Activist Investors Are Selling Faster
Activism isn’t going away,
but the activists may not hang around too long.
Activist investors in the U.S. are
cashing out of their holdings faster than in the past, according to a survey
from law firm Schulte Roth & Zabel. The study found plenty of reasons to
expect that activism will continue to be a force in the market — 98% of
those surveyed globally said they expect some sort of increase in activism.
But the nugget on holding periods could inflame activists biggest naysayers.
The study said that only
36% of U.S. activists said they have an average holding period of at least
one year, down from 60% last year. The biggest chunk of respondents, 48%,
said they average six months to a year for each holding. And 16% say they
hold less than six months.
In the study, Schulte’s
David Rosewater, among the leading attorneys who represent activist hedge
funds, said it wasn’t entirely clear what led to the shift, though he
pointed toward activists winning the fights they pick with companies faster
than in the past.
“If it takes less time for
the companies to respond to activist demands with appropriate changes and
those changes then are reflected more quickly in the stock price, logically,
holding periods would fall in response,” Mr. Rosewater said in the study.
In another section, the
survey found both activists and corporate respondents predicting greater
investor support for activist campaigns.
But no matter the reason,
activists have spent years trying to combat the argument they are short-term
investors whose ideas are not good for long-term investors. Academic
studies, high-profile lawyers and billionaires have duked it out over the
veracity of that claim.
Activists argue they are
good for long-term holders and often say they are around as long as most
CEOs. Several studies have found the average activism target beats the
market over three and five years. But a debate has now erupted in the
industry as to whether average returns are a fair measure.
In this context, a
statistic saying a majority of activists say their average holding period is
less than a year could add draw some attention.