COVID-19 has fundamentally changed the way we live, think, and do business. However, some constants remain. For companies, engaging with shareholders is still critical, and proxy solicitation strategy is more important than ever. Luckily, at Kingsdale Advisors, we have been offering the leading, tailored shareholder advisory services since 2003. Simply put, we get unparalleled results because we have an unparalleled team.
Here’s the lasting impact of COVID-19 on shareholder activism:
COVID-19 has ushered in unprecedented change and uncertainty in virtually every aspect of business and life, including proxy solicitation.
During the beginning phase of the pandemic, activists were relatively inactive. Presumably, this was an effort to mitigate distractions for companies enduring the trials presented by a global pandemic. However, the world has settled into the new normal.
Activists are mobilizing with an understanding that settlements will be preferable during continued COVID-19 chaos. With the pandemic expected to continue into the foreseeable future, activists must be activists. Resting on their laurels is unimaginable.
The numbers reflect a growing level of shareholder activism. In June 2020 alone, we saw nine cases of activism. This figure accounts for a quarter of all contests in the 2020 proxy season, making it one of the busiest months ever recorded and signaling an “activist renaissance.”
A significant number of mostly small, industry-specific companies maintain share prices that have not recovered in line with large caps, rendering them vulnerable. Analysts are even starting to observe board-related campaigns targeting small or micro-cap issuers.
Moreover, there’s an increasingly pronounced trend of contested M&A with public opposition from significant shareholders. We also forecast an uptick in non-financially motivated activism, such as proposals to promote climate change and diversity initiatives.
The new normal necessitates employing the right advisors who will intrepidly set precedents as opposed to following them. Fortunately, at Kingsdale, our tenacity and innovation set us apart.
A crucial development in proxy solicitation is that settlements have continued to increase as they exceed 30% for the first time.
In reality, the settlement rate is even higher as many activist contests were settled behind the scenes before they went public, which is why they’re excluded from the numbers. This trend of rising settlements is a result of boards understanding the magnitude of proxy contests.
Boards realize they can incur significant financial and reputational damage as a result of these contests. Consequently, boards are more open to change and less likely to tolerate underperforming management.
Rising transparency across markets and costs of a contested vote and ongoing PR campaigns render settlements an increasingly appealing option for all parties, and directors are significantly more likely to settle with an activist when a shareholder vote is perceived to be detrimental.
Because of this, sophisticated vote projection with scenario analysis is critical to a board’s decision on whether or not it should settle and on what terms. Activists conduct similar calculated moves and only push for a full contest if a reasonable settlement can’t be reached.
If vote projection and proxy solicitation analytics are daunting, you’re in luck. At Kingsdale Advisors, we offer unrivaled services and can engage your shareholders like never before.
Disengaged and disgruntled shareholders can be devastating for an enterprise. This hazard is why strategic proxy solicitation counsel like we offer at Kingsdale Advisors is so critical. Since 2003, we’ve been helping entities across North America by influencing decision-makers and delivering results. Get in touch now to get started! We boast a stellar reputation, dedicated campaigns, and unmatched team talent. With Kingsdale in your corner, you always have a vote of confidence.
