“As professors who write about shareholder activism, we’d thought we’d seen an opportunity to mimic the big activists, such as Bill Ackman and Carl Icahn, who agitate to improve the transparency and performance of much larger companies,” Frank Partnoy of the University of San Diego, who previously worked in derivatives at Morgan Stanley, and Steven Davidoff Solomon of UC Berkeley, a former corporate attorney, write in The Atlantic. Together, they decided to climb down from their “ivory tower”, and invest their retirement savings in “actually being activists”. After all, “how hard can it be”?
So the pair built up a half-million-dollar stake in Tejon Ranch, a firm that owns the largest continuous expanse of private land in California, and “seemed like a perfect target”. Over ten years, the stock had fallen by almost 50%, while its revenue in 2014 was $52m – “minuscule for a public company”. Profits were just $5.7m, while “the managers were feasting”. Gregory Bielli, the chief executive, made $2.7m that year. Partnoy and Solomon met with Bielli in 2015, and pushed for more disclosure about its finances and plans to develop the land. “We told Bielli we thought that Tejon Ranch shares were massively undervalued.”
Progress was scant. Partnoy and Solomon considered writing a “poison pen” letter – a well-worn tactic that sets out to publicly embarrass the management – but decided against it. Instead, at the barely attended shareholder meeting, “[we] poured our hearts out” about the falling share price (the pair were nursing paper losses of $100,000 at one point), “sluggish development” and “inadequate disclosures”.
But it was Donald Trump’s election victory that saved their investment, as investors became more bullish on real estate. The pair cashed out for a $55,000 gain. “From our perspective, corporate America is now too well guarded,” say Partnoy and Solomon. Management tends to hire lawyers to deter shareholder activism. Apathy is also a problem. “There are too few, rather than too many, of us activists out there banging at the gate.”