When a companys stock starts to drag, activist investors often swoop in to shake things up, pressing the laggard to cut costs, shed poorly performing assets or even consider selling itself altogether.
Sensing opportunity for investment profits at a time when the stock market has been rocky, activists have taken aim at their latest targets: the multinational consumer goods company Unilever, the fitness equipment maker Peloton and the department store chain Kohls.
Unilever faces a new challenge from a prominent activist.
Shares in Unilever rose more than 6 percent on Monday on the revelation that Trian Fund Management, the investment firm founded by Nelson Peltz, has amassed a stake in the consumer products giant.
The emergence of Mr. Peltz in Unilevers stock, previously confirmed by people briefed on the matter, poses another challenge for the company, days after it was forced to drop its $68 billion takeover bid for GlaxoSmithKlines consumer health business.
It is unclear how much of a stake Trian owns or what it is calling for. But Mr. Peltz is one of Wall Streets most prominent activist investors, who has successfully pushed for change at consumer goods companies like Mondelez and Procter & Gamble. His successful battle to win a seat on Procter & Gambles board in 2017 was the costliest such fight on record.
Shareholders and analysts appear to be hoping that Trian will prod Unilever into selling lower-growth brands, something that Mr. Peltz has pushed companies to do in the past.
But others warned that even Mr. Peltz may not be able to improve the companys fortunes anytime soon. The changes required to culture and structure will take time and may fail, as they have done previously, Bruno Monteyne, an analyst at Bernstein, wrote to clients on Monday. Unilever stock is likely to be an emotional trading stock for years.
Peloton is pushed to sell itself and drop its chief executive.
In a letter to the embattled at-home fitness equipment maker, Blackwells Capital called for directors to fire the companys chief executive, John Foley, who is also a co-founder, and to weigh a sale as its shares tumble amid falling sales and growing inventory. Peloton said last week it was considering layoffs and resetting its production levels for sustainable growth. The stationary bike company initially had to ramp up production to meet pandemic demand and has now found itself with excess inventory as more people head outdoors for their fitness.
Peloton is on worse footing today than it was prior to the pandemic, Blackwells wrote. With high fixed costs, excessive inventory, a listless strategy, dispirited employees and thousands of disgruntled shareholders.
Shares of Peloton have tumbled more than 80 percent over the past year, giving it a market capitalization of a little over $9 billion. Shares were up more than 4 percent in morning trading.
Still, any fight might be an uphill battle: Peloton has two shares of stock, where Class B shareholders have drastically more voting power and Mr. Foley alone controls nearly 40 percent of shareholder votes. A representative for Peloton did not immediately respond to a request for comment.
Kohls comes under pressure with a bid to go private.
The retailer Kohls has received a roughly $9 billion offer to go private in a deal with an investment consortium backed by the activist hedge fund Starboard Value, according to two people familiar with the matter. The private equity firm Sycamore Partners has also reached out to Kohls about a potential deal.
Kohls confirmed on Monday that he had received letters expressing interest in acquiring the company. Its shares are up more than 30 percent in early trading.
Kohls is already under pressure to improve its share price. The activist firm Macellum Advisors, which has a 5 percent stake in Kohls, urged the retailer in a letter last Tuesday to explore strategic alternatives, including a sale. That move came after Macellum raised similar criticisms over Kohls stock performance last year. The hedge fund Engine Capital has also been calling on Kohls to consider a sale, along with other strategic initiatives.
But it is not clear whether Kohls will approve a sale, which would depend on whether the initial suitors can secure the necessary financing.
Starboard has helped Acacia Research Corporation, which is leading the consortia bid, to raise equity to pay for its offer. Acacia has also received a letter of confidence from a bank pledging support for arranging debt. It is in talks with a firm that would sell off part of Kohls real estate to help fund the bid, in what is likely to result in a sale-and-lease-back transaction, in which a company leases back the real estate it has sold.
Such sale-lease-back deals have worked at companies like Bed Bath & Beyond, but they have fared poorly for others like Sears, because the cost of rent can limit the companys ability to spend on capital investment. They also often entail long-term leases, which could lock Kohls in to property at a time it needs to be nimble.
Kohls said last year that various covenants inhibited its ability to do such deals. It also said moves like those could threaten its investment grade status.
We think adding fixed costs as margins hit multiyear highs and are at risk of retrenchment is risky, and we are wary of the rent expense that Kohls would have to shoulder through a full cycle, analysts at Bank of America wrote about a potential lease-back .
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