Seth Klarman is not known for high-profile activist campaigns confronting underperforming management. The manager of Baupost Group has built his formidable track record finding undervalued stocks and quietly building positions as a long-term investor.
That’s why Baupost’s recent 13D filing targeting Viasat, Inc. (Nasdaq:VSAT) is interesting. Prior to the October 4 disclosure, since 2009 Baupost had filed only six 13Ds – SEC filings which disclose activist intentions. How would investors have fared if they followed Klarman into these newly disclosed activist positions? The answer is, pretty well. Buying when Baupost filed an initial 13D, and selling when the fund reported reducing its position by at least 25%, or after 2 years, would have produced an average annualized return of 145.2%, with only one losing position.
|Company||Symbol||Event Date||Filing Date||Source||Reported Shares||% Change in Shares||Price||% Gain||Annualized % Return|
|Facet Biotech||FACT||2009-04-08||2009-04-08||SC 13D||4,374,407||8.74|
|Brietburn Energy||BBEPQ||2009-04-27||2009-04-30||SC 13D||8,495,939||6.34|
|Idenix Pharma||IDEX||2013-11-01||2013-11-01||SC 13D||36,910,868||4.62|
|Keryx Biopharma||KERX||2015-10-14||2015-10-20||SC 13D||42,016,276||4.60|
|Biotie Therapies||BITI||2016-01-19||2016-01-20||SC 13D||172,711,112||24.67|
|Orexigen Therapeutics||OREX||2016-03-15||2016-03-24||SC 13D||2,726,840||5.50|
Prior to the recent activist 13D, Viasat was Baupost’s fifth largest position – 13.7 million shares, representing 7.59% of the fund’s portfolio. Baupost’s initial passive 13G filing was back on November 9, 2009, when the fund disclosed a 4.6 million share position representing 14.72% of VSAT shares. Since then, Klarman has never reduced the fund’s position, and has steadily increased VSAT holdings to the point it now holds 23.06% of the company’s shares. VSAT is up 113% since Baupost’s initial 13G. That’s compared to the S&P 500’s total return of 216% over the same period. So, while Klarman has been a loyal investor, VSAT has underperformed.
Viasat Inc. provides advanced broadband digital satellite communications and other wireless networking and signal processing equipment and services. The company targets clients in government and commercial markets. VSAT recently hit a one-year low of $59.52 on August 10 after reporting a first quarter 2019 loss of $0.30 on revenues of $439 million.
Why Klarman’s sudden change from passive investor to activist?
In an October 3 press release, Viasat announced it “has invited The Baupost Group, L.L.C. to participate in meetings of Viasat’s Board of Directors in a non-voting observer capacity. Baupost has a successful long-term philosophy of value investing. Inviting Baupost to participate as a Board observer provides us with an opportunity to capitalize on their strategic insight, as well as their valuable financial and investment expertise.”
In the same press release, Greg Ciongoli, a Partner with the Baupost Group says: “As a decade-long investor in Viasat, we remain excited about the Company’s growth potential in both its defense and commercial businesses. We appreciate this opportunity to contribute to boardroom discussions.” Baupost’s 13D was filed immediately after the press release.
Baupost’s 13D filing immediately followed Viasat’s press release.
While the language in the press release is civil compared most activist campaigns — where activist investors rant about management incompetence and management assails the activists’ predatory actions – we can assume that VSAT is trying Klarman’s patience. We might further assume that a legendary investor (who happens to have half a billion dollars invested in VSAT) sitting-in at the next meeting will put pressure on Viasat management to get the share price up.
Source: Interactive Brokers and WhaleWisdom.com
Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the article.