October 21, 2019 BARRON’S M11
13D Filings
Investors Report to the SEC
13Ds are filed with the Securities and Exchange Commission within 10 days of an entity’s
attaining a greater than 5% position in any class of a company’s securities. Subsequent
changes in holdings or intentions must be reported in amended filings. This material has
been extracted from filings released by the SEC from Oct. 10 through Oct. 16, 2019.
Source:InsiderScore.com
Activist Holdings
Argo Group International ( ARGO )
Voce Capital Management disclosed on
Oct. 15 that it held 1,863,557 shares of the
property and casualty insurer, equal to
5.4% of Argo’s outstanding stock. On
Oct. 14, Voce Capital issued a press release
stating that the recent SEC investigation
into Argo’s executive compensation and
benefits “illustrates the need for immedi-
ate and sweeping changes at Argo.”
Voce had proposed a reconstituted
board in the past and reiterated the need
for such now. Its recommendations include
the removal of the five longest-serving
directors, the election of independent
directors to at least partially fill the
vacated seats, and the creation of a special
committee that “will respond to the SEC
subpoena” and conduct a “comprehensive
investigation, with the assistance of an
outside law firm, into any misappropria-
tion of corporate assets,” along with any
other misconduct. Voce concluded that it
remains open to engaging with Argo, but
if the board refrains from discussions, it
would “seek to hold [Argo’s board] ac-
countable through whatever process we
deem to be in the best interest of all Argo
shareholders.”
Barnes & Noble Education ( BNED )
Outerbridge Capital Management cited
a position in the college and university
bookstore-services provider of 6,499,621
shares, or a 13.7% stake in the tradable
stock. That amount includes Outerbridge’s
purchase of 3,499,749 shares from Aug. 12
to Oct. 9 at a per share price of $2.94 to
$4.01. Outerbridge has switched to an
active stance and cited that it wishes to
engage Barnes & Noble Education to “dis-
cuss enhancing shareholder value and to
potentially seek board representation.”
Outerbridge noted that it also wishes “to
have discussions with other stockholders
to understand their perspectives and
priorities.”
USA Technologies ( USAT )
Hudson Executive Capital disclosed on
Oct. 16 that it holds 10,385,172 shares of
the payments-processing firm, equal to
16.3% of the outstanding stock. Included in
that figure are 2,189,200 shares that were
purchased from Sept. 23 to Oct. 14 at $4.14
to $7.30 apiece. Hudson Executive ad-
dressed an open letter to USA Technolo-
gies shareholders, dated Oct. 14, that it
intended “to nominate a slate of indepen-
dent” directors to USA Technologies’
board. Hudson Executive feels strongly
that change is necessary, as the incumbent
directors have “repeatedly rejected” Hud-
son’s assistance for issues that it believes
have eroded shareholder value.
Specifically, USA Technologies had
declined help with a timely audit so that it
could submit restated financial statements,
and has refinanced debt that increased “on-
going financial costs.” Lastly, the board has
not held management accountable for deci-
sions that have “failed to attract and retain
senior staff,” enabled poor shareholder
communications, and cost business opportu-
nities as well as reputation. Hudson Execu-
tive said it’s seeking to reconstitute the
board and that future communications will
be forthcoming.
Increases in Holdings
TerraForm Power ( TERP )
Brookfield Asset Management , through
a wholly owned Canadian subsidiary,
bought 2,981,514 shares of the clean-
energy operator through a private place-
ment. On Oct. 8, Brookfield entered into a
purchase agreement with TerraForm to
buy the noted shares at $16.77 apiece, fur-
ther cementing Brookfield as the energy
company’s largest shareholder with a
61.5% interest in the outstanding A stock,
equal to 139,631,666 shares.
DBV Technologies ( DBVT )
Baker Brothers Advisors lifted its stake
in the French biopharmaceutical firm to
11,164,669 shares. On Oct. 9, wholly owned
subsidiaries of Baker Brothers purchased
9,104,704 American depositary receipts
through a public offering at $6.59 per
share. Following the offering that closed
on Oct. 11, Baker Brothers now owns
23.7% of the biopharmaceutical’s outstand-
ing stock, including 21,500 ordinary shares
underlying a similar number of exercisable
warrants. Baker Brothers also cited that a
representative serves on DBV’s board.
GameStop ( GME )
Hestia Capital Management and Permit
Capital revealed on Oct. 15 that they
jointly own 4,601,961 shares of the video-
game retailer, about 5.1% of the tradable
stock that includes shares personally
owned by founding managers. The shared
stake includes 1,769,975 shares bought
from Aug. 16 to Oct. 10 at prices of $3.25
to $5.55 apiece. Toward the end of March,
Hestia and Permit entered a cooperation
agreement with GameStop that would al-
low the election of one director to the
board within 30 days before GameStop’s
2019 annual shareholders meeting, se-
lected from a group of candidates provided
by Hestia and Permit.
Further, the agreement allowed for the
selection of one additional designee during
the annual meeting. As those seats have
been filled, Hestia and Permit have agreed
to standstill provisions that will prohibit
the investors from owning more than 9.9%
of GameStop’s stock as well as prevent
either Hestia or Permit from seeking or
soliciting proxies that would influence or
control management or seek “extraordi-
nary transactions.”
WideOpenWest ( WOW )
Crestview Partners purchased 694,705
shares of the regional cable operator from
Sept. 10 to Oct. 10. Crestview Partners
bought shares at prices ranging from $5.60
to $6 each and now holds 31,132,977 shares,
equal to 36.9% of the outstanding stock.
Decreases in Holding
Verso (VRS)
Lapetus Capital lowered its holding of
the coated-paper producer to 2,491,707
shares. The reduced stake resulted from
Lapetus’ purchase of 291,766 shares from
Oct. 1 to Oct. 9 at $12.24 to $12.47 each
and the sale of 395,905 shares on Oct. 7 at
$12.50 apiece. Lapetus now holds a 7.2%
interest in Verso’s outstanding stock.
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or call 866-400-9595.
The Activist Spotlight
Emerson Electric (EMR)
Business: technology and engi-
neering
Stock Market Value: $41.7 billion
($67.84/share)
What’s Happening:DE Shaw
has submitted a detailed plan to the
company outlining its ideas for share-
holder value improvement.
Key Numbers:
50% : DE Shaw’s estimate of the
appreciation of Emerson stock if its
plan is followed
$150 million : compensation of
CEO David Farr over past 10 years.
50% more than his S&P peers
8: number of Emerson private jets
Nov. 6 : deadline to nominate
directors
Behind the Scenes: DE Shaw
uses activism situationally as a tool
when it makes sense. Emerson has
top tier automation assets and a pre-
mium climate franchise with leading
market share but has consistently un-
derperformed its peers and the mar-
ket. DE Shaw attributes this to a long
track record of bad capital allocation,
excessive costs, a poorly integrated
conglomerate structure, insufficient
corporate governance, and poorly
aligned executive compensation.
DE Shaw estimates that $1 billion
of costs could be cut, and recom-
mends that Emerson split into sepa-
rate industrial-automation and cli-
mate-technology companies, de-
stagger its board, and tie executive
compensation to operational or finan-
cial returns rather than growth. DE
Shaw is aware of the director nomina-
tion deadline and will probably push
to add directors with experience ana-
lyzing and executing the separation of
disparate businesses.
Emerson has responded that it
welcomes input from all shareholders,
will evaluate DE Shaw’s proposals,
and has started a comprehensive re-
view of operational, capital-allocation,
and portfolio initiatives to enhance
shareholder value. —KENNETHSQUIRE
The 13D Activist Fund, a mutual fund
run by an affiliate of the author and not
connected to Barron’s, has no position in
the securities mentioned here. In addi-
tion, the author publishes and sells 13D
research reports, whose buyers may
include representatives of participants in,
and targets of, shareholder activism.