In a column published on August 3 in The worldProfessor Jean-Philippe Denis analyzed the attacks carried out by activist funds on listed companies, rightly emphasizing that they proceeded from a “new phase of capitalism”. However, the case of Casino put forward presents singularities which it is useful to underline to fuel the necessary debate on these evolutions.
First of all, the activist funds referred to in the article are in fact “seller” funds. Their strategy, their method of financing and the influence they exert on the valuation and governance of the targets are radically different from activist funds in the traditional sense of the term, so much so that the use of the same term “activist” is misleading. The latter invest capital in companies, take significant minority positions (around 2% to 10%) and build coalitions to impose decisions on managers. They can even obtain the departure of the business manager, as in the case of Danone, in 2021. The battles are sometimes violent, but the rules exist and continue to evolve, particularly in terms of transparency on the crossing of control thresholds . Also, if the effects on stakeholders and society remain largely to be studied, academic studies confirm that the other minority shareholders are winners.
Liability of directors
The vendor activism the article refers to is different. He bets on the collapse of the value of the capital or the debt of a listed company. The actors are different too. As Jean-Philippe Denis also mentions, one of the targets of these sellers is none other than Carl Icahn himself, the father of activist funds, the inspiration for the character of Gordon Gekko in the film Wall Street (1987), by Oliver Stone. In the case of the selling funds maneuvering in the Casino case, provided the fund has acquired a sufficient reputation and knows how to communicate, the self-fulfilling nature of the attack is possible. But, in this case, these funds are not the cause of the fall of the Casino group.
First of all, the sales activist’s report highlighting the fragilities and conflicts of interest of the Casino galaxy dates from 2015. What must be questioned is why the fall came so late. Present in a very competitive market with low margins, Casino’s economic profitability has been lower than its cost of capital for ten years, its turnover is falling, it generates negative cash flows and its debt ratios are deteriorating.
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