Pop Culture Proxy Fights
by Dan McDermott | Yahoo! Finance | December 17, 2019
In the 1987 film Wall Street, Michael Douglas’ character Gordon Gekko gave the famous “Greed is Good” speech during a hostile takeover of his target, Teldar Paper. This scene is arguably still the most well-known portrayal of an activist shareholder. Recently, however, shareholder activism has returned in dramatic fashion to Billions on ViacomCBS Inc.’s Showtime and Succession on AT&T Inc.’s HBO. Both hit shows depict hostile takeovers/proxy fights as central themes. Viewers might wonder: Does this kind of thing really happen? And, if so, how accurate are the shows’ respective depictions of events?
Starting with Billions, Bobby Axelrod (see Steve Cohen of S.A.C. Capital/Point 72 capital for the character’s inspiration), played by Damian Lewis, wages two proxy fights during the course of the series. In Season 1, Axelrod wages a proxy fight at Yumtime (see Hostess Brands for likeness). In Season 4, Axe wages another proxy fight at Saler’s (see Sears) with private equity investor/love interest Rebecca Cantu played by Nina Arianda. Let us focus on Axelrod’s engagement with Yumtime, which shares the most real-life similarities with an actual proxy contest.
Companies often become vulnerable to activist hedge funds through sustained underperformance. In particular, lower stock price returns versus a group of peer companies can invite an activist hedge fund – like Axe Capital – to make an argument that change is necessary at the company’s Board of Directors, C-level management or both to turn the company around. In the case of Yumtime, Axe demonstrates that the dessert-pastry company had delivered poor performance for shareholders and offers a solution to turn the company around: