Activist Investor Efforts Increasingly Lower Credit Ratings

Truman Slate

Here’s yet another cause for finance chiefs to be wary of shareholder activist strategies: increasingly, they lead to downgrades or other destructive credit score ranking actions, particularly for organizations with already weak credit score rankings.

To be distinct, most activist strategies do not lead to adjustments in credit score rankings, credit score outlooks, or the inserting of the corporation on “credit look at.” But in accordance to a report unveiled by S&P World Rankings on Wednesday, when strategies do lead to rankings actions, the bulk of the time individuals actions are destructive. Twenty-just one of the 26 ranking actions induced by trader strategies in 2020 were being destructive, up from only seven five a long time back.

Activists qualified mainly investment-grade organizations in 2020. But organizations in the “BBB” ranking groups, the tiers just higher than “junk,” saw the greatest variety of ranking actions and downgrades.

Shareholder activist M&A or

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