BetterIR Spotlight: Activism, Ready or Not

Once a month, the Ipreo Blog reaches back into the archives of our Better IR newsletter to spotlight a particularly compelling piece.

In the past we’ve discussed IR’s role in the IPO process, the impact of changes in portfolio management, and high-frequency trading.

This month, we’re going to dive into a piece from our November issue, which covers the growing trend of Investor Activism and the steps IROs are taking to prepare for potential action.

From November 2014’s Better IR: “Activism, Ready or Not – How IROs are preparing for activist shareholders”

Shareholder activism is a topic of increasing importance, with the number of campaigns launched per year showing a steep and steady increase since 2009. By Ipreo’s estimates, the number of campaigns enacted during this timeframe grew by over 160%, with campaigns launched in the first half of 2014 comprising over 25% of the total during the 5-year timeframe. Moreover, since 2012, the total equity assets controlled by activist firms has risen nearly 70%, suggesting increased investor conviction in the strategy and success of activist campaigns.

As managed assets and public attention increase, industry professionals also suggest that investment returns on activist funds also continue to support the strategy. A case can be made that funds employing activist strategies have nearly become their own asset class in some investors’ eyes. Speaking to the growing trends in the market, an IRO mentioned to Ipreo, “Activism is going to continue, because it works. Even non-activist shareholders appreciate these guys rattling things up to a certain extent, because they usually have decent success in raising the price of the stock. Non-activist shareholders are taking a closer look at the points these activist shareholders are making.”

Given the growing prominence of shareholder activism, companies are advised to keep abreast of activist trends and prepare in advance for the event of an activist engagement. There is an abundance of information and discussion concerning how to take those first steps, but the true question is whether or not companies are taking action, and if so, what actions? Ipreo set out to determine if and to what extent companies have prepared themselves in the event of an activist engagement. Moreover, for those companies who have already dealt with shareholder activists, Ipreo sought to determine how their perspectives on shareholder activism have changed.

After receiving comprehensive survey responses from over 125 investor relations professionals and conducting thorough follow-up interviews with various IROs with experience dealing with shareholder activism, several interesting trends were identified.

For the full piece, and all of Ipreo’s findings from the survey, visit Ipreo Ink.