“Elliott Management Corp. has built a significant stake in Public Storage and privately nominated six directors to the self-storage giant’s board,” WSJ writes.
Why It Matters: Public Storage’s stock price “has stumbled in the past few years after a decadeslong march upward.” Elliot has a history of turning companies around, though it’s unclear how exactly it plans on approaching this situation. Though PSA’s board-overhaul — Elliott nominated six members and three of its longest-tenured ones retired and were replaced — suggests a massive corporate shakeup is in the works.
What is Public Storage? “Public Storage, recognizable by its bright orange logo, is a Glendale, Calif., real-estate investment trust that specializes in developing, owning and operating self-storage units. Founded in 1972, it was one of the earliest major self-storage companies but has been under pressure as competition from the likes of Extra Space Storage Inc. and CubeSmart heats up.”
- Public Storage’s Stock Price Before Monday’s Open: $220.06
- Public Storage has a market value of $38 billion. The company’s shares have risen 3% this year, while the S&P 500 has grown 13%.
- Elliott has roughly $41 billion under management and has built its reputation as a corporate activist. Some of its bloodier battles included “public clashes with companies including Arconic Inc. and Athenahealth Inc.”
The Rest: With its history in tow, Elliott has made a habit of doing things differently of late. Rather than the notable public battles, it has been “conducting more activist campaigns behind the scenes and, in the rare cases it chooses to nominate directors, has tended to do so privately.”
Billionaire Paul Singer (Elliott Management) is a legendary activist investor. Activist investors generally buy large stakes in companies that are being run poorly or mismanaged, fight to nominate board directors, and try to influence or pressure the company to change in a way that is beneficial to shareholders.
I am open on investing behind good activist investors with clear improvement goals, but it also depends on the activist investor’s reputation, the company’s situation, how defensive the management team is, and more.
But these companies are usually struggling, deep value plays and returns rely on operational transformation, which is harder for me to get excited about as opposed to a healthy product at a reasonable price.