The lousy January start for the U.S. stock market is giving activist hedge funds plenty of company in the misery they see.
You don't have to look far for local examples.
Comcast Corp. and its chairman and CEO Brian L. Roberts have come under withering criticism from a hedge fund that owns about 2 percent of the cable company’s shares.
Chieftain Capital Management Inc. sent a letter to Comcast's board of directors in which it called for the ouster of Brian Roberts as CEO. It also wants the board to change the company's voting structure, under which the founding Roberts family keeps control with 33 percent of the voting power while owning about 1 percent of the shares.
Corporate-governance issues tend to make many people shrug their shoulders. Everyone's a critic, right? But Comcast's shares, which closed at $17.22 Friday, are trading below where they were when the Philadelphia cable company launched its failed effort to capture Walt Disney Co. in 2004.
Even a patient investor like Microsoft Corp., which has owned more than 7 percent of Comcast for years, might listen to what Chieftain has to say.
Hedge fund MMI Investments has obviously caught the attention of Unisys Corp. The Blue Bell computer company pushed back deadlines for shareholder proposals and board nominations last week to continue discussions with MMI, which has championed a breakup.
Charming Shoppes Inc. is faced with a group of investors, led by Crescendo Partners L.P., that is promising a proxy fight. It has nominated three people for election to the Bensalem company's board. A letter sent by the group criticized the retailer's strategy and complained about the low stock price.
(By the way, Crescendo has a 9.9 percent stake in Mothers Work Inc., which last week said it had lost $400,000 in its fiscal first quarter. So far, the New York fund has not publicly rattled the Philadelphia maternity retailer's cage.)
And there's Ikon Office Solutions Inc. , which was muscled by the formidable Steel Partners into a share buyback last fall. Malvern-based Ikon had a bad first quarter, with earnings down 45 percent. Last week, Ikon announced it would lay off 350 people. Its shares are down 37 percent since Christmas.
Do activist hedge funds make a difference for shareholders? Let's look at Pep Boys — Manny, Moe & Jack. In 2006, the Philadelphia auto-parts retailer was pressured by Barington Cos. Equity Partners and Pirate Capital. Pep Boys CEO Larry Stevenson resigned that July, and the hedge funds got board representation. Shares were trading at $11.46 the day Stevenson stepped down.
Pep Boys hired a new CEO last March, bringing in Jeff Rachor from the auto-dealer world. Since then, Pep Boys reported two quarters of profits and shares hit $22.26 the day after the annual shareholder meeting on June 14.
In late November, Rachor announced the company's new five-year plan to refocus on "core" automotive merchandise and add smaller neighborhood service shops by acquisition or organic growth. It closed 31 poor-performing stores and did a sale-leaseback on 34 others that raised $166 million.
But "transformational change," as Rachor calls it, takes time. And Pep Boys' hedge-fund investors are going to need some patience. On Friday, Pep Boys shares closed at $10.04.
