Spinoff Odds & Ends: Catching Up With Elliott, JANA and Greenlight

The boom in spinoff activity over the past few years has been aided greatly by the boom in activist investing. In this edition of Odds & Ends we check in on some activists. Other hedge funds may be shuttering, but it seems this segment remains hot! When something works, the financial industry knows how to milk it, but when will we hit peak activist?

  1. Paul Singer’s Elliott Management is raising a $2b buyout fund adding another tool to the firm’s toolkit. The focus is for companies outside of the technology space and views the capability as an advantage in the ‘activism’ sphere. The line that jumped out to me though was that ‘Elliott launched the equivalent of nearly one new public activism campaign every two weeks’ last year. Wow. A recent example is the nascent war against eBay (EBAY) where the fund is pushing for a breakup.
  2. On the same note, Jana Partners is closing its non-activist hedge funds and will solely focus on activism. Bye bye traditional long/short funds (including its flagship Jana Partners) and hello activism (Jana Strategic Investors). The firm is also planning on launching a social activist fund which is a unique twist on the trend. The firm has already pushed companies like Apple (AAPL) on ‘issues’ such as smartphone addiction instead of traditional operating or capital deployment critiques. The concept raises some interesting questions. Should certain investors – particularly pensions that are often underfunded – really prioritize those types of campaigns instead of seeking higher returns?
  3. Not everyone’s fortunes are improving though. Investors continued fleeing David Einhorn’s Greenlight Capital in 2018, after performance woes stretched into their sixth year. AUM has plummeted from a peak of $12b to about $2.5b. Still pretty impressive considering the dismal recent results. Don’t worry though because the fund is now open to accepting new money. Phew. Although his portfolio was full of spinoffs at the start of 2018, only Brighthouse Financials (BHF), a 2017 spinoff from MetLife Financial (MET), remains a top holding. The recent performance led Mr. Einhorn to remark that he has ‘never seen a life insurer trading at this kind of valuation in a stable environment unless it has either a reserving problem or a capital problem’ and that BHF has neither. His few remaining investors sure hope so.

Disclosure: Author is long shares of AAPL