Two thirds of investors open to
working with activists
JUN 24, 2020
Almost 50 percent of sell-side analysts say activist campaigns
influence their buy/sell ratings, study finds
Almost two thirds of investors say they
are open to talking to activist investors about a company they have a
position in, according to recent research from IR Magazine.
companies continue to experience volatile share prices and balance
sheet concerns – with a significant increase in the number of
companies adopting poison pills this year – investors are more likely
to support an activist campaign now than they were three years ago.
IR Magazine’s Shareholder Activism research report,
which was released last month. Almost two fifths (39 percent) of
investor respondents say they are more likely to support an activist
campaign than they were three years ago, with almost half of European
and Asian respondents agreeing with this statement.
number of investors siding with activist investors during the last
three years is relatively low. Just 22 percent of buy-side respondents
have been involved in an activist campaign since 2017, with 5 percent
leading the campaign and a further 17 percent supporting or partnering
with an activist investor.
in Europe were those most likely to support an activist campaign
during the last three years, according to the study, while Asia-based
investors were most likely to lead a campaign.
why they’re likely to support an activist campaign, buy-side
respondents firmly identify the investment thesis as the first pick.
But investors are also interested in the activist investors’ track
record: activists’ conduct during prior campaigns and the quality of
board director nominees during prior campaigns are both deemed to be
important by a significant number of respondents.
agree that open communication is crucial for companies’ responses to
an activist campaign. ‘[The] company’s response
determines only whether we are going to war with it or working
together,’ one buy-sider says.
company is responding and taking appropriate action, there’s no need
for the cost of an activist campaign/proxy battle,’ says another
Activist campaigns can affect sell-side ratings
also surveyed sell-side respondents about whether activist campaigns
change their perspective on the companies they cover.
(44 percent) of sell-side analysts say a shareholder activist campaign
would affect their buy or sell rating of a company. In Asia, three
quarters of respondents say an activist campaign would affect their
rating, while in North America almost two thirds say a campaign has no
effect on their rating of a company.
assess that the [campaign] has the potential to be brand-destroying,
we take notice,’ one sell-side respondent says. On the other hand,
another respondent notes: ‘Once an activist campaign starts, a stock
generally has a one-time move, and then not much else happens until
the campaign is over. So it’s a fait accompli, and I don’t
usually change my rating.’
expect companies to be proactive in their defense against an activist
campaign, the study reveals. More than seven in 10 sell-side analysts
expect companies to schedule meetings with their investor, while
around half expect companies to update their investor-facing materials
and brief against the activist campaign.
Asia are much more likely to expect a company to host a conference
call than their counterparts in North America and Europe.
respondents acknowledge that activist investors are more effective
than IR teams at building a social media campaign around their thesis.
But these respondents also firmly state that activist investors have
well-established track records and it’s important to research the firm
thoroughly when considering their campaign.
Magazine Shareholder Activism report is based on survey work
conducted in Q4 2019. The results are based on responses from 384 IROs
and 218 investment community respondents. The report also covers how
many companies have been targeted by activist campaigns during the
last three years as well as companies’ activism preparedness.
Click here to read the full report.
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