The Morning Brief: Corvex Takes Activist Stake in Pandora

Keith Meister’s Corvex Management has taken a new activist position. The New York manager disclosed in a regulatory filing that it owns 9.95 percent of Pandora Media, the music streaming company. In the filing, Corvex says the stock is undervalued and reveals that it backed off from an earlier plan to launch a proxy fight. However, Corvex also states that it has discussed with the company a possible sale of and other options “including the risk-adjusted value of continuing to operate on a stand-alone basis.”

In a letter to the board dated May 16, Corvex laments that Pandora has been unable to “translate its great product into a great business with an attractive public market valuation.” So, it asserts that Pandora “can become an even more differentiated product and a more valuable business as a part of a larger enterprise.” As a result, Corvex says Pandora would be doing a disservice to shareholders by signing what it calls “potentially business-altering direct deals and spending significant additional capital on non-core growth initiatives” without finding out what the company would be worth to an acquirer.

Corvex also disclosed that it earlier told Pandora it planned to nominate three individuals to the board for the 2016 annual meeting. However, it agreed to drop these plans after holding several conversations with the board, including former CEO and chairman Brian McAndrews. However, it said it was subsequently taken by surprise when Tim Westergren replaced McAndrews as CEO shortly afterward. “As you know, this management and Board change had not been addressed in any of our conversations, including at the time of our notice withdrawal on Wednesday, March 23, 2016 – which we do not believe was a coincidence,” an irked Corvex states in the letter. Shares of Pandora jumped about 6 percent on Tuesday.

By the way: In a break from recent experience with activist managers, who have been building up their stakes in secret, investors could have speculated on this move. At year-end Corvex did disclose owning a small stake in Pandora.


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Shares of Valeant Pharmaceuticals International surged more than 7 percent on Tuesday and are now up around 16 percent over the past three trading days. However, the stock still trades at a depressed price of around $29. In the first quarter 13F filings, mostly made public on Monday, a number of high-profile hedge fund managers disclosed new or enlarged positions in the controversial drug maker. They include New York-based Paulson & Co. — a major existing shareholder — which boosted its stake, and New York-based Tourbillon Capital, which bought more than 3.4 million shares of the common stock as well as call and put options. Other buyers included Miami Beach, Florida-based Appaloosa Management, which acquired a relatively small stake of 945,000 shares, and New York-based Hound Partners, which added to its position, the ninth largest in its U.S. stock portfolio.


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