Activist Investor Nightmares
Jeff, back at it again I see.
Jeff Smith and his activist hedge fund Starboard Value is back at it again. This has been the busiest of the activist hedge funds over the last year. Their newest fight is with Depomed (NASDAQ: DEPO). Starboard also recently started a battle with Marvel Tech (NASDAQ: MRVL), where it recently managed to get the co-founder husband and wife combo ousted - making the path to a buyout much cleaner.
Starboard is also still in a heated battle to get Yahoo! (NASDAQ: YHOO) sold, come on Daily Mail. Regardless of who buys Yahoo!, it’ll be welcomed, just to end one of the greatest tech downfalls of recent memory. Although, I’d much rather see Yahoo! go to someone like Verizon (NYSE: VZ) than the Daily Mail or Google (NASDAQ: GOOG).
But back to Depomed, it owns ~10%, has called a special meeting and is looking to replace the entire board, something that Starboard is no stranger to - recall it overthrew the entire Darden Restaurants (NYSE: DRI) board a couple years ago in an unprecedented move. Jeff Smith just stepped down from the Darden Restaurants board, where he saved Olive Garden with a breadstick overhaul.
The activist hedge fund is moving quick at Depomed given the fact the company is trying to re-incorporate in Delaware, which would increase how much stock a company must hold to call a special meeting and remove the ability to replace directors at such a meeting. Bigger issues are afoot as well, the stock is trading at ~$15 a share, less than a year after Horizon Pharma (NASDAQ: HZNP) offer to buy the company for $33.
When a founder goes ‘activist.’
PulteGroup founder and former CEO, Bill Pulte, is activist on his homebuilding company with his ~8% stake. He sent a letter to the PulteGroup board. He wants the current CEO out, calling the hiring of Rich Dougas the biggest mistake of his career. Dougas has made major missteps with overly aggressive land purchases, leading to a flat stock price over the last three years. But the company is sticking by Dougas, calling the family’s push “misguided” and said it’s been happy with the Dougas leadership.
Big bank breakup talk - again.
Activist investors are circling the big banks, again, with the idea of possibly breaking them up. The government has refused to break up the big banks, instead saving many of them during the financial recession. But JPMorgan Chase (NYSE: JPM) and Citi (NYSE: C) could find themselves in the activist crosshairs, yet, this’ll require deep pockets.
Nelson Peltz’s Trian Fund has led the way by taking on Bank of New York (NYSE: BK), where it has a board seat. Carl Icahn is also in on the mix, trying to break American International Group (NYSE: AIG) into three pieces.
But the most value might be locked into JPMorgan, where Goldman Sachs (NYSE: GS) sees 25% upside if it breaks up. Which, in some cases, might be Goldman’s way of trying to get rid of a competitor in the investment banking space. Now, Paul Singer has already gone head to head with JPMorgan CEO Jamie Dimon, where the two talked about disclosures at big banks in Davos during 2013. It’ll take an activist with deep pockets to bring Dimon and JPMorgan to heel though.
Sequoia, what could have been.
Sequoia has fallen on hard times thanks to Valeant Pharmaceuticals (NYSE: VRX). It’s a mutual fund that’s taken concentration to a new level - with 30% of its fund in the pharma company. They invested based on the idea of putting “all their eggs in one basket, and then watching that basket very closely.” Warren Buffett given convinced investors in his partnership to invest in Sequoia when he closed it down.
Investors are now pulling cash from Sequoia, only to get stock, with the mutual fund sending stock in O’Rielly (NASDAQ: ORLY) as part of redemptions - called a redemption in kind. We’ve also seen the resignation of two independent directors at Sequoia and the headman, Bob Goldfarb, over the last year.
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