Activist Investors Spark Change at Soho House, Third Harmonic Bio, and Beyond

The world of finance is abuzz with news of activist investors making waves in the stock market, with notable players like Dan Loeb and Ron Burkle taking center stage. Their actions have sparked significant changes at companies such as Soho House and Third Harmonic Bio, and investors are eager to see what other stocks will be targeted in the coming proxy season.



Activist investors, such as those from hedge funds like Third Point and Yucaipa Companies, play a crucial role in the stock market by pushing for changes in targeted companies to enhance shareholder value. They often take large stakes in these companies and engage with management to advocate for strategic shifts, such as asset sales, spin-offs, or operational improvements. This approach can lead to significant changes and improved shareholder value but may also create uncertainty and volatility in the short term.

One such example is the ongoing battle between Dan Loeb and Ron Burkle over the future of Soho House. Loeb, through his hedge fund Third Point, has challenged Burkle's proposed $1.7 billion take-private plan for the company, citing potential conflicts of interest and a lack of transparency in the deal. Burkle, on the other hand, aims to take the company private to alleviate financial pressures and maintain exclusivity amid rapid expansion. The outcome of this deal could significantly impact Soho House's members, employees, and overall market positioning.



Another notable example is Third Harmonic Bio's successful IPO, which raised $1.85 billion at a higher price than initially planned. This IPO comes amidst challenging market conditions for biotechnology companies and could help restore investor confidence in the sector. Third Harmonic Bio's lead product candidate, THB335, is expected to enter clinical trials during the second quarter of 2024, targeting chronic inducible urticaria, a dermatologic disease driven by mast cell activation.

The regulatory landscape is also shifting, with the Universal Proxy rule taking effect in the fall of 2022. This rule allows shareholders to vote for a single slate of directors, rather than having to vote for each director individually. This change is likely to make it easier for activists to gain board seats and influence corporate decisions. As a result, companies with slower trailing sales growth, lower trailing EV/sales multiple, weaker trailing net margin, and trailing 2-year underperformance are more likely to be targeted by activist investors. These companies may be seen as having underperformed relative to their peers and thus ripe for activist intervention.