YouSaid · the spoken record

Pamela J. Thomas

lines on the record: 20
first: 2023-04-04
most recent: 2023-04-04
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“I would also say that one of the things that I think you need to do is to constantly benchmark your performance against your peer group. And there'll be times where the performance is gapping. And if it is, I think you need to have a strategy of communicating to your investors why that's the case in the moment and why that won't be the case a quarter or so from now. I think that when companies seem that they're reactive, that they're only doing things when a shareholder or an activist is raising the issue. That's when I think you get into a more vulnerable position. If shareholders are used to you grading yourself being, as Pam said, very clinical about your performance and just being honest about gaps that we might have today.”
2023-04-04 · Goldman Sachs Exchanges · What’s driving the surge in shareholder activism activity? · IDENTIFIED FROM THE TRANSCRIPT
“The first step is to what we call things like an activist. What I mean by that is you have to take a very clinical and objective look at your company and very importantly you have to do it based on public data. Because as a board and management team, you have information that investors don't have. And you have to look at stock price performance, operational performance, board composition, governance. And when we do this exercise with companies, what you found is it might lead to changes, so around capital allocation, around return of capital, around portfolio. And sometimes it actually leads to more of a shift in investor messaging. Because again, sometimes what creates an activism situation is that the board has a clear view of what they're trying to achieve. Investors don't have the same view. And so how do you bridge this gap sometimes with changing the investor messaging and doing this sort of very clinical outside in analysis helps tremendously for this.”
2023-04-04 · Goldman Sachs Exchanges · What’s driving the surge in shareholder activism activity? · IDENTIFIED FROM THE TRANSCRIPT
“Up universal proxy opens up the possibility that non economic actors or someone who has an issue-oriented agenda could decide that they want to put a candidate on a board. So, for example, what if there is a labor-oriented activist that wants to put a labor candidate on a board of a company that is a very large employer? I think it opens up the possibility for that. So I think that universal proxy, this is the first proxy season that we're seeing it in effect to date, the effects have been relatively muted, but we're keeping an eye on it because it has the potential to really change the game around some of these things that we just talked about.”
2023-04-04 · Goldman Sachs Exchanges · What’s driving the surge in shareholder activism activity? · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so very simply, it used to be the case that if you were running a proxy contest, the activists had their own proxy card. The company had their proxy card, and you needed to vote one card or the other card. The universal proxy rules allow you to simplify that into one card, and I think it's going to have a couple of different effects that we should keep in mind. One is that, as you mentioned, it lowers the barriers to entry for an activist attacking a larger company. And I think in particular, it's going to allow smaller activists, maybe less resource activists, to go after larger targets. So that's going to be one very important implication. The marrying up of the proxy card into a unified proxy card will also make it easier for you to pick and choose which directors you want to vote. And so from an activist standpoint, it allows a more efficient targeting of individual directors at a company. So I think that's another thing that we're going to see. And then a third effect, which we haven't seen yet, but may come later in this proxy season or perhaps in the next proxy season, is that we have talked about activists really as economic actors.”
2023-04-04 · Goldman Sachs Exchanges · What’s driving the surge in shareholder activism activity? · IDENTIFIED FROM THE TRANSCRIPT
“I would say another way to think about success is that when an activist targets a company, particularly if it becomes public, it may draw other criticism, it may draw other activists. And so I think another way of thinking about success is that you're able to manage the situation without it proliferating into something that becomes bigger than just the initial attack. And so I think that there's an enormous amount of focus on getting these things resolved quickly, getting them resolved efficiently, and particularly as you had raised the question about swarms, those are particularly challenging situations where you've got multiple activists very often who are looking for different things. They're giving you demands that are competing demands and sometimes inconsistent demands. And so I think success is to make sure that you're not going to the lowest common denominator and negotiating with each one of these individual activists, that you're taking the broader picture into account and resolving it efficiently and quickly.”
2023-04-04 · Goldman Sachs Exchanges · What’s driving the surge in shareholder activism activity? · IDENTIFIED FROM THE TRANSCRIPT
“Can start, and I'm sure Avi will have thoughts because we debate that a little bit. Look, ultimate success is you convince your other investors that the board and the management team are doing what they should be doing to drive shareholder value and they're executing on that. And therefore, there's no need for external intervention. Now, most of these cases never see the light of day because the activist goes away. They know they're not going to have traction. So that's one. Other success is, look, if you are in a situation where the company needs to make concessions, for me, success is how do we contain this in the private domain so that we can limit the distraction, the public distraction for the company. Sometimes you have to fight, right? And you just have to do it, but containment is also a form of success.”
2023-04-04 · Goldman Sachs Exchanges · What’s driving the surge in shareholder activism activity? · IDENTIFIED FROM THE TRANSCRIPT
“I think tech continues to be a big target because again of these sort of high growth companies but we see it everywhere right healthcare industrials I don't think any sector is immune especially if you are a high growth company that needs to now focus on profitability i think it's really pervasive right now”
2023-04-04 · Goldman Sachs Exchanges · What’s driving the surge in shareholder activism activity? · IDENTIFIED FROM THE TRANSCRIPT
“Our view is that the MA environment may be slow right now, but it's going to recover. And when it does, I think the activist demands are going to shift and revert back to many of the things that they had focused on when we had a very robust M&A market, specifically that companies should reevaluate whether they should be sold. So this exploration of strategic alternatives will be back on the table.”
2023-04-04 · Goldman Sachs Exchanges · What’s driving the surge in shareholder activism activity? · IDENTIFIED FROM THE TRANSCRIPT
“And I might also add that on the return of capital point that Pam mentioned, we are coming off of two back to back years of absolutely record share repurchase activities. So in 2021, there was almost a trillion dollars of corporate share repurchases. In 2022, it exceeded a trillion dollars. So as we enter 2023, we're coming off the back of a momentum of two very active and record years of share repurchase activity.”
2023-04-04 · Goldman Sachs Exchanges · What’s driving the surge in shareholder activism activity? · IDENTIFIED FROM THE TRANSCRIPT
“Depressed stock prices, but the one thing that's interesting, there's a lot of focus on inorganic growth. So should you really be buying businesses at this point in time? Is it the best way to allocate capital? That's what we're seeing now.”
2023-04-04 · Goldman Sachs Exchanges · What’s driving the surge in shareholder activism activity? · IDENTIFIED FROM THE TRANSCRIPT
“That's a great question. I will maybe separate M&N spin-offs because I do think that investors are still very focused on portfolio simplification, so spin-off divestitures, and they tend to Which used to be a major ass that's going down and is being replaced by operational thesis, right? And it's about frugality around capital spending, operational efficiencies, margins, profitability. So that's a new theme that we are seeing. And as I think about it, the environment is ripe for it, right? You had a bunch of companies that, whether it's industrial tech companies, healthcare companies that had very high growth that focused on high growth. And now in this environment, investors at large put activists aside for a minute, but investors at large are saying we want more focus on cost. We want more focus on profitability. So when an activist comes with a thesis around that, they're frankly pushing on an open door. It's very easy for them to gain traction with this kind of arguments. The other things we see is capital allocation. So there's a big focus on return of capital to shareholders, especially for companies with high cash balances.”
2023-04-04 · Goldman Sachs Exchanges · What’s driving the surge in shareholder activism activity? · IDENTIFIED FROM THE TRANSCRIPT
“No, I think it's a fantastic observation. In our view, activism has fully become a global phenomenon. If you take a look at Japan, which is not really a place that you would think of to have a lot of activist activity, Japanese companies have been targeted by activists quite pervasively over the last couple of years. And I think there's some reasons for that. Japanese companies have strong cash balances, strong balance sheets. In many cases, they also have lots of different business lines. So there's a view and an argument towards pruning the portfolio or optimizing the portfolio. And from a governance standpoint, they've got boards that are a little bit less diversified than US boards, either from a gender standpoint or from a skill standpoint. And so we've seen activism in Japan grow quite in a proud manner. And we've also seen activism in Europe flourish quite aggressively. And in Europe, the phenomenon is very much this large cap phenomenon that we've talked about where many European companies, particularly the larger ones, are visited not by just European activists, but also US activists. And in fact, the average size of a European company that's being targeted by activists.”
2023-04-04 · Goldman Sachs Exchanges · What’s driving the surge in shareholder activism activity? · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, look, I think that many of the activists are looking for the same things in terms of what draws them towards a company's vulnerability. And when you've got lots of activists targeting large cap companies and a finite number of those large cap companies, it's not surprising to us that we'll see doubling up and tripling up of activists in these companies. We've seen that notably in the last handful of months. Our expectation is that as we go through the course of this year, we're also going to see that large cap companies also in this environment have stronger balance sheets. And one of the activism arguments is that companies should be returning capital more aggressively. And so I think that the nature of the companies and the nature of the environment and the fact that there is more capital out there is going to create this doubling and tripling up, which we've already seen and our expectation is that we'll continue to see.”
2023-04-04 · Goldman Sachs Exchanges · What’s driving the surge in shareholder activism activity? · IDENTIFIED FROM THE TRANSCRIPT
“And not only is activity up in the space, but there's this trend that is often discussed where we're seeing swarming of activists, so many activists converging around the same company. So what's deriving that behavior?”
2023-04-04 · Goldman Sachs Exchanges · What’s driving the surge in shareholder activism activity? · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I think building on what Pam said that because there's more activism, capital, and there are more activists out there, they're looking to invest more efficiently in larger and larger targets. I think it's drawn them towards large cap companies. Large cap companies also have market caps that allow you to enter the stock and exit the position relatively seamlessly. So I think that's also attractive to them. And we're living in an environment right now where the GDP profile is uncertain. It's a harder economic environment. And these larger companies, I think, afford a little bit of defensive capabilities to the activists. They're drawn to companies that in a more volatile economic environment may be able to ride out that economic environment more soundly. And so I think for all of those reasons, the fact that there's more capital, they're looking to invest that in larger chunks. They're looking to have fluidity in exiting the position when they need to. And the fact that some of these large cap companies are viewed as defensive, I think it's drawn them into this nexus of very large corporates.”
2023-04-04 · Goldman Sachs Exchanges · What’s driving the surge in shareholder activism activity? · IDENTIFIED FROM THE TRANSCRIPT
“Really, what we mean is that there's an activist in the shareholder register. Some of those will lead to campaigns tomorrow. Some of those are active campaigns today. But when one-fourth of the S&P 500 has an activist in it, and when you think about the holding time and the holding period for some of these activists, which is a little bit shorter than your long-only typical investor, they'll cycle out of those investments and into new ones. So it's really just a matter of time if you're a large cap company before you might see an activist jump into your stock.”
2023-04-04 · Goldman Sachs Exchanges · What’s driving the surge in shareholder activism activity? · IDENTIFIED FROM THE TRANSCRIPT
“I might add that when you look at the S&P 500 today, one out of four companies in the S&P 500 has an activist in it. And if you look at that in Europe, one out of three companies in the FTSE 100 has an activist in it. So these elevated levels of activity, this proliferation that Pam talked about, we're seeing this in very meaningful way across geographies.”
2023-04-04 · Goldman Sachs Exchanges · What’s driving the surge in shareholder activism activity? · IDENTIFIED FROM THE TRANSCRIPT
“When they think about it, I think it boils down to three things, really. One, we still are in a very volatile market and valuations are down. And so that creates just fertile grounds for activists. Let's not forget that they value investors at the end of the day. So it's a lot of targets that they can pick on. The second thing is really activists have a lot of capital to work with. Some of them were very successful raising capital last year. For instance, Elliott raised 13, 13 billion. the biggest capital raise ever and that money has to go somewhere. And the last reason I would say is the number of activists ever growing, right? You think about what we like to call the first timers or occasional activists, so people who aren't really activists, they are now more and more willing to go public. And the second sub-bullet on that, if you will, is all these activist funds are tawning new funds. So you have Eliot.”
2023-04-04 · Goldman Sachs Exchanges · What’s driving the surge in shareholder activism activity? · IDENTIFIED FROM THE TRANSCRIPT
“So before I jump in, when we mean activism, we mean shareholder activism. So these are basically investors that are seeking to agitate to change outcomes. So whether it's around board composition or strategic alternatives or strategic positioning of a company. That's what we mean by activism. And look, it's funny because last week we actually had 12 campaigns, so that's almost two campaigns per working days, so very high level of activity. What we see in the public market is we back to pre-pandemic levels. But what I find fascinating is when you think about the private level of activity. So for every campaign that you see publicly, we are working on two or three times the number of campaigns privately. Some of those will become public and some of those will remain private. So very, very high level of activity right now.”
2023-04-04 · Goldman Sachs Exchanges · What’s driving the surge in shareholder activism activity? · IDENTIFIED FROM THE TRANSCRIPT
“One of the activism arguments is that companies should be returning capital more aggressively. And so I think that the nature of the companies and the nature of the environment and the fact that there is more capital out there is going to create this doubling and tripling up, which we've already seen in our expectation is that we'll continue to see.”
2023-04-04 · Goldman Sachs Exchanges · What’s driving the surge in shareholder activism activity? · IDENTIFIED FROM THE TRANSCRIPT