Investor activism general declined in 2020, however giant corporations got here underneath scrutiny
Daniel Loeb, CEO of Third Point LLC, speaks at the Skybridge Alternatives conference on May 18, 2017 in Las Vegas.
David Paul Morris | Bloomberg | Getty Images
Given the global pandemic, it’s not surprising that activism declined in 2020.
There was less 13D activism, less UTT activism, and less capital invested in new campaigns. (“UTT” activism, or activism below the threshold, is activist campaigns by shareholders who own less than 5% of the common stock and do not need to complete a 13D filing.)
It is noteworthy, however, that the average market cap for total activism was $ 21.04 billion, its highest in the past four years (up from $ 9.87 billion in 2019, $ 20.47 billion in 2018, and 13, $ 05 billion in 2017).
Since 2017, the number of 13D filings has declined each year, with only 48 new 13D filings from activists in 2020, compared to 61 in 2019, 65 in 2018 and 71 in 2017. While the number of 13D campaigns declined The average market cap has increased and the dollars invested in new 13D campaigns has increased. However, 2020 is still well below the average market capitalization of $ 4.1 billion and the total of $ 19 billion invested in 2017.
The number of UTT campaigns in 2020 matched 2019 pretty well, but the big story of UTT activism in 2020 is the surge in megacap activism, with the market capitalization of target companies nearly doubling in 2020. This is because there were six campaigns in 2020 among companies with a market capitalization of more than $ 150 billion (Comcast / Trian, Exxon Mobil / Engine # 1 and DE Shaw, Johnson & Johnson / Trillium, Walt Disney / Third Point and Intel / Third Point). This is more than all of the megacap activism in the past three years combined – 2019 had one situation and 2018 and 2017 each had two situations. Even so, the dollars invested in new campaigns have declined, indicating that activists like to occupy much smaller positions in their activist campaigns.
Gone are the days when it took 5% to achieve activist goals.
With the exception of Elliott Management, every major activist investor launched fewer campaigns in 2020 than in 2019. Additionally, there was a much less diverse 13D filer base in 2020 with 33 different filers versus 49 in 2019. This makes sense as a strategy Temporary failure Typically, only those investors who use it as a core strategy will continue to use it.
The industries engaged by activists were remarkably consistent between 2019 and 2020. The top four industries accounted for 63% of all activism in 2019 and 56% in 2020. These industries didn’t change from 2019 to 2020 and stayed in the following order:. ) Consumer Discretionary, (2) Healthcare, (3) Information Technology, and (4) Industrial (2019 linked to financial data). The other industries had no real material changes between the years.
Ken Squire is the founder and president of 13D Monitor, an institutional shareholder activism research service, and the founder and portfolio manager of the 13D Activist Fund, a mutual fund that invests in a portfolio of 13D activist assets.
Disclosure: Comcast owns NBCUniversal, the parent company of CNBC.