| Shareholder activism

Key takeaways from PDC Energy & Medley Capital’s proxy campaign outcome

by | Sep 22, 2019

I. Kimmeridge failed to win the proxy fight at PDC Energy, citing failure to garner support from passive investors

In March 2019, Kimmeridge, a NY-based private equity firm, launched a proxy campaign at PDC Energy. Kimmeridge lost its proxy fight with the incumbent directors.

 Nominee 1Nominee 2Nominee 3
Company Nominee36,748,33736,738,09936,125,703
Activist nominees25,768,17025,522,09312,016,352

For two seats, the fund was short by 10.9-11.2 million votes.

As per Kimmeridge, even though over 70% of active managers voted in favor of the Kimmeridge slate, approximately 80% of passive managers supported the existing PDC management team.

You can easily note that a handful of passive funds own roughly 50% of the o/s shares.

Key takeaway –

It is very challenging to win a proxy campaign if that majority of shareholders are passive investors.

II. NexPoint Advisors failed to win the proxy fight at Medley Capital Corporation due to poor institutional ownership and a huge insider ownership.

In May 2019, NexPoint Advisors nominated two candidates for election to the board at the 2019 AGM. At the AGM, held on June 4, 2019, shareholders elected the company’s nominees to the board.

From the table below, it is clear that the NexPoint nominee secured significant “non-affiliate” votes, i.e. votes excluding insiders and NexPoint.

Possible reasons for NexPoint Advisors’ failure

a) Except for insiders, there are no shareholders who own 5% or more.

b) Only eight institutional shareholders own a stake of 1% or more of the company. These eight shareholders, as a group, hold a stake of just 18% of the company.

c) Poor shareholder participation: only 73% of the total outstanding shares voted at the election. This could be due to the fact that retail investors own the majority of the stock.

d) NexPoint’s small holding – the fund owns a meagre 0.6%.

e) Huge insider ownership – the company’s insiders, as a group, own roughly 18%.

Key takeaway – poor institutional ownership and a huge insider ownership is a hurdle.


Number of shares voted (1) 39,739,814
minus insiders (2) 9,844,410
minus NexPoint Advisors’ ownership (3) 335,100
= Non-affiliated shareholders (1 minus 2 minus 3) 29,560,304
I. Total number of votes received by NexPoint Advisors 15,627,844
NexPoint Advisors’ ownership 335,100
Number of votes received by NexPoint Advisors from “other shareholders” 15,292,744
% of votes received from shareholders, excluding insiders and NexPoint Advisors 52%
II. Arthur S. Ainsberg, an incumbent director, who received the highest number of votes 21,733,188
Number of votes received from shareholders (excluding insiders) 11,888,778
% of votes received from “Non-affiliated shareholders” 40%




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