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ValueAct likely to be patient with the NYT, to a point

Aug 11, 2022

The New York Times building, New York City. Getty Images.

If you're a CEO and an activist investor announces a 7% stake in your company, the usual response is, buckle up. And dust off your resume. But for Meredith Levien, the Times' CEO, there's a bit of comfort in ValueAct's arrival in the stock. For now.

Why it matters: San Francisco-based ValueAct is one of the oldest and well-known activist investors in the business. When the fund puts money into a company, changes usually occur, sometimes subtle, sometimes drastic.

Driving the news: Media reports say ValueAct wants the Times to push for subscriber-only bundles.

Of note: ValueAct has built a reputation of working (mostly) patiently behind the scenes with companies, barring a few exceptions. Unlike other activist funds, ValueAct hasn't relished a proxy fight, and hasn't sought to embarrass a CEO, board, or management team in public.

  • Their more West Coast style of activism has focused more on operational changes, and incremental strategic moves over the stereotypical activist that says sell the company, fire the CEO, toss out the board.
  • Behind the scenes though, ValueAct has been known to be very savvy and convincing with a company's institutional investors. Forging relationships with active managers such as Capital Group and T. Rowe Price and gaining their support of ValueAct's thesis. The more other investors join a pressure campaign, the harder it is for management to resist.

Flashback: Microsoft's Steve Ballmer stepped down as CEO in 2013 after ValueAct bought a stake and pushed the company for changes. A week after Ballmer left, ValueAct got a board seat.

  • A few other CEO changes have followed a ValueAct stake. Whether any of the changes had a direct connection to the fund is hard to prove.
  • ValueAct is a generalist, and investments include Citigroup, CBRE, and Seagate. It has some media chops too.

Context: ValueAct owned a stake in 21st Century Fox before its sale to Disney, and the fund's founder, Jeffrey Ubben, sat on the company's board. Ubben has since handed the reins to Mason Morfit. The NYT is the fund's largest current media stake, according to its 13-F.

The bottom line: The bundling case that ValueAct makes in its letter seems like a reasonable thesis, and one the fund surely has spent a lot of time and resources to research and model.

  • The NYT stake has all the makings of a friendly, fruitful investor engagement.
  • Should the NYT decide to not play ball, though, it could turn into a brawl by October.
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