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May 28, 2020

Activist appetite grows for small caps

Majority of small-cap companies lack activism defense plan, study finds

Small-cap IROs faced a growing number of shareholder campaigns last year, according to the IR Magazine Shareholder Activism report.
The report, based on responses from a survey of 382 IROs and 218 buy-side representatives, underlines that there has been a growing appetite for targeting small-cap companies: 15 percent were targeted by an activist investor in the past year, while just 8 percent of mega-caps experienced shareholder activism in 2019.

Recognizing their vulnerable position, small-cap IROs are those most concerned about shareholder activism. Despite facing a growing threat from shareholder activism, however, the preparedness level of small-cap firms is low: they are the least likely to have an activism defense plan in place. 

Seventy percent of small-caps firms surveyed in 2019 lack a strategy to defend against a potential activist attack, the study finds – well below the median of 54 percent of all companies that don’t an activism defense plan. 

Mega-cap companies are the most likely to have a strategy for shareholder activism, with 62 percent having one in place. Mid and large-caps are equally prepared for a potential attack with about half of each having a defense plan. 

Most companies that have an activism defense plan update it at least annually. According to the research, 71 percent of small-cap companies with a plan review it every year, while the global average stands at 51 percent. 

Findings in the report are based on data from the IR Magazine Global IR Survey 2019 and the IR Magazine Global Investor Survey 2019, both conducted in the second half of last year.