13Ds are filed with the Securities and Exchange Commission within 10 days of an entity’s attaining a greater than 5% position in any class of a company’s securities. Subsequent changes in holdings or intentions must be reported in amended filings. This material has been extracted from filings released by the SEC from Jan. 3 through Jan. 9, 2019.
Health Insurance Innovations (HIIQ)
Cannell Capital disclosed on Jan. 9 that it held 776,836 shares of the health insurance provider, amounting to 5.4% of the outstanding stock. That same day, Cannell addressed a letter to the chairman of Health Insurance, asking for any update regarding its suggestion to fill a newly added board seat. Cannell says that it has not yet received a response, and so has nominated its own designee, former HIIQ CEO Patrick McNamee.
On Jan. 3, Hillhouse Capital Advisors revealed that it had purchased an initial position in the oncology-based biotech of 63,117,389 ordinary shares, 57,693,389 of which are represented by 4,437,953 American depositary receipts. (One ADR equals 13 ordinary shares.) Hillhouse, which now owns 8.2% of the company, further disclosed that it has a representative on BeiGene’s board. It also stated that it had acquired the shares without “changing or influencing the control or management of [BeiGene].”
Ascribe Capital switched from a passive to an active stance as it disclosed holding 7,021,879 shares of the drill-rig environmental services provider, equal to a hefty 45% of the company’s stock. The position includes 1,611,920 shares acquired on Dec. 28 through the exercise of rights offered on Dec. 10 that allowed for the purchase of Nuverra’s stock for $9.61 per share. Nuverra reorganized and exited bankruptcy in October 2017, issuing new stock in the process. Ascribe was a pre–Chapter 11 investor and was granted 5,409,959 shares of the new stock to replace its canceled stake.
As a part of the restructuring plan, Ascribe was given the right to appoint a director at that time and another designee “at its discretion.” Ascribe has filled the two board seats.
Increases in Holdings
Liberty Braves (BATRA)
Gamco Investors (GBL) purchased 131,309 shares at prices ranging from $23.76 to $26.16, then sold 10,342 at $24.12 to $25.66 apiece. All of the transactions took place from Nov. 8, 2018, through Jan. 3. The net result lifted Gamco’s stake in the Braves holding company to 1,684,675 shares, or 16.5% of the tradable stock.
Safety, Income & Growth (SAFE)
iStar Financial has raised its position in the New York City–focused REIT to 7,647,317 shares, or 41.8% of the tradable stock. The larger position reflects purchases of 210,042 share from Oct. 26 through Dec. 31. They were done under a 10b5-1 trading plan, at per share prices ranging from $17.43 to $19.87.
In addition, on Jan. 2, 2019, iStar bought 12,500,000 newly issued limited partnership units (investor units) from a Safety, Income & Growth subsidiary for an undisclosed sum. Safety, Income & Growth is seeking shareholder approval to exchange those investor units for common shares of its own stock on a one-for-one basis.
China Biologic Products (CBPO)
Centurium Capital Partners bought 419,872 shares of the plasma-related biotech from Dec. 17 to Jan 7. Centurium acquired the stock at per share prices ranging from $72.85 to $76.76 and now owns 4,447,798 shares—11.3% of the outstanding ordinary stock.
Centurium utilized a 10b5-1 plan adopted on Dec. 14, 2018, to execute the purchases. The trading plan will terminate on June 15, 2019, or when Centurium has 1) invested in the lesser of $120 million in Safety shares, or 2) bought 1,875,000 ordinary shares under the plan.
Decreases in Holdings
Jack in the Box (JACK)
Jana Partners sold 279,486 shares of the casual-dining chain from Dec. 17, 2018, through Jan. 2,. That reduced its holding to 1,551,521 shares. The purchases were executed at prices ranging from $74.97 to $83.47 apiece and lowered Jana’s stake in the company to 6%.
Jana also noted that an earlier agreement with Jack in the Box had been amended, pushing the deadline for director nominations to March 15, 2019.
Turquoise Hill Resources (TRQ)
Sailingstone Capital Partners reduced its position in the global miner to 259,551,238 shares, leaving it with 12.9% of the outstanding stock. The diminished holding resulted from the sale of 21,728,253 shares at prices ranging from $1.45 to $1.91 each and the purchase of 1,619,200 at prices ranging from $1.59 to $1.64. All the transactions took place from Nov. 13, 2018, to Jan. 4.
Acorda Therapeutics (ACOR)
Scopia Capital Management revealed a smaller position in the biotechnology company of 5,360,828 shares, equal to 11.3% of the tradable stock. The lowered stake was the result of sales of 552,314 shares from Dec. 13 through Jan. 7, transacted at per share prices ranging from $13.24 to $16.97.
Ra Pharmaceuticals (RARX)
Morgenthaler Venture Partners and Lightstone Ventures jointly reported a reduced stake of 2,980,609 shares of the biotech firm. That equals 7.1% of the outstanding stock.
From Dec. 28, 2018, through Jan. 4, Morgenthaler sold 322,944 shares at prices that ranged from $18.29 to $21.78 each; Lightstone sold 163,036 shares, at $18.24 to $21.14 during the same span.
Lightstone was formed in 2012 as an offshoot of Morgenthaler. Each is a separate investor, but both share managers and other staff members. Hence, the crossover in ownership. This is their third disclosed divestment since the beginning of December, when they revealed a nearly 12% stake in the company.
The Activist Spotlight
Benchmark Electronics (BHE)
Business: electronic manufacturing services
Investor’s Avg Cost: $26.24/share
Stock Market Value: $994 million ($22.75/share)
What’s Happening: Engaged Capital received two board seats
5.1%: percentage of Benchmark common owned by Engaged
70%: Benchmark’s business in value-added manufacturing
4.7: the EV/Ebitda multiple at which Benchmark’s stock trades
$322 million: net cash on the company’s balance sheet
Behind the Scenes: This is presently an amicable situation, following a confrontation that took place more than two years ago. In 2016, Engaged ran a proxy fight in which two of its three nominees were elected to the board. Since then, Engaged has had a good relationship with management, which is now focused on what Engaged views as the right things—fixing capital allocation, improving investor relations, and aggressively buying back stock at the current valuation. Benchmark’s stock is trading around $2 above its tangible book value and at a low EV/Ebitda multiple, both of which are at the bottom end of its peer group.
One reason the company is trading at a depressed valuation may be that it is misunderstood by the market. It could be unfairly penalized because of its perceived exposure to China. In reality, it has only one facility there. Most of its factories are in Southeast Asia.
Benchmark has transitioned into a value-added manufacturer, now doing design and research and development for most of its clients, thus improving its margins. The company has the highest backlog in its history, which bodes well for the near future.
The 13D Activist Fund, a mutual fund run by an affiliate of the author and not connected to Barron’s, has no position in the securities mentioned here. In addition, the author publishes and sells 13D research reports, whose buyers may include rzepresentatives of participants in, and targets of, shareholder activism.