Is Farallon Capital Management becoming an activist investor? At first glance it sure seems like it.
In the past few months, the San Francisco–based hedge fund firm has filed initial 13D disclosures or amended forms on three different companies and also has reported that it has secured positions on the boards of directors of all of the companies. On further examination, however, the three situations do not appear to be connected with one another and thus do not indicate that Farallon is ramping up its activism strategy.
Most recently, on March 25, Farallon disclosed that two of its nominees were named to the board of directors of Town Sports International Holdings, an operator of fitness clubs. Farallon has a 16.7 percent stake in Town Sports, making it the company’s largest shareholder. The nominees include Jason Fish, a former managing member of Farallon who left the firm more than ten years ago.
Using 13D boilerplate, Farallon says in its filing that it may engage with the company about operations, capital structure or some other initiative, but does not have a specific plan for the company at this point. Pretty standard stuff. Keep in mind that Farallon has had a position in the stock for 15 years or so.
Town Sports, which has a $164 million market capitalization, says in a press release that it invited Farallon’s two nominees onto the board in conjunction with its settlement with two investors — New York–based hedge fund firm HG Vora Capital Management and Chicago-based investment firm PW Partners Atlas Funds, who collectively own 26 percent of the stock and had threatened a proxy fight.
On February 20, Farallon filed an initial 13D indicating that it owned 27 percent of Nexvet Biopharma, a small, loss-plagued, clinical-stage biopharmaceutical company that is developing drugs for animals. The company, which went public on February 10, has a market cap of just $43 million, based on its share float.
Several Farallon special-purpose vehicles had acquired shares of Nexvet Biopharma when the company was privately held and had their preferred stock converted to equity at the IPO. The SPVs bought another 700,000 shares at the IPO. The 27 percent stake includes warrants in the company. The SPVs make investments for their own accounts, according to a regulatory filing.
In addition, the filing states that Rajiv A. Patel, one of Farallon’s reporting individuals in the filing, is a nonexecutive member of Nexvet’s board of directors.
The third recent development involves Farallon’s 10.9 percent stake in Hudson Pacific Properties, a Los Angeles–based real estate investment trust, making Farallon the largest shareholder of the $2.15 billion market-cap company. Farallon has had a position in the stock since 2010.
One of Hudson Pacific’s directors is Richard B. Fried, who has sat on the board since the company’s 2010 IPO. Fried is a managing member and co-head of the real estate group at Farallon. In March the company indicated in a shelf registration that Farallon registered to sell its entire stake in the company.
Farallon was founded in 1986 by Thomas Steyer. In 2012, Steyer sold his stake to Andrew Spokes, who now heads up the firm.
At the beginning of 2014, Farallon had $19.8 billion under management, ranking No. 21 on Alpha’s annual Hedge Fund 100 survey. Last year one of its funds was up 6.1 percent, according to an investor.
