UPDATE: Shareholder Activism in Australia (Q1 2021)
It’s been slow going for shareholder activism across the globe so far in 2021. The coronavirus pandemic put a dampener on activity during 2020 and continues to make its presence felt. Activists have become a little gun shy it seems as companies deal with the ongoing fallout from the pandemic.
Despite this, Australia was second only to the US in terms of overall activity. Companies making headlines with activists on the ASX included Woodside Petroleum, Tabcorp, Santos, Rio Tinto, AMP, Bank of Queensland, among others.
Data from London-based research firm Insightia make the picture clear though. Their recent report covering the first quarter of 2021 shows[1] :
The overall level of activist activity across the globe was the lowest in the past seven years with 247 companies publicly subjected to activist demands (versus a high point of 385 in the first quarter of 2016).
Activist activity continues to be highest (by a stretch) in the US, followed by Australia and Japan.
In the US, 169 companies were targeted.
The next most active regions were:
Australia (12 companies targeted)
Japan (11 companies targeted); and
Canada, UK, the Republic of Korea (all with 8 companies targeted).
Activity was lowest in Malaysia, Austria, Finland, Czech Republic, and New Zealand (all had only one company targeted during the period).
Figure 1: Australian Activist Targets SOURCE: Activist Insight report from Insightia
The stats say a lot about the level of activism in the U.S. versus Australia and the rest of the world. You could almost say activity is non-existent outside the US based on the figures above. But the two-strikes rule and other regulations on the Australia Stock Exchange (ASX) are clearly a stimulant for activity in our own backyard.
The basic materials and technology sectors on the ASX were the most targeted. Each sector accounted for 25% of the overall total number of companies targeted. In terms of demands on ASX-listed companies, demands on boards were the most common, accounting for 47% of demands overall.
In addition, activists in Australia have so far secured six board seats. 50% of these board seats were secured through settlements.
Going After the Nano Caps
Nano caps on the ASX are copping the brunt of shareholder activist demands and appear to be sitting ducks for larger fund managers who can influence a vote with a minimal investment relative to the size of their funds under management.
The following graphic makes this clear:
Figure 2: Nano caps still account for more than half of activity happening on the ASX but demands are still well below prior quarters from the last three years. SOURCE: Activist Insight report from Insightia.
Having an Impact
Of note from Insightia’s report was the number of impactful campaigns by Australian companies in the first quarter.
The average impact versus total campaigns launched averaged 25% over the past five years but this figure is already at 50% after the first quarter of 2021 (6 out of 12 campaigns were considered ‘impactful’ by Insightia data).
Figure 3: 6 out of 12 campaigns launched in Australia in the three months to March had a direct impact on listed companies.
Providing Some Definitions
Providing some clarity in Insightia’s first-quarter report were the definitions they provided at the beginning regarding shareholder activists.
These definitions may help to clarify where Advocate Strategic Investments (ASI) sits among the global cohort of activists. The definition of an activist was spread among three categories:
PRIMARY FOCUS ACTIVIST: AN INVESTOR WHICH ALLOCATES MOST, IF NOT ALL OF ITS ASSETS TO ACTIVIST STRATEGIES.
PARTIAL FOCUS ACTIVIST: AN INVESTOR WHO FREQUENTLY EMPLOYS ACTIVIST INVESTING AS PART OF A MORE DIVERSIFIED STRATEGY.
OCCASIONAL FOCUS ACTIVIST: AN INVESTOR WHO EMPLOYS AN ACTIVIST STRATEGY ON AN INFREQUENT BASIS.
We have bolded the definition that best suits ASI. We plan to work constructively with listed companies on the ASX to help shareholders realise long-term value in their shareholdings.
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