In the fast-paced world of corporate America, activist investors have been making waves at a record number of companies globally during the first six months of 2024. These investors have been launching campaigns left and right, aiming to shake up boardrooms and push for changes in leadership, spin-offs, and sales. Some of the recent notable examples include Elliott Investment Management’s targeting of Southwest Airlines, Starboard Value taking on design software maker Autodesk, and Jana Partners pushing for changes at silicon carbide maker Wolfspeed. With 147 activist campaigns tracked by Barclays in the first half of the year, surpassing the previous record set in 2018, it is clear that activist investors are becoming more active and aggressive in their approach.
Despite the surge in activist campaigns, success in gaining seats on company boards has been less prominent. During the first half of the year, dissidents won 74 seats, down from 93 in the same period a year ago. In U.S. proxy fights, activists won only 11% of the seats they sought, a significant decrease from 65% during the same time in 2023. Companies have been effective in defending themselves against activist investors, often convincing shareholders that the current leaders are already pursuing the right strategy and that their board directors are more qualified than the activists’ nominees. For instance, hedge funds like Trian Fund Management and Blackwells Capital lost their battles to seat nominees at entertainment giant Disney, while shareholders at wireless tower owner Crown Castle rejected Ted Miller’s appeal to elect him to the company’s board.
With uncertain factors such as potential interest rate cuts, geopolitical turmoil, and a looming U.S. presidential election, the landscape of corporate fights has become more challenging for activist investors. While last year saw an average return of 18% for activists, returns for the first five months of 2024 have been flat. The environment is becoming more competitive, with veteran activists like Elliott and Carl Icahn still securing directorships but facing tougher battles. Major activist hedge funds obtained 24 seats in the first half of the year, slightly fewer than in 2023. The focus on pushing for change at tech firms remains strong, with successes like Sachem Head Capital Management joining the board at cloud communications firm Twilio. However, some investors are shifting their focus to industrial companies, indicating a broader trend in the activism space.
The rise of activist investors in corporate America signifies a shift in the traditional power dynamics between shareholders and management. While these investors are becoming more active and aggressive in their campaigns, the challenges they face in gaining board seats and implementing changes should not be underestimated. With a volatile economic and political environment, the future of activist investing remains uncertain, but one thing is clear – corporate fights will continue to evolve, with both sides sharpening their strategies and tactics.