Elon Musk paves the way for activism of the new investor model

Elon Musk paves the way for activism of the new investor model

Shareholder activism is on the rise. And guess what? Elon Musk – a vocal advocate of electric cars, gas-swallowing rockets and many other contradictions – is his new protagonist.

Musk’s an offer that has been much debated as Twitter, the social media platform he used for all his election statements, replaced what briefly seemed like a more normal activist investment in line with the Elliotts and Icahn in the world. It was April 4th discovered that the maverick entrepreneur has become Twitter’s largest shareholder, with a 9 per cent stake. In a few days he was offered and accepted a seat on the board with the obvious mission of playing the role of an external agitator.

Traditional molds, of course, are not for Musk. And as befits an iconoclast in a hurry, he soon changed his mind, deciding not to join the board after all, instead accumulating financial support to launch a full $ 43 billion bid for Twitter. There is an agreement done nowalthough it can be speculated that the story will end, given the uncertainty surrounding the soundness of funding and the history of Musk’s conflicts with regulators, particularly the Securities and Exchange Commission, which has jurisdiction over acquisitions.

But the case with the unique musk fluorescence highlighted that poorly performing companies are vulnerable to activists of one kind or another (Twitter’s stock price fell more than 50 percent in March from a 12-month high).

As economic pressures, rising inflation and rising interest rates threaten stock market valuation, there is an additional incentive for investors to be more interventionist in an effort to overcome the potential downward trend in average stock prices.

At the same time, another motive is at work: mainstream active investors are becoming more active as they finally feel the pressure to differentiate their performance from cheap passive funds holding indexes. Recently, a large number of groups, such as the British abrdn, they tried to push the high market into fund models with higher fees and better performance.

Of course, in the first three months of this year, 73 activist campaigns were launched around the world, which is a quarterly record according to new review from Lazard. In Europe, where stock markets were far less foamy than in the United States, activists’ search for undervalued investments was particularly fierce. Fifteen new campaigns were launched in the first quarter, up 50 percent from a year earlier.

In part, this reflects the growing willingness of well-known names to take loud positions against the company’s management on certain issues. Abrdn was among Vodafone activists, for example, joined Cevian’s established campaign in calling for a drastic restructuring and overhaul of meeting rooms.

There was even activism of the state fund community, which is traditionally a rarity. Last month’s theme is logged in that he demanded that Bayer CEO Werner Baumann leave the German health group.

Another trend, which is obvious in Italy, has led to the domestic rivalry taking place – in a sense, of course, but now clearly driven by arguments about poor performance on the stock market. In Generali, this week’s annual meeting will witness a showdown between a board of Italian insurers backed by a leading investor in Mediobanca and a competing contingent of shareholders led by business tycoons Leonardo Del Vecchio and Francesco Caltagirone. Both sides maneuvered to maximize the weight of their shares – following pattern more associated with activist hedge funds.

Activist campaigns have also become particularly influenced by the ESG program, with activists pushing companies to pursue more progressive environmental, social and governance policies. Carl Icahn, for example, has targeted McDonald’s on how its suppliers treat pigs. Hedge funds Snowcap and Clearway have advocated for the transition from coal and exit from Russia, in the energy groups AGL and Total.

Lazard data show that the number of proposals for annual meetings related to the environment and social issues in the first quarter of the year (438) is almost equal to the record number recorded in the whole year last year.

Campaigns advocating mergers or acquisitions have fallen (from an average of 41 percent in the last four years) to just 30 percent, with a change of board now targeting 40 percent of cases, up from 31 percent. As usual, in his private plan for Twitter and rejecting a seat on the board, Elon Musk is fighting the tide.

patrick.jenkins@ft.com



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