Morning Brief: ValueAct Takes 6.4 Percent Stake in Salle Mae

ValueAct Capital disclosed a new, significant activist stake in SLM Corporation, also known as Sallie Mae, the student loan giant. In a 13D filing, the activist investment firm said it owns nearly 30 million shares, or 6.4 percent of the total. At year-end, SLM was not one of ValueAct’s 13 disclosed holdings. ValueAct started building its stake in early February, according to a regulatory filing.

The hedge fund firm said it bought the shares because they are undervalued. It also said it has had discussions with officers and directors of the company and expects to have additional discussions in the future covering a wide range of issues, including those relating to management and board composition, stressing they “may include whether it makes sense for a ValueAct Capital employee” to sit on the board. ValueAct also said it may also have similar conversations with other shareholders or other interested parties. Shares of SLM rose 1.14 percent on Monday, to close at $11.50.

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Elliott Management boosted its stake in Telecom Italia to 1.345 billion shares, or 8.8 percent of the telecom giant, according to a regulatory filing. Using standard boiler-plate language, the multistrategy and activist firm said it thinks the stock is undervalued and is an attractive investment opportunity. Elliott added that it thinks Telecom Italia’s governance, valuation, strategic direction and relationships with Italian authorities would be improved by replacing certain members of the board with new, fully independent directors.

On March 14, Elliott nominated six individuals to the company’s board to replace six of the directors appointed in 2017 by Vivendi, the French media giant that is the largest shareholder of Telecom Italia. According to Reuters, three proxy advisory firms are backing Elliott’s slate, including Glass Lewis and Institutional Shareholder Services. In its regulatory filing, Elliott asserts that a fully independent board should consider taking steps to boost the stock’s value, including simplifying the capital structure so all shares can have the same voting and economic rights. It also called on the company to sell its NetCo and Sparkle units and use the proceeds to reduce leverage. It also urged the company to reintroduce a dividend.

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UBS reaffirmed its $214 price target and buy rating for Facebook — the most widely-held stock among hedge funds — in light of the social media giant’s controversy over data privacy, with the New York Times reporting that millions of users’ data had been improperly harvested by voter profiling firm Cambridge Analytica.

“Since press reports of the Cambridge Analytica data situation, we have seen FB taking a number of steps to adjust privacy and advertising settings on its platform,” the investment bank stated in a new report. It added that a downside scenario for 2019 could result in a 6 percent reduction in ad revenues and 10 percent in earnings per share. However, it thinks Facebook is more likely to suffer a 1 percent to 3 percent reduction in ad revenues and a 2 percent to 5 percent decline in earnings per share.

“Going forward, we expect Facebook to be a stock with materially more upside than downside, but unlikely to react to any one single catalyst,” UBS added in the report. “Based on our recent ad checks, we see no material impact on FB’s business in the past few weeks.” It made no changes to its near-term estimates or its valuation of the stock. Shares of Facebook rose 0.46 percent on Monday, to close at $157.93. It is now trading 18 percent below its February 1 high.

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The HFRI Fund Weighed Composite Index declined 0.25 percent in March, trimming its gain for the quarter to 0.35 percent. This was better than the declines posted by major indexes such as the Standard & Poor’s 500 stock index and the Dow Jones Industrial Average. Fixed income-based relative value arbitrage was the only main strategy to post a gain last month, albeit just 0.02 percent. For the quarter, the index rose 0.84 percent.