April 14, 2023

Activism: Occasional Activists Move to Center Stage

Like a lot of other investors, traditional activist hedge funds had a tough year last year.  This Morrison & Foerster memo says that the sector was down 17% 2022, after posting positive returns of 16% and 10% during the prior two years. Activists also struggled at the ballot box, winning less than half of the proxy contests that went to a vote last year. The memo doesn’t suggest that these setbacks will result in activist hedge funds abandoning their strategy, but it does speculate that so-called “occasional activists” may play a more prominent role in future activist campaigns.  This excerpt explains:

Taking the place of these dedicated activists are “occasional activists” like institutional investors and individuals, including company insiders. As institutional investors have grown in size, they have become major shareholders in many companies, giving them a significant voice in corporate decision-making and greater leverage to push for changes they believe will benefit both the company and its shareholders.

At the same time, the rise of online trading platforms and social media has made it easier for individuals to organize and advocate for changes in the companies they invest in. Directors and officers of publicly traded companies who are typically seen as being aligned with the interests of the company’s management, have also become more vocal in their efforts to push for changes that they believe will benefit the company and its shareholders.

The memo goes on to list some campaigns undertaken over the past 3 years in which institutional investors or individuals played a prominent role. Last year’s list includes the unusual proxy contest between the CEO of Aerojet Rocketdyne and the company’s Executive Chairman, which saw the CEO’s slate of directors prevail with 75% of the vote.

John Jenkins