Shearman & Sterling LLP Recent Shareholder Activism Trends | 19
POISON PILLS CAME BACK
When stock markets plunged in March
2020 following the global shut-down
amid the growing COVID-19 pandemic,
companies began adopting defensive
postures to preempt shareholder
activism and implementing shareholder
rights plans at rates not seen in a
long time. Many of these plans have
notably been adopted by companies
in the absence of a specific takeover
or activist threat. But as markets slowly
recovered in April through the time of
this writing, poison pill adoptions have
tapered off. As the COVID-19 pandemic
evolves and markets respond, it
remains to be seen whether another
market downturn will again trigger a
new wave of poison pill adoptions.
While proxy advisors such as ISS and
Glass Lewis have historically been
wary of shareholder rights plans, they
acknowledged that the COVID-19
pandemic has created a "reasonable
context" for adopting a poison pill that
has acceptable features and meets
certain conditions.
ACTIVISTS ARE ACTIVE
While economic volatility had a chilling
effect on the number of campaigns
in 2020 thus far, activists have been
anything but idle. Many activists have
spent the last few months raising
capital for new campaigns, building
ownership stakes while stock prices
were low and preparing to launch
new campaigns in the latter half of
2020. Nevertheless, increased capital
outflows, particularly following the
stock market dip in March 2020, put
pressure on smaller firms that may
have been less diversified and
well-capitalized than their more
established peers.
10
20
30
40
50
60
70
80
30.5
6.0
5.7
2016 2017 2018 2019 2020
62.4
20.9
16.5
67.2
26.0
19.0
42.3
11.6
13.0
14.7
11.1
Global Capital Deployment (in Billions)
Annual Q2 Q1
Source: Lazard, Review of Shareholder Activism – H1 2020, July 14, 2020, https://www.lazard.
com/perspective/lazards-quarterly-review-of-shareholder-activism-h1-2020/.
MOST COMPANIES
UNCONCERNED
Nevertheless, fewer than
a quarter of companies
surveyed have been targeted
by an activist investor and
a majority of companies
view activism as little to no
threat to their company.
1
1
IR Magazine, Shareholder Activism Report 2020, May 4, 2020, https://www.irmagazine.com/activism/shareholder-activism-report-now-available.