Sosin Partners has made an activist move on one of the few positions it holds.
The hedge fund headed by Clifford Sosin disclosed in a regulatory filing on Friday that it had converted its investment in Cardlytics from a passive 13G filing to a 13D filing, a move that indicates possible activist or hostile intentions.
The firm did not change its position of a little more than 5.4 million shares.
In the new filing made by CAS Investment Partners, which manages the hedge fund, Sosin asserted that it admires and is supportive of chief executive officer Karim Temsamani and believes that “his business expertise and history of building growth-oriented technology businesses will enable him to execute on much needed change” at the company.
Sosin added that it intends to communicate with Cardlytics’ board of directors and management “regarding opportunities to enhance stockholder value,” including the improvement of operating performance, capital allocation matters, and the composition of the board.
Cardlytics teams up with banks and other financial institutions to track consumer spending, then offers marketers opportunities to target potential customers. The company lost a key customer last year and warned of an unexpected slowdown in business in the fourth quarter.
The stock plunged about 91 percent in 2022. After losing 4 percent on Friday, which reduced the company’s market capitalization to under $200 million, Cardlytics is exactly flat for 2023, although the stock is down 35 percent since early February.
In early May, Temsamani said on an earnings call with investors that first-quarter results “exceeded external expectations.”
Cardlytics, which is one of just five stocks that Sosin currently owns, accounts for roughly 7 percent of the firm’s capital. At year-end 2021, it accounted for nearly 18 percent of the fund’s U.S. common stock assets.
In the latest filing, Sosin said that it didn’t have a plan or proposal. But it did say that it intends to review its investment in Cardlytics on a continuing basis and may “in the future take [actions] as they deem appropriate,” which includes holding discussions with other Cardlytics stockholders or other third parties, “including potential business combinations or dispositions” or certain of its businesses, making recommendations or proposals concerning changes to the capitalization, ownership structure, board structure, including board composition, potential business combinations or dispositions involving the company or certain of its businesses, or suggestions for improving the company’s financial and/or operational performance, among other matters.
Sosin Partners was a high-flier several years ago, posting gains of 64.5 percent in 2019 and 96.5 percent in 2020. But after slipping to just a 3.9 percent gain in 2021, the firm’s fortunes took a dive, dropping 77 percent in 2022.
Through May of this year, however, the firm was up 29 percent.
Sosin typically owns just six stocks, but it reduced the count to five in the first quarter of 2023 after liquidating a small position in retailer Party City Holdco.
Sosin’s largest long is timeshare giant Hilton Grand Vacations, which accounted for nearly two-thirds of the firm’s assets at the end of the first quarter. The stock is up more than 15 percent this year, after losing roughly 26 percent in 2022.
Used car retailer Carvana, which accounts for more than 13 percent of Sosin’s U.S. long assets and is the firm’s second-largest long, is up more than 450 percent this year, despite dropping more than 16 percent on Friday.
