Bulldog Investors Returns To Using Proxy Contests

From Activist Insight

Bulldog Investors LLC didn’t run a proxy contest in the first half of 2013, but all of a sudden two have come along at once. The activist, still one of the busiest around but less aggressive in recent years, announced last month that it would nominate directors at two companies – Firsthand Technology Value Fund and Javelin Mortgage Investment Corp.  Then again, it has history with management in both cases.


Firsthand is a closed-end fund with big stakes in Facebook and Twitter. Back in September, the stock was doing well and Bulldog began to sell shares, with Phil Goldstein admitting that, despite his past antipathy to fund manager Kevin Landis, the stock was on a good run. Twitter’s IPO came and went, but Goldstein told Activist Insight recently that shares in Firsthand didn’t match the micro-blogging stock, instead falling 7%. “The discount widened to 20%,” he says. “No one can understand that, so we turned around and started buying shares again.”


Bulldog is seeking to add two directors to the board and encourage Landis to repurchase shares. However, the proxy contest could be a turbulent one. Earlier in the year, Landis sued Goldstein over an episode where Bulldog forced the resignation of independent director, Rodney Yee, and the ill feeling is likely to continue.


At Javelin, a US Real Estate Investment Trust, Bulldog has nominated six candidates and wants shareholders to vote on a proposal to enhance the REIT’s buyback policy. Behind the scenes, Bulldog has pursued a slightly more conciliatory line. It has had talks with management, and says the $2 million stock repurchase authorization is sufficient, so long as the company pursues its programme aggressively. Says Goldstein, “They have the authorisation, they should be able to buy those shares within six months. If they don’t, to me that affects their credibility.”


Despite Bulldog’s willingness to settle-and over the last few years it has settled more frequently than it has gone the distance in a proxy fight (something Goldstein puts down to his firm’s enhanced credibility and negotiating prowess) – Goldstein says the only thing Bulldog can sacrifice is to drop its proxy contest. If Javelin doesn’t offer something in return, Bulldog is likely to be gearing up for a busier proxy season in 2014.


Reproduced with permission from Activist Insight.
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