Perspectives

Do you know who is invested in your company?

If not, you should.

Shareholder activism continues to threaten public companies in Canada. As a public company, if it’s not something you’re actively discussing and preparing for – you’re falling behind. More often than not companies are unaware that an activist shareholder may be making a play for them, and responding to these events requires readiness and the ability to act at a moment’s notice. An activist shareholder has typically spent a fair amount of time preparing to make a move, and if you’re under attack, you won’t be given much notice. Being prepared can potentially save you from a long drawn-out proxy battle.

Our team of investor relations experts have compiled a series of the most important questions that companies should be asking themselves to stay ahead of the curve.

  1. Know your shareholder base: While not all investors are required to disclose their ownership, typically ones with at least 10% are required to report their ownership in Canada. Keep up to date on who owns your shares, who is making changes and if anyone new becomes a shareholder. If a known activist has recently invested, you can prepare to handle a situation should it arise.
  2. Stay in touch with the street: What is the sentiment around your company? Has it begun to shift? Keeping an ear to the broader market will give you an inkling if shareholders are unhappy with your current course of action.
  3. Watch your sector: Are you beginning to see your peers being targeted? Are large players in your sector trending towards consolidation? Is there an activist out there targeting certain industries? It is important to know what the trends are in your sector so you can keep abreast of market sentiment.
  4. Audit your governance: Does your board have an issue with over-boarding? Is it a diversified group? Have you done a recent review of your compensation plans? It is best to know if your policies are in line with current best practices. If the market identifies issues with your governance structure it can leave you more vulnerable to an activist.
  5. Have a plan: Take the time to identify who your key advisors should be if you are targeted by an activist shareholder. Have you identified a person who could lead a special committee? Are you going to engage any third party consultants to assist you? This will save you a lot of time when it’s at its most valuable.
  6. Engage your shareholders: Keep your shareholder base engaged and informed on your business. Have a clear and concise strategy, and keep the market updated through a variety of communications tools: conference calls, shareholder letters, annual meetings, or press releases. Shareholders who are well informed about your business and outlook can feel more confident with the management team running the show.

 

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capitalmarkets@national.ca