Why doesn’t the PSE have high-profile activist investors like Bill Ackman in the US?

Great question! Let’s get everyone caught up before I give my take. 

> What is an activist investor?  What the reader is talking about here is the type of investor that accumulates a big chunk of a company’s outstanding shares (5-10%), with the goal of leveraging that position to obtain board seats and make reforms within that company to increase the value of the shares. In the US, these activist investors use media (socmed and traditional media) to whip up shareholder votes for the activist investor’s preferred slate of board candidates, in direct opposition to the current leadership and its proposed slate of candidates. Bill Ackman is a good contemporary example of this type of investor (though his recent socmed presence has descended into some culture war trash). A good historical example might be Carl Icahn. 

> Why do they work in the US?  The American markets have a better legal system that is configured (in some jurisdictions, and in some cases) to handle these types of issues more quickly and with greater certainty. American markets are also deeper, with greater transaction volumes layered on top of much larger public floats. 

> Why not on the PSE?  I don’t think there’s any one reason, but instead a jumble of structural and cultural conditions that make activist investing less attractive. The weight/importance of these reasons is debatable, but to me, the primary problem is the PSE’s anemic public floats. In the US, companies on the S&P 500 have substantially all of their shares in the public float. It’s not uncommon to see companies with public floats of 70% to 90%. Here, companies are usually family-owned, with floats that rarely get above 50%. The controlling shareholders dominate the board, oftentimes with family members or long-serving “soldiers” of the family holding seats and key committee positions. Volumes are low, so even if you or I decided that we wanted to acquire a huge chunk of shares, it’s very difficult to do this without driving up the price of the stock and drawing a great deal of attention to ourselves. Institutional investors, who in the US might back an activist investor to push for reform, are often drawn from those same family-owned conglomerates. Culturally, the Philippine business and finance sectors are generally averse to conflict. We are a high-context society that places a great deal of value on relationships and hierarchy.

  MB BOTTOM-LINE:  The closest thing we have to a Bill Ackman right now is probably Leandro Leviste. Instead of leveraging a pool of capital--like his American comparison might--he’s leveraging his political connections to find and monetize deals for himself and his family. I’m finding it very difficult to think of any other examples, but I’m not convinced that this is a bad thing. I mean, yes, I think the factors that I’ve speculated as contributing to the lack of activist investors are bad (low public floats, low volume, family-held conglomerates in control) for the PSE’s health, but I don’t think it’s automatically bad that we don’t have a cohort of brash investors weaponizing capital for selfish gain. It’s beyond my pay grade to know if we can have the former (high floats and high volume) without the latter (activist investors), but if we had to suffer a few goobers like Bill Ackman here locally, but it meant that we had a vibrant and deep market with tons of activity and lower family control, then that would be a tradeoff I’d be willing to accept.

Merkado Barkada is a free daily newsletter on the PSE, investing and business in the Philippines. You can subscribe to the newsletter or follow on Twitter to receive the full daily updates.