8% Value Activist

A great chart here from Japan Research Institute that directly shows the value that activist funds have created for minority shareholders in many cases of under-priced take-private transactions. This "bumpitrage" strategy has also delivered attractive returns for the investors in the activist funds in many cases. Even where the bumpitrage itself was not successful, there have been several cases of funds following a court process for "appraisal rights". In recent times, we have seen activist interventions in management buyout deals deliver large returns in short timeframes in the case of Pacific Industrial, Soft99, Mandom, and most famously - Toyota Industries. I have heard from M&A bankers in Tokyo that they are now counselling management teams to set takeover premia at higher levels that better reflect the true value of the company, so as to reduce the likelihood of activist intervention and thus ensure the deal completes quickly and cleanly. This is a clear win for investors in Japan. Shareholders using their shareholding to hold accountable those directors and other managers who abuse their positions to attempt to enrich themselves at the expense of outside shareholders. Companies are also following better processes to reduce the likelihood of losing an appraisal rights cases. Japanese courts are very focused on boards following a reasonable process, rather than looking into the substance of the deal's pricing. Whether the improved processes lead to better outcomes for shareholders is debatable. If the government and courts will not provide satisfaction for shareholders by legislating directors to have a duty to shareholders and/or by examining the substance of whether a take private deal was fairly priced, it must be the shareholders taking measures to achieve a better outcome.

OpenAI is getting squeezed.

There's Elliott, then everyone else! From JPM via FT.