Some pertinent points in yesterday's AFR Chanticleer article...

Some pertinent points in yesterday's AFR Chanticleer article with an eye towards HAV's looming EGM.


https://www.copyright link/brand/ch...e-fund-managers-turn-activist-20181207-h18vlm

Some extracts:

The key factor is a disagreement over valuation – that is, the activist will see a way of unlocking value so they can [achieve] a better return. That might be through an asset sale, a recapitalisation of some sort, or operational improvements such as cost cutting.

Secondly, there will typically a gap between what Muir Paterson, Citi's global head of activism, describes as the "confidence horizon" of the company, and of the activist. The company might be confident it has the strategy to grow over three years to five years. But because of some misstep – a profit downgrade or a governance problem, for example – the confidence horizon of the activist may have shrunk to 12 months to 24 months. This can create a big difference of opinion between the activist and the management. And if other investors share the activist's view of the confidence horizon, trouble is brewing.

"Activists rarely go after broken companies that they really have to fix. They generally go after good companies that have hit a bump in a road where they fundamentally have a good business, good marketplace and good assets, but that confidence horizon has shortened."

DYOR