Activist investors shake up Peloton, Kohl's, Unilever

Yahoo Finance's Julie Hyman and Brian Sozzi discuss activist investor Blackwells calling for Peloton's CEO to step down, Kohl's receiving a $9 billion bid backed by Starboard Value Group, and activist investor Nelson Peltz buying stake in Unilever.

Video transcript

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JULIE HYMAN: We are just a few minutes until the opening bell here in the United States, and it looks like it's going to be an ugly one folks, so buckle up. We've got selling that is acute in Europe, we've got selling that is acute here in the US as evidenced by these futures that are heading lower.

The NASDAQ already down 12% this year. It looks like it is going to add to those declines this morning on continued heavy selling in technology, as we've been discussing, some trepidation about the Fed's next moves, and simmering tensions on the Russia/Ukraine border, so people not feeling great this morning.

We also have activists rearing their heads this morning as well. We've got a trio of companies that are being targeted by activists. Let's start with Peloton, Peloton down another 3.5% this morning. And a company called Blackwell's Capital, which reportedly has a stake of less than 5% in Peloton, is calling for the CEO and co-founder, John Foley, to step down. He wants Peloton to maybe put itself up for sale.

Brian Sozzi, you've been paying very close attention to this story, and looking through the statement from this new investor.

BRIAN SOZZI: Yeah, any time I cover an activist situation, Julia, I think you always get these letters from the activists. And I would grade this one by Jason Aintabi over at Blackwell's as level one. Level one being, has a personal sound to it, it's very aggressive, it's hard. It's really targeting the CEO and founder, John Foley. I mean, Aintabi even goes down, lists a host of concerns I should say, regarding the company.

He's saying that Peloton has misled investors, that the company didn't need additional capital just weeks before raising $1 billion in equity, questioning the company's approach to handling the safety issue regarding the Peloton treadmill several months ago. Aintabi even calling out the fact, and you know this has been well known, that John Foley's wife, Jill, is an executive inside the company, too.

So Aintabi really calling out the company for the stock prices down 83% over the past year, calling for the company to fire immediately John Foley, and then, secondarily, consider selling the company. Aintabi suggests that Disney, a Nike, and even Apple might be, would be potential suitors here for Peloton.

But this is an ugly situation, a Peloton spokeswoman declined to comment to me on this activist campaign. But I should note a source is telling me that this activist has amassed a little bit less than 5% stake in Peloton here.

JULIE HYMAN: Yeah, and as you pointed out in our morning meeting, it's interesting that an activist campaign here because the voting structure of Peloton is such that it might be difficult to get some of these changes done. Although one, obviously one, of the levers that an activist will pull is putting out a public letter as you say, and one that is rather pointed.

BRIAN SOZZI: Very pointed and really attacking the board here, suggesting that the board is not doing its fiduciary duty here and holding Foley to account, suggesting that the board is just trying to help save Foley's legacy. But this is going to come to a head, as we've learned with a lot of activist situations. The company being targeted could try to skirt the situation, they can not put out a press release. But rest assured, something is likely to happen here at Peloton, potentially very soon before the company reports earnings.

JULIE HYMAN: And by the way I was perusing the Board of Directors of the company this morning. In addition to Foley himself on the board, the President of the company, William Lynch, is on the Board of Directors, and there's a number of venture capitalists on the board as well. So for what it's worth, these are folks who are sort of inside that ecosystem. So we'll see if they are receptive to some of this criticism as well.

Another activist target this morning is Kohl's, and this is a little complicated because we're talking about a number of different activists and a number of different potential suitors for the company. So we've got various activists, including a company called Engine Capital. We have reportedly a bill, a bid, for Kohl's, from a company backed by Starboard Value, but not directly from Starboard Value, a company called Acacia, right, if I've got that right.

And then Bloomberg is reporting that Sycamore is interested in bidding for Kohl's, too. So there's a lot of different players in this one.

BRIAN SOZZI: A lot going on here, Julie, you are correct, and really coming after that strong activist letter from Jonathan Duskin over at Macellum. Now we talked to him last week on this transaction. He really blasted Kohl's again for just not doing anything since they originally targeted the company last year. Not overhauling the company, not spinning off real estate assets that he values of close to $8 billion, not selling off the online business or even exploring that.

Now with Starboard has put it forward reportedly here and a source tells me that this is a credible, legitimate offer that Starboard has put forward for Kohl's. $9 billion in the pre-market price here, and Kohl's suggests that something may get done about $8.8 billion market cap for Kohl's, given the pre-market move. Trading somewhat in line with that Starboard reported offer.

JULIE HYMAN: Yeah and sort of where that's trading versus a Peloton shows you where we are in the process for that, versus being at the very beginning of some kind of a process at Peloton.

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Well those folks on the podium are smiling this morning, but you may not be if you're watching your portfolio, and have been for this year-to-date. But, so, we were just hurting from, hearing from, Julian Emanuel, I mean, he's not pessimistic necessarily about the direction for stocks over the course of the year. And we've talked to a lot of other folks who feel similarly, right, that maybe we could see a lift in stocks by year end. It's just, it's feeling, it's feeling a little rocky here for the moment for investors who are long, particularly those who are long tech.

Just want to talk about our last of the trio of activist targets this morning, and then we'll get into a little bit of a deeper market discussion with Jared, but Unilever is the third of these. Here are the US shares of Unilever, which of course, is based in Europe, the share's up 6 and 1/2%. Nelson Peltz and his Tryon, building a stake in the company, and is pushing for changes.

Now Unilever's had some issues, right, the company bid for GlaxoSmithKline's consumer unit, then ended up abandoning that bid because it said it didn't want to raise the price more. But the stock has really been battered by that whole process, and that eventual abandonment of that, so it's not clear exactly what Peltz is going to be pushing for.

But saw some interesting commentary, Soz, from a Jefferies analyst this morning that said the fox would now appear to be inside the hen house. And said that Tryon will likely argue for splitting the food business from the household and personal care business. So we'll see how this plays out.

BRIAN SOZZI: If there are two activists you don't want knocking on your door at any time, if you are an executive management team that has shown a historical, a track record of under performance like a Unilever has, that is Carl Icahn, and then, secondarily, Nelson Peltz over at Tryon.

Now the stock price of Unilever, and I go into this more at length in the "Morning Brief" newsletter on the Yahoo Finance set now, the stock is up 32% in the past five years, versus a 93% return for the S&P 500. Proctor & Gamble, another target over that, by Peltz, a couple of years ago, P&G shares up 86%.

Now Peltz came in, I covered that situation, Peltz came in and really helped drive a lot of change and a new way of thinking for P&G. P&G restructured how it does business. And they have gone on to show really consistently strong profits ever since Peltz arrived at the company, as they just started better innovating inside the company, cut out a lot of layers of managerial fat, and they're just doing better business. So I think that Peltz might be looking to repeat his P&G playbook here at Unilever.

JULIE HYMAN: Yeah, and to put, emphasize a point you were making, may not be good news for the executives, but it could be good news for shareholders because of Peltz's track record here.