Understand relation between activist director events and agreements

[iangow]

DWA focuses on settlements.

• Are their settlements consistent with settled cases below?
• Or do they also include standstill cases?
• What are the activist_director cases that are neither settled nor standstill?

library(RPostgreSQL)
#> Loading required package: DBI
library(dplyr, warn.conflicts = FALSE)

pg <- dbConnect(PostgreSQL())

sharkwatch <- tbl(pg, sql("SELECT * FROM factset.sharkwatch"))

sharkwatch %>% 
    mutate(
        activist_director = campaign_resulted_in_board_seats_for_activist=="Yes",
        standstill = standstill_agreement_special_exhibit_included=="Yes", 
        settled = settlement_agreement_special_exhibit_included=="Yes") %>% 
    count(activist_director, standstill, settled)
#> # Source:   lazy query [?? x 4]
#> # Database: postgres 9.6.5 [igow@iangow.me:5432/crsp]
#> # Groups:   activist_director, standstill
#>   activist_director standstill settled     n
#>               <lgl>      <lgl>   <lgl> <dbl>
#> 1              TRUE       TRUE    TRUE   416
#> 2              TRUE      FALSE   FALSE   649
#> 3              TRUE         NA      NA     1
#> 4              TRUE      FALSE    TRUE   243
#> 5             FALSE       TRUE    TRUE    58
#> 6             FALSE       TRUE   FALSE    37
#> 7             FALSE      FALSE    TRUE    88
#> 8             FALSE      FALSE   FALSE  6040
#> 9              TRUE       TRUE   FALSE    36

[sapyung]

Standstill Agreement/Standstill Agreement variables from SharkWatch seem incomplete. As seen below, even though there are agreements in place, SharkWatch did not mark it as a settled case. Synopsis has information on settlements, so we can use it to modify the variables ourselves.

temp <- activism_events %>% 
    filter(
        campaign_resulted_in_board_seats_for_activist, 
        !standstill_agreement_special_exhibit_included, 
        !settlement_agreement_special_exhibit_included,
        !proxy_fight_went_the_distance)
temp_table <- as.data.frame(temp)

temp_table$synopsis[192] 
[1] "On 3-14-2016, Twin Haven Capital Partners LLC entered into a Standstill Agreement 
with Hawaiian Telcom Holdco, Inc., pursuant to which, the company agreed to recommend 
and nominate Robert Webster, an employee of Twin Haven, to the company's board at the 
2016, 2017, and 2018 annual meeting. Twin Haven also agreed to abide to customary 
standstill provisions lasting for a period of three years." 
temp_table$standstill_agreement_special_exhibit_included[192] 
[1] FALSE
temp_table$settlement_agreement_special_exhibit_included[192] 
[1] FALSE

[iangow]

Thanks. We have code to extract these dates, I believe.

Based on the results of one or both of those other activist director papers, I think we may want to use settlement dates instead of appointment dates (when earlier) for event studies, etc.

[sapyung]

activist_director	standstill	settled	proxy	settle_synopsis	n
FALSE	FALSE	FALSE	FALSE	FALSE	1059
FALSE	FALSE	FALSE	FALSE	TRUE	745
TRUE	TRUE	TRUE	FALSE	TRUE	286
TRUE	FALSE	TRUE	FALSE	TRUE	156
TRUE	FALSE	FALSE	FALSE	FALSE	103
TRUE	FALSE	FALSE	FALSE	TRUE	89
FALSE	FALSE	FALSE	TRUE	FALSE	71
FALSE	FALSE	FALSE	TRUE	TRUE	53
TRUE	FALSE	FALSE	TRUE	TRUE	51
FALSE	FALSE	TRUE	FALSE	TRUE	44
TRUE	FALSE	FALSE	TRUE	FALSE	40
FALSE	TRUE	TRUE	FALSE	TRUE	30
FALSE	TRUE	FALSE	FALSE	TRUE	23
TRUE	TRUE	FALSE	FALSE	TRUE	22
TRUE	TRUE	TRUE	TRUE	TRUE	11
TRUE	TRUE	TRUE	FALSE	FALSE	11
TRUE	FALSE	TRUE	TRUE	TRUE	10
FALSE	FALSE	TRUE	TRUE	TRUE	6
TRUE	FALSE	TRUE	FALSE	FALSE	4
FALSE	TRUE	FALSE	TRUE	TRUE	2
FALSE	TRUE	TRUE	FALSE	FALSE	1
FALSE	TRUE	FALSE	FALSE	FALSE	1
TRUE	TRUE	FALSE	TRUE	TRUE	1
TRUE	FALSE	TRUE	TRUE	FALSE	1
FALSE	FALSE	TRUE	TRUE	FALSE	1
FALSE	TRUE	TRUE	TRUE	TRUE	1

103 and 89 are the ones I shall dig deeper into.

This is how I defined _settlesynopsis. synopsis_text ilike '%settle%' OR synopsis_text ilike '%agreement%' AS settle_synopsis

[iangow]

(CC @surajsrinivasan)

If there are some activist directors who were appointed without any settlement (or standstill) agreements, that helps us a little.

But, for sure, do some digging into a sample of these cases. Hopefully, enough of a pattern emerges that we can code the variables without having to look at all of them.

[iangow]

103 and 89 are the ones I shall dig deeper into.

@sapyung Did you do this digging?

[iangow]

@sapyung in email on 5 February 2018:

(3) As noted in an earlier thread, I found some inconsistency in the way SharkWatch defined “settlement.” It requires some textual matching, especially for the activist director cases. In their case, information on the existence of settlement agreements between activists and targets was obtained from FactSet’s Shark Repellent, Capital IQ Key Developments, and via news archive searches. The content analyses use data from new archive searches.

[iangow]

@sapyung

Regarding the 103, can we conclude that at least some of these involved appointment of activist directors without settlement (or standstill) agreements or proxy fights?

Regarding the 89, should some (or most, or even all) of these be considered to be settlement cases?

[iangow]

@sapyung Bump. Two questions above.

[sapyung]

I looked through the 103 and 89 cases (the number is now 118 and 93)

1. No mention of "settle" in synopsis - There is no settlement between the two parties but the management accepts the activist recommendation/request.

Here are some examples FYI: A. On 5-7-2010, Prescott Group Capital Management LLC, 18.1% stakeholder in 4Kids Entertainment, Inc., converted its reporting from a 13G to 13D in order to disclose that Prescott recommended Duminda M. Desilva (an employee of Prescott) and Wade I. Massad to the board's nominating committee for service as directors. The company's 4-30-2010 definitive proxy statement included Massad and Desilva as board-recommended nominees.

B. On 10-24-2006, Contrarian Capital Management, LLC filed a SC13D/A with the SEC to report its combined ownership stake of 2,584,000 shares (18.0%) in Salton, Inc. The SC13D/A also advised that Contrarian had made a recent request for representation on the Salton, Inc. Board of Directors. As a result of this request, dissident representative Jason Mudrick was elected to the company's Board of Directors.

C. On 12-2-2014, The Bank of New York Mellon Corporation announced the election of Ed Garden, Chief Investment Officer and founding partner of Trian Fund Management, L.P., to BNY Mellon's board, following the increase in board size from 13 to 14 members. Trian was one of the largest shareholders in the company. BNY Mellon also disclosed that the company had discussions with Trian over the past months regarding the company's financial performance and market opportunities.

D. On 4-1-2014, Ludvig Lorentzen AS reporting a stake of 12% in Energy Recovery, Inc., and disclosed its intention to seek board representation. On 1-13-2015, Lorentzen disclosed the nomination of three candidates for election to the board at the company's 2015 annual meeting. On 2-6-2015, the company announced the appointment of Mr. Lorentzen and Mr. Buehler to the board.

E. On 1-9-2015, MSD Capital LP filed a 13D and reported a stake of 7.5% in Asbury Automotive Group, Inc. MSD disclosed that it had discussions with representatives of Asbury regarding the company's business, operations, and board composition. MDS also announced the appointment of Joel Alsfine, partner at MSD Capital, to the company's board.

2. Mention of "settle" in synopsis - Here it is mixed. Some mention specifically that there were no standstill agreement, while others have some kind of standstill agreement. (possibly more informal agreement?)

Here are some example again FYI:

A. On 2-3-2014, KKR Asset Management LLC (KAM) filed a 13D/A at Amedisys, Inc., disclosing that KAM requested that KAM executive Nathaniel Zilkha be nominated immediately to the board. KAM owned 14.9% of outstanding shares. On 2-24-2014, the company announced the resignation of founder/chairman/CEO William Borne from the company. On 3-27-2014, the company announced the appointment of KKR's Zilkha to the board. No standstill agreement was announced.

B. On 3-9-2015, Meru Networks, Inc. disclosed an agreement with Vertex Capital Advisors LLC. Meru added one candidate originally recommended by Vertex to its slate of board nominees at the 2015 annual meeting while Vertex agreed to vote in favor of management proposals at the meeting.

C. On 10-15-2013, Basswood Capital Management LLC filed a 13D reporting a 9.7% stake in Hudson Valley Holding Corp. Basswood said it met with management on 10-2-2013 and requested that a Basswood member be added to the Hudson Valley board. On 3-27-2014, the company added Basswood's Matthew Lindenbaum to the board. No standstill agreement was announced.

D. On 6-1-2016, Legion Partners Asset Management LLC entered into into a cooperation agreement together with Boingo Wireless, Inc. and Ides Capital Management LP. According to the agreement, the company agreed to increase the size of the board by two, appointing Maury Austin as a class III director and David Cutrer as class I director effective immediately following the adjournment of 2016 annual meeting and the appointment of Kathy Misunas as a class II director. Legion, in return, agreed to abide to certain customary standstill provisions.

E. On 3-14-2016, Twin Haven Capital Partners LLC entered into a Standstill Agreement with Hawaiian Telcom Holdco, Inc., pursuant to which, the company agreed to recommend and nominate Robert Webster, an employee of Twin Haven, to the company's board at the 2016, 2017, and 2018 annual meeting. Twin Haven also agreed to abide to customary standstill provisions lasting for a period of three years.

F. On 7-11-2016, White Winston Select Asset Funds LLC, 15.8% holder filed a 13D and disclosed that it engaged in discussions with the board and management regarding a possible investment in Professional Diversity Network, Inc., ways to enhance shareholder value and possible board representation. White Winston also stated that it entered into a master credit facility and a board representation agreement with the company pursuant to which White Winston nominated persons to serve as company's director and the company agreed to recommend such nominees on shareholder's election to the board.