Monthly Archives: March 2024

Most boards and management teams are acutely aware of the threat posed by shareholder activists who often use public letters and media attention to exert pressure on directors and executives. They may be more surprised to hear about an emerging trend: an increase in so-called “sell-side activism” in which a company’s sell-side analysts advocate directly for change.

Historically, the sell-side has parsed earnings reports and executive commentary to update their financial models and apply a valuation multiple to arrive at a “buy,” “sell,” or “hold” recommendation. While their research might identify an underperforming stock and they might change their rating accordingly, sell-siders were typically content to leave advocacy to the shareholders themselves. Sell-siders have also played an important role in facilitating investors’ access to management through the use of roadshows, conferences, and other avenues, and have traditionally sought to maintain positive relationships with management.

Recently though, a growing number of sell-side reports have channeled traditional activist letters, with a clear call to action for management teams and boards. These letters go beyond a traditional “sell” rating, instead advocating for specific, sometimes wholesale, changes at the company. The target companies span a range of market capitalizations, industries, and geographies, and include names like Walgreens, Amazon, and Verisk Analytics. The analysts, meanwhile, represent a mix of bulge bracket and independent firms.

Some analysts have stated that their purpose is to serve as a mouthpiece for investors who have voiced concerns about the company, and to make their own clients aware of common criticisms they are hearing. Others have expressed an interest in advocating for change on behalf of their clients to help the company and stock succeed. No matter the reason, management teams and directors should be paying attention.

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