Media giant Comcast gains 3% after Trian confirmed the participation of activists.


The Trian management confirmed a participation in the media giant Comcast.
Both sides are in talks.
It is unlikely that an activist campaign will be successful.

The shares of Comcast Corporation (NASDAQ: CMCSA) rose by more than 3% on Tuesday after the well-known activist investor Trian Fund Management bought a relatively small stake in the media giant, the Wall Street Journal reported on Monday evening.

Undervalued thesis

Trian recently purchased $900 million worth of Comcast shares, giving Trian an approximately 0.4% stake in the parent company of NBC, Telemundo, CNBC, USA Network, Universal Pictures and many other media companies. A Trian spokesperson confirmed to the WSJ that talks between Trian and Comcast management have recently begun.

As an activist investor, Trian has a reputation for acquiring stakes in companies that are in difficulty and need a turnaround strategy. Most notably, Trian has acquired a $3 billion stake in consumer goods giant Procter & Gamble and has been pushing to change its complex and overly global structure.

Fight of the activists on the mountain

The continuing assumption is that Trian believes Comcast shares are undervalued, commented CNBC’s David Faber on the deal. Comcast consists of both a broadband business and an entertainment business. Compared to competing broadband company Charter and competing entertainment company Disney, Comcast’s shares are trading at a discounted multiple.

An activist campaign against Comcast, aimed at pushing through major changes at the management level, is a tough battle. On the other side of the table is Chairman and CEO Brian Roberts, a major shareholder who owns 33% of the company. His leadership rewarded investors with a relatively good return on investment until the COVID 19 pandemic. The stock has risen nearly 400% over a 10-year period.

Roberts is a “very aggressive” CEO who is playing the long-term game by building the company through convincing takeovers, Faber noted. It is also unlikely that the CEO will give in to potential demands from Trian to split the company into two units so that the market can allocate a higher multiple to each unit.

But Trian and Roberts can certainly see eye-to-eye when developing strategies to emphasize to the investment community that the stock is undervalued.

“But does it really make a difference,” Faber asked. “That much is very difficult to imagine.

Cramer: Trian should not take action against Comcast

Trian has done a great job in previous campaigns, but it’s just a mistake for the company to target companies that could create long-term value, Jim Cramer of CNBC told Faber.

Cramer also noted that Comcast’s problems could only be short-term, especially a struggling amusement park business in the midst of a global pandemic. If the amusement parks were running at normal levels, Comcast’s stock would probably be about $10 higher at $55 per share.


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