former hedge-fund manager Vivek Ramaswamy. The advent of strategies such as indexing on Wall Street also means that large asset managers have more clout than ever, and maintaining a positive image is paramount since funds with an ESG mandate are drawing capital and often command higher fees than other products. Moreover, large fund managers often follow shareholder advisory services' recommendations when voting in a proxy contest.

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6/3/2021

New Generation at Wall Street's Old Guard Rattles Corporate America

Reuters (06/03/21) Dinapoli, Jessica; Kerber, Ross

A new generation of executives at the world's biggest asset managers is helping drive an uprising against Corporate America that environmental and social justice activists have long campaigned for. The big mutual fund firms, whose stock holdings amount to trillions of dollars, used to be loyal members of the corporate establishment. They cast their votes at shareholder meetings largely as instructed by the management of companies in their portfolios, on issues ranging from CEO pay to carbon emission reporting. They rarely discussed their decisions publicly. This year marks a sea change as top funds throw more of their weight behind investor challenges to companies on environmental, social and governance (ESG) issues and put companies on notice by often choosing to publicize how and why they voted, a Reuters review of voting results and fund firms' new disclosures shows. A record 14 S&P 500 companies had more than 50% of investors reject their executive pay packages as of June 1, according to corporate governance consultant ISS Corporate Solutions. Investors voted down a total of 12 CEO pay plans in the entirety of 2020. About 28% of S&P 500 companies have not yet held their annual meetings this year. The mutual fund firms are increasingly relying on ESG-focused funds they manage for a part of their fee revenue. They are also being prodded by their own investors, including state pension funds, to take a more active stance. Big fund managers "have gotten the message that this is important to investors," said Andrew Collins, who oversees responsible investing for the $31 billion San Francisco Employees' Retirement System.

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6/3/2021

Cloud Software's Low-Hanging Fruit Is a Tempting Target

Wall Street Journal (06/03/21) Gallagher, Dan

Reports that Elliott Management has acquired a "sizable" stake in Dropbox (DBX) come on the heels of Starboard Value launching a proxy battle against Box Inc. (BOX) that could potentially oust CEO Aaron Levie from Box's board. Both Dropbox and Box offer cloud-based data storage and collaboration services, and were star unicorn companies before drifting down in market value since their initial public offerings (IPOs). Box's valuation was about $2.8 billion before Reuters reported in February that Starboard was considering a board challenge, versus a closing value of $2.7 billion on the day of its IPO. Meanwhile, Dropbox's valuation has hovered under the $10 billion it landed in private transactions. Investors' engagement is timely, with cloud stocks having sold off as shareholders have exited riskier brands, while the BVP index is down nearly 9% this year. Dropbox would look especially enticing, having 700 million registered users and a business that produces $2 billion in yearly revenue. The eight other cloud firms similar in size or bigger average sales multiples four times as high as Dropbox. Yet investors must confront the views that Dropbox and Box sell primarily commoditized services that larger companies like Microsoft (MSFT) package or offer at no charge. Goldman Sachs (GS) analysts assigned Dropbox at a sell rating in May, pointing to the risks of competition overtaking an "undemanding valuation." Dropbox's dual-class share structure also grants its founders voting control, while Erik Suppiger of JMP Securities (JMP) told clients that strong quarterly results from Box last week were "favorable for management's efforts to resist Starboard's activist campaign." Box shares have climbed 7% since those results.

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