Activist investor Elliott Investment Management has just taken a major stake in a company called Bio-Rad Laboratories, signaling that big changes could be on the horizon.
So, why Bio-Rad, and why now? It's a classic setup for an activist. Bio-Rad's stock price has fallen dramatically, down nearly 70% from its all-time high in 2021. To make matters worse, the company recently lowered its financial forecast for the year, frustrating many investors. This combination of a low stock price and shaky confidence creates the perfect opportunity for a firm like Elliott to step in and push for a turnaround.
Elliott's playbook here likely has three main chapters. First is capital allocation. Bio-Rad is currently trading at a valuation well below its historical average and its peers. Think of it like a house that's priced much lower than its neighbors and its own past sale prices. Elliott will probably point to this and argue that the company should use its cash to buy back its own shares, which supports the stock price and signals confidence in its own value.
Second, Elliott will likely focus on Bio-Rad's large ownership stake in a German company called Sartorius AG. While this investment is valuable, its fluctuating market price causes Bio-Rad's official profits (its GAAP earnings) to swing wildly up and down each quarter. This 'noise' can confuse investors about the core business's health. Elliott often pushes companies to reduce this kind of volatility, perhaps by hedging the investment or selling a portion of it, to make the financial results clearer and more predictable.
Finally, there's the issue of governance. Bio-Rad has a dual-class share structure, which gives the founding Schwartz family special voting power and effective control over the company. This makes a full sale of the company very unlikely. Knowing this, Elliott will probably not push for a sale. Instead, they'll focus on what's achievable: pushing for new, independent directors on the board, setting clear operational targets, and demanding a better strategy for the Sartorius stake and capital returns.
In short, Elliott's move on Bio-Rad is a textbook activist campaign. They've identified an undervalued company with clear issues that can be addressed to unlock value for all shareholders, even without a change in control.
- Glossary
- Activist Investor: An individual or group that buys a significant minority stake in a public company to influence how it is managed.
- Dual-class share structure: A stock structure where a company issues different classes of shares with different voting rights, often used to keep control within a founding family or management group.
- Valuation: The analytical process of determining the current worth of an asset or a company.