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With Apple Campaign,
Activist Jana Partners Polishes Its Brand
The activist fund has traditionally focused its energy on share price
improvement and M&A. Now it has a social impact fund with a different
kind of campaign at the iPhone giant.
By
Ronald Orol
Jan 12,
2018 9:19 AM EST
Activist fund Jana Partners and a giant California public pension fund
launched a new kind of activist campaign over the weekend, joining
forces to urge Apple Inc. (AAPL)
to take action to curb smartphone addiction among children.
The campaign, which sets up a special impact fund for the campaign,
represented an unusual shift for the activist investment firm headed
by Barry Rosenstein, who typically targets corporations with efforts
seeking to improve their share price through operational changes or
M&A.
Jana and its partner, the California State Teachers' Retirement System, issued a
letter Saturday full of statistics and data about child overuse of iPhones and
their impact on sleep, depression, and risk of suicide. The effort should be
lauded. But is there a bigger picture beyond protecting children? Yes. The
investment will almost certainly help Rosenstein as he seeks capital allocations
from public pension funds for his traditional activist fund and its more
aggressive, less friendly agitations. For example, the campaign is likely to
help Jana maintain a strong relationship with CalSTRS, its partner in the Apple
effort.
Also, it could help Jana Partners gain support for its campaigns in the form of
the votes of big institutional investors, whether they have the fund's back in
behind-the-scenes negotiations or public boardroom battles.
The campaign fits squarely within the category of environmental, social and
governance activism, or ESG, an investing category that sizeable public pension
funds such as CalSTRS as well as the primary index funds, including Vanguard
Group, State Street, and BlackRock, are concentrating on heavily.
Shane Goodwin, chief of the Columbia Law School shareholder activism research
project, suggests that the new Apple campaign indicates that Jana Partners is
motivated in part by seeking to get on the good side of index funds, who are
often the largest investors at corporations targeted by activists. "These index
funds are very focused on ESG for the 2018 proxy season," Goodwin said. "You
[activist] need the top three index funds if you are going to win your campaign.
Is Barry [Rosenstein] trying to rebrand himself as constructivist in the
boardroom?"
Gary Lutin, the founder of the Shareholder Forum, suggests that the Jana-CalSTRS
partnership and Apple effort is a very constructive development because it
demonstrates that a professionally managed activist hedge fund is focusing on
something that supports the foundations of fair business practices. "It is good
positioning both for Jana Partners' specialized purpose fund, and it is good for
their public image, anything they are doing," Lutin said.
The effort has already developed a lot of buzz, with news articles and TV
interviews on the subject, in large part because Rosenstein and Jana Partners
were included in the effort. Will other activists and pension funds join forces
with similar social campaigns in the future? Expect it, experts say.
Andrew Freedman, a partner at Olshan Frome Wolosky LLP in New York, argues that
the partnership goes a long way towards building goodwill between Jana and the
ESG-focused institutional investor community at the same time that it also
generates good PR and visibility for Jana. "It could also spearhead a trend
among the top tier activist investors to seek to wield their influence more
holistically on other fronts and issues at public companies," Freedman said.
Columbia's Goodwin agreed that the kind of collaboration exhibited by Jana
Partners and CalSTRS would be followed by other funds, though he said he didn't
know if other investors will employ similarly formal arrangements. "You are
going to see many others do this," Goodwin said. "Some of the well-known
activist funds have been privately doing things in the philanthropic arena in
part to get a halo effect around their name."
Even so, don't expect Rosenstein to launch a director-election proxy contest if
Apple doesn't respond
to the Jana Partners-CalSTRS demands. In fact, observers argue that one of the
reasons Rosenstein targeted Apple for the campaign is because there is a great
likelihood that the iPad and iPhone maker will respond in some way he can say
was a win for his campaign.
Columbia's Goodwin argued that Apple seeks to be a good corporate citizen, so
the smartphone maker makes for an easy target. "It's an easy win," Goodwin said.
"Going after some other corporations would require a bigger fight."
Next on the agenda? A pension fund-hedge fund partnership targeting Coca Cola's
impact on childhood obesity? Only time will tell.
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