Ruling in CSX Battle Has Changed Activist Tactics

on director nominees proposed by two activist hedge funds, the landscape for these battles has changed drastically. A recent decision by a federal district court found that the method that the two funds used to build up their stake in the railroad operator violated regulatory disclosure laws. That has nearly closed a loophole for hedge funds to ambush companies, The New York Post reported. Notable investors like Nelson Peltz and William Ackman have scaled back their use of the method — which involves using cash-settled equity swaps, giving the buyers of these derivatives the economic exposure of the equivalent amount of stock. In a note to clients last week, according to The New York Post, law firm Olshan Grundman Frome Rosenzweig & Wolosky said the ruling could have “potentially far-reaching ramifications regarding the use... [read full story]