Shareholder Activism in Action: Icahn Eyes Yahoo!
Updated on May 15.
From
Report: Icahn Zeroes in on Yahoo!
:
Shares of
Yahoo!
(YHOO)
climbed Tuesday
May 13 on news that billionaire activist investor Carl Icahn may be considering a
proxy fight.
The stock rose 5.2% to $26.56 after
CNBC
reported that Icahn is planning to launch a proxy fight in time for Yahoo!'s annual shareholder meeting scheduled for July 3.
Shareholders have until Thursday to nominate a board of directors.
From
'Fast Money' Recap: Icahn Lifts Yahoo!
:
Karen Finerman called Carl Icahn's actions in Yahoo! "Carl 101." She said that with an irate shareholder base that's ready to skewer management, Icahn is well positioned to implement change at the troubled Internet company. If Icahn can get Gordon Crawford at Capital Research on board, then he'll be set. If not, he'll have a hard time.
From
Icahn's Yahoo! Proxy Battle Advances
:
Sources have told
Reuters
that Icahn now has more than enough people to unseat Yahoo!'s entire 10-member board, all of whom are up for election at the company's annual shareholder meeting on July 3.
If the reports are true, Icahn will have just squeaked by Yahoo!'s deadline to nominate candidates for the board. Yahoo! set the date for the end of the day on Thursday, a tight turnaround for anyone trying to push through his or her own slate.
From
'Fast Money' Recap: Yahoo! Stays in Play
:
The traders discussed Icahn's pursuit of a 12-member slate for Yahoo's board, meaning he's seeking a full slate. Finerman said that a full board is much harder to win than a half board, because proxy advisory firms have a harder time condoning elimination of an entire board. She said this means there's higher risk that a deal will not get done.
From
Icahn Launches Bid for Yahoo! Board Seats
:
In a letter to Yahoo!'s Chairman Roy Bostock Thursday
May 15, Icahn said the Internet search giant "acted irrationally" and has lost the faith of shareholders and Microsoft
(MSFT) - Get Report
, which tried to acquire the company at a price of $33 a share, an offer that Yahoo!'s management said was too low.
"It is quite obvious that Microsoft's bid of $33 per share is a superior alternative to Yahoo's prospects on a standalone basis," Icahn wrote to Bostock. "I am perplexed by the board's actions. It is irresponsible to hide behind management's more than overly optimistic financial forecasts. It is unconscionable that you have not allowed your shareholders to choose to accept an offer that represented a 72% premium over Yahoo's closing price of $19.18 on the day before the initial Microsoft offer."
Read the full article.
Cramer: A Reason to Buy Yahoo! Activist shareholders could get this stock higher by next year, says Jim Cramer on May 6. |
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Shareholder Activism and You
Let's say you want to play a more active role in the performance of a public company, but you can't afford to own a large enough number of shares. What can you do then?
Specifically, how can you trade off of and learn from the activity of investors who
can
afford a 5+% stake?
The following are several looks behind the scenes of activist investing.
From
Stockpickr's Activist Track Stocks
:
Since most
hedge funds get paid based on their returns for the year, managers who want to get the most out of a stock investment often turn to shareholder activism as a way to increase shareholder value and ultimately boost their returns.
Here at Stockpickr.com we track all of the
recorded by StreetInsider.com 13D Tracker for those interested in possibly piggybacking these activist funds.
Activist hedge fund
Harbinger Capital Partners
has purchased a 5.9% stake in starch goods company
Corn Products International
(CPO)
. Harbinger disclosed that it owns about 4.34 million shares of Corn Products.
Corn Products has a
forward P/E of 13, a
PEG ratio of 1.5 and quarterly earnings growth of 29%. The corn refiner also recently boosted its 2008 profit guidance and reported a 29% rise in first-quarter profit. Keep an eye on this one.
From
:
Just a half decade after the stock market recovered from the collapse of tech stocks, the bursting of another
asset bubble -- in housing and credit -- is refocusing scrutiny on the large executive-pay packages at underwhelming companies.
A revolution that started simmering in the post-Enron era has boiled over, with a new generation of shareholder activists determined to change the corporate status quo. Empowered by rich financial backing, an explosion in digital communications, friendlier laws and regulations, widespread discouragement with the stock market and a sea change in public perceptions, these activists are rattling the walls of corporate boardrooms like never before.
"This is shaping up to be the busiest year on record for activist investors," says Chris Young, director of M&A research with RiskMetrics Group, a firm that advises shareholders on proxy matters.
From
Shareholders Seek 'Say on Pay'
:
Former
Merrill Lynch
(MER)
CEO Stan O'Neal left the firm in October after $18 billion worth of securities writedowns tied to subprime and other risky mortgages and a plummeting stock price.
For that, he was sent off with $161 million.
O'Neal's retirement package and the lofty pay for fellow humbled CEOs Charles Prince at
Citigroup
(C) - Get Report
and Angelo Mozilo at
Countrywide Financial
(CFC)
made the trio poster children for rising shareholder anger at the discord between lofty executive pay and lackluster corporate performance.
As the season of annual shareholder meetings gets underway, this year is sure to lend itself to some active, if not downright testy, stock owners speaking out against perceived company injustices, particularly at the banks, brokerages and mortgage lenders. Several large
institutional shareholders are coordinating efforts to remedy the situation by pushing for so-called say-on-pay proposals and other measures.
"It's going to be an issue this year. There is no question about it, because there has been criticism of pay packages and pay practices," says Carol Bowie, head of RiskMetrics Group's Governance Institute.
From
Investors Ramp Up Fight for Ballot Choice
:
Like baseball, voting for corporate board members is a time-honored springtime tradition.
But that tradition is increasingly under fire from angry shareholders who say the game is rigged.
Because the ballots provided to investors list only one slate of candidates, handpicked by company management, critics say the system is undemocratic and prevents shareholders from appointing representatives who will truly look out for their interests.
Shareholder advocates have been clamoring for years to get equal access to the ballot -- known as a proxy card -- to field alternative choices for company boards. Now, as investors contemplate staggering writedowns at the world's largest financial firms, and as America prepares for a change in the political landscape, some shareholder advocates believe the chance to win proxy access is better than ever.
And while the rich sendoffs of subprime poster-boys Angelo Mozilo, Countrywide Financial's CEO, and Stanley O'Neal, the ex-Merrill Lynch chief, have made "say on pay" the hot-button issue at this year's shareholder meetings, it's possible that this proxy season could turn out to be one of the last in which board elections are conducted without opposing candidates.
"This is one of those issues, if it's ever going to get acted on, it would be in this current market environment, with a change in party in the
Securities and Exchange Commission and in the White House," says Patrick McGurn, special counsel at corporate governance firm RiskMetrics.
From
Motorola Names Dorman Board Chairmam
:
The Schaumburg, Ill., handset maker said that David Dorman will succeed prior
Motorola
(MOT)
CEO Ed Zander as chairman of the board. Zander, who had fallen out of favor with shareholders such as billionaire investor Carl Icahn, will retire from the post after completing his term at Motorola's annual shareholder meeting on May 5. Greg Brown is now Motorola's CEO.
The appointment of Dorman is the latest shake-up at Motorola. On Monday
April 7, the company said it has reached an agreement with Icahn that will see William Hambrecht and
Icahn Enterprises'
Keith Meister nominated for election to the board at the annual meeting.
From
Open Book: Pick Stocks Like an Activist Investor
:
A wide variety of activist hedge fund managers have taken the time to let me interview them in the U.S., Europe and Asia. I've put everything I have learned about their popular and expanding craft in a new book called
Extreme Value Hedging
.
Good Activist Investors = Great Stock Pickers
Good activist investors, at their core, are great stock pickers.
Most experienced activist investors typically allocate
capital to companies that will improve in value on their own, over a period of time. But, unlike
mutual funds or other
institutional investors, these insurgent investors won't sit back patiently and wait for that growth to happen.
Instead, activist investors, backed by an increasing amount of both high-net worth and institutional money, identify undervalued corporations, buy large minority stakes and do everything they can to make sure their investment's stock price is on an upward trajectory. To accomplish this goal, activists engage in a wide variety of tactics: anything from collaborating with management behind the scenes to pressing for a value-enhancing
merger. Though public perception of activists has them always pressing for mega-deals, just as many of them can be found blocking mergers they consider illogical or destructive.
From
The Art and Science of Measuring CEO Performance
:
Of all the potential metrics,
growth is among the most critical. "It captures how well a CEO is running the business," says Mary Ellen Carter, a Wharton accounting professor. Adds Brian Cadman, an accounting professor at Northwestern University's Kellogg School of Management and currently a visiting professor at Wharton: "Earnings is generally considered a good metric because it provides a summary measure of value added to the firm over a given period." But regardless of which specific performance metrics are used, "it is important to compare them to historical values or to a 'peer' group of firms," Cadman says.
Wharton accounting professor Wayne R. Guay says most of the financial incentives provided to CEOs and other senior executives are based on their company's stock price. "These executives hold large portfolios of stock and stock options that tie their wealth to shareholder performance pretty closely," Guay says. "For the typical CEO, that is the lion's share of the incentive."
Read the full article.
From
Aggressive Stock-Picking: How to Trade Off of Unusual Activity
:
Check out Stockpickr's
, which is a portfolio based on the mandatory "13D" filings that indicate that an outside investor has taken a major (greater than 5%) stake in the company. A big investor move like this could result in a shakeup in company management, and ultimately a boost for the stock price.
A recent activist situation took place with
Freeport-McMoRan Copper and Gold
(FCX) - Get Report
. This month
August 2007,
Atticus Capital LP
disclosed that it raised its stake in Freeport-McMoRan to over 7% (the stock has steadily gone up since the disclosure). Even with FCX's year-to-date rise of around 30%, an increased stake by Atticus is a strong sign that the stock price can go a lot higher.
Since "How to Trade Off of Unusual Activity" was published, the share price of FCX has increased over 35%.
To stay up to date on activist moves, don't miss Stockpickr's
portfolio.
This article was written by a staff member of TheStreet.com.