Shareholder activism is often associated with campaigns involving large, high-profile issuers. Yet as the Financial Times reports in a recent article, referencing global data from Activist Insight, there has been a slight upswing this year in activism against relatively small issuers.

The data show that from the start of year to the end of July, 61 “micro-cap” companies—that is, companies with market capitalizations ranging from USD $50m to USD $250m—have been targeted by activist funds. 56 micro-cap issuers were targeted over the same period in 2015. In contrast, activism against the largest issuers has experienced a slight slowdown, with 16 companies with market capitalizations over $10b being targeted, compared with 22 over the same period last year. According to the figures, activism against companies worth less than $50m has held steady.

As the article suggests, there are several possible reasons why smaller companies have been gaining increased activist attention. These include:

  • campaigns involving smaller issuers generally demand less financial wherewithal, which may prove especially enticing to smaller funds who are newer to activist investing
  • increased M&A opportunities when smaller companies are involved
  • the potentially increased ability of activists to add strategic value at smaller companies, who may not necessarily have access to the same kinds of legal, financial and strategic advice as larger companies

The article (paywalled) can be accessed here.

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The author would like to thank Joe Bricker, articling student, for his assistance in preparing this legal update.