By Bill Alpert
Activist investors normally push to sell struggling companies. This year, they're making a different demand: decapitation. Starbucks, Johnson Controls, and CVS Health are all replacing CEOs, after activists argued their stocks suffered from bad management or strategy. On Oct. 24, Southwest Airlines CEO Bob Jordan managed to keep his job, despite calls from Elliott Investment Management to fire him. Instead, Southwest agreed to name five directors nominated by Elliott to its board.
In the year's first nine months, activists launched 184 campaigns globally, notes Barclays Shareholder Advisory Group, 24% above the four-year average, despite a two-year slump in mergers and acquisitions. M&A remains activists' most common demand, says the group's head, Jim Rossman, but calls to change management and board have risen.
The S&P 500's average annual CEO turnover is about 12%. Some 20% of CEOs targeted by activists in the past two years have been replaced, Barclays says. Among large-cap targets this year, 38% replaced their CEOs. In 2022, the average time to a CEO exit was 138 days after a campaign began. Last year it was 113. This year it's 88.
Activism is spreading. The 10 busiest activists accounted for 29% of this year's campaigns, says Barclays, from 46% in 2023. First-time activists initiated 22% of 2024 campaigns, from 13% in 2023. Rossman sees M&A reviving in 2025 as private equity sells holdings. CEOs, rejoice.
Write to Bill Alpert at william.alpert@barrons.com
Last Week
Markets
Oil fell after Israel's retaliatory attack on Iran hit only military facilities. Japan Prime Minister Shigeru Ishiba lost ground in a snap election, tanking the yen. U.S. stocks greeted a spate of Big Tech earnings with a new Nasdaq high, then lost all of October's gains in a Halloween plunge. Third-quarter growth came in at 2.8%, inflation cooled, and strikes and hurricanes hit October jobs, with only 12,000 added. On the week, the Dow Jones Industrial Average was off 0.15%; the S&P 500, 1.4%; and the Nasdaq Composite, 1.5%.
Companies
Boeing raised $24 billion in new financing and reached a third tentative deal with union leaders. McDonald's ruled out beef patties as the cause of a recent E. coli outbreak and reported that same-store sales fell. Alphabet beat earnings expectations on its cloud business; Meta Platforms and Microsoft both beat but warned of rising AI spending. Apple was cautious in its outlook, but Amazon.com earnings were strong. Intel took a $16.6 billion loss, but shares rose. Volkswagen saw net profit fall 64% as workers threatened to strike over planned factory closures. The Philadelphia district attorney sued Elon Musk over his million-dollar giveaways.
Deals
Musk's artificial-intelligence start-up, xAI, is seeking funding that could value it at $40 billion...The Wall Street Journal reported that Quantum Capital Group has amassed some $10 billion for energy deals...Paris asset manager CIAM came out against the proposed four-way breakup of Vivendi before a Dec. 9 shareholder vote.
Next Week
Monday 11/4
Earnings season rolls on with roughly 20% of S&P 500 companies announcing results on the week. Constellation Energy, Palantir Technologies, and Vertex Pharmaceuticals release earnings on Monday, followed by Apollo Global Management, Emerson Electric, and Ferrari on Tuesday. Arm Holdings, Gilead Sciences, Novo Nordisk, Qualcomm, and Toyota Motor report results on Wednesday, while Airbnb, Arista Networks, and Duke Energy do so on Thursday.
Tuesday 11/5
Americans head to the polls on Election Day with control of all three branches of the federal government at stake. The presidential election between Vice President Kamala Harris and former President Donald Trump looks like a tossup heading into the final days of the race. Republicans are heavily favored to retake control of the Senate, while Democrats are marginally favored to regain control of the House of Representatives.
Thursday 11/7
The Federal Open Market Committee announces its monetary-policy decision a day later than usual because of Election Day. The FOMC is widely expected to cut the federal-funds rate by a quarter of a percentage point to 4.50%-4.75%.
The Numbers
3,700
Number of Boeing and Airbus planes expected from 2019 to 2028 that won't be built within that period.
$1 T
Amount of floating-rate debt sold in the U.S. leveraged-loan market so far this year, besting 2017's record.
108.7
Reading of Conference Board's October consumer confidence survey, up from 99.2 in September.
$28 B
Third-quarter revenue for China's electric-vehicle maker BYD, beating Tesla for the first time.
Write to Robert Teitelman at bob.teitelman@dowjones.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
November 01, 2024 19:35 ET (23:35 GMT)
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