Home > Shareholder Activism > What to include in a hedge fund campaign letter: an example

What to include in a hedge fund campaign letter: an example

I include in this post a very short comment on an activist campaign led by hedge fund Starboard Value LP, the biggest shareholder in the target company, Wasau Paper Corp.,  with more than 15% of outstanding common stock.

Should we consider the arguments are correct, the letter addressed by the hedge fund to the company board and management includes many of this kind of campaign`s topics, and is also a manual of easy to improve management habits, such as:

–        A long history of earnings missings, execution malfunction,  deceiving oversight by board, accountability avoidance, and so on.

–        Delay in getting rid of not profitable units, even investing large amounts of capital in those units, and the subsequent value loss of those declining units and investments.

–        Excessive overhead or structure costs.

–        Mistaken capital allocation.

–        Compensation sins, such as new “change of control” arrangements in the midst of the activist shareholder`s engagement effort, with unusual “change of control” definition, ad-hoc eligibility criteria

–         A hands-off management team, (just an example, they kept headquarters nearby a sold unit, 500 miles away from current only facilities).

–        Bad investor relations practices.

On the other hand, the letter provides the recommendations, in this case a very clearcut choice between selling the company or some other radical changes in management and policies.

 

Please, see the original letter at the link below.

http://www.sec.gov/Archives/edgar/data/105076/000152153614000031/sc13da1106297097_01172014.pdf

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