Activist hedge funds are “throwing in the towel,” as a Bloomberg headline put it, in a sign that the intensifying market chaos has indeed proven to be a “poison pill” for dissident investors, as Sidley Austin predicted. Elliott Management ended its opposition to Altran Technologies’ $4 billion takeover by Capgemini, announcing it will sell its stake in Altran to the French technology consulting firm, despite arguing that the offer price was undervalued for months.
Activist activity was already slowing year on year, and COVID-19 has only seemed to exacerbate the pullback. British property tycoon Robert Tchenguiz is also dropping his campaign against FirstGroup’s management. Tchenguiz is hardly a brand name activist but he proves the point: agitating becomes difficult in times of such massive volatility. Activists, coming off a banner year in 2019, appear to be losing it for now – as displayed by Bill Ackman’s emotional plea on CNBC and on Twitter, advising President Trump to shut down the U.S. for 30 days and close the borders in order to “save lives,” “save the economy” and “win the war against this virus.” Strange days.
Separately, stock buybacks, once the staple of an activist’s base case, are taking on a whole new economic meaning. With industry and company bailout plans in the news, buybacks are now carrying a stigma, with antagonists saying that the cash would better serve struggling employees and COVID-19 efforts. But Starbuck’s CEO Kevin Johnson went on CNBC to defend his company’s recent buyback plan. Major U.S. banks, most of whom received federal bailout money in 2008, vowed to suspend their buyback programs in order to assist the U.S. economic recovery effort.
Have a great weekend,
Mike and Jennifer