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Morning Brief: Trian Takes On Giants GE, Procter & Gamble

Nelson Peltz’s activist hedge fund firm has had a busy week already, between major announcements at General Electric and Procter & Gamble.

  • By Stephen Taub

This is shaping up to be quite a week for the folks at Trian Fund Management. On Tuesday Procter & Gamble said its shareholders voted not to elect Trian co-founder Nelson Peltz to its board. Peltz told CNBC the vote was too close to call and that it was "as close to a dead heat" as possible.

Meanwhile, on Monday General Electric announced that it elected Ed Garden, chief investment officer and one of three founding partners of the activist hedge fund firm, to its board of directors. The move comes one week after Jeff Immelt resigned as chairman of the board. Immelt initially announced his plans to leave about four months ago, earlier relinquishing the chief executive role.

“Like other GE shareholders, I am disappointed by the recent performance of GE’s stock,” said Garden in a press release. “But I continue to believe that GE represents an attractive long-term investment opportunity with significant upside.”

Garden currently sits on the board of Bank of New York Mellon Corp., where he is chairman of its human resources and compensation committees, and is a director of Pentair. In the past he has served on the boards of Wendy’s Company and Family Dollar Stores.

At the end of March, GE had the 13th-largest market capitalization in the world, at $260 billion, while P&G ranked 19th at $230 billion, according to PwC. 

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Jeffrey Smith’s Starboard Value has disclosed a new activist position. The hedge fund firm said it owns 6.8 percent of Monotype Imaging Holdings, a provider of text imaging software for consumer devices. In its 13D filing, Starboard also says it has formed a group with Houston-based hedge fund BLR Partners, which owns an additional roughly 939,000 shares, or 2.3 percent of the total. In the regulatory filing, Starboard says it bought the shares because it deemed them to be “undervalued and represented an attractive investment opportunity.” Using typical boiler-plate language, Starboard says it does not have a plan for the company and may or may not take some sort of future action.

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Shares of Tesla fell nearly 4 percent on Monday, to close at $343.84, after the company disclosed it is producing far fewer of its electric cars than it had previously forecast. The Wall Street Journal several days ago reported that due to production problems, many cars are being made by hand. The stock has been a high-profile short position of David Einhorn’s Greenlight Capital. We reported in August that Tesla was the most shorted U.S. stock. The stock is now down about 11 percent from its September 18 high.

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John Paulson extended his losses in September. The Schroder GAIA Paulson Merger Arbitrage fund, a UCITS (undertakings for the collective investment of transferable securities) fund offered on the Schroder Investment Management platform, lost money again in September and was down nearly 15 percent through the first three quarters of the year, according to a document from investment bank HSBC that tracks hedge fund performance. Although the fund only manages $125 million, a person with knowledge of Paulson’s performance says the UCITS fund’s performance is in line with Paulson Partners, Paulson & Company’s oldest fund, which specializes in merger arbitrage.

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