Rectifier Update

International Rectifier has set the date for its annual meeting.

I last wrote about IRF in September. Since that time, the price of the stock has dropped steadily, from the neighborhood of $20 to that of $12.

Yes, everybody else has been dropping during that priod, too, but not as severely. If we round out the period in which we're interested to an even three months, the math is easier (or, tobe frank, the Nasdaq site will do the work for me).

IRF has lost 44.9% of its value over three months. The Nasdaq 100 has lost 31.4% of its value. The DJIA has suffered comparatively little, -22.5%.

Anyway, the IRF has set the date: January 9, in Los Angeles, California.

I had thought, in September, that there would be a challenge slate. But it now appears that the challenge didn't materialize, that the two members of the board up for re-election are running unopposed.

On the other hand (the "good news" for fans of conflict), it does appear that the meeting will consider a proposal to de-classify the board.

Target and the proposed REIT

Target's shares (NYSE: TGT) fell 6% on Thursday, AFTER bill Ackman announced his plan to enhance the value of Target's equity through a REIT spinoff.

It seemed safe to conclude the market doesn't like his plan. But then, the stock gained most of that value back on Friday. So one might have to re-think this.

I'll attaching a stock chart for last week. Target's price moves are the blue line, compared here to those of the DJIA, in yellow.

Target seems to have risen Tuesday and Wednesday. The DJIA too was rising Tuesday, but was flat on Wednesday. We can infer, I think, that traders were "buying on the rumor" as the old adage has it. They were buying on the expectation that Ackman would present a plan, even without knowing what the plan was.

What's the other half of that aage? "Buy on the rumor, sell on the fact." My own best guess is that when Ackman publicly announced his plan, whatever it was, there was bound to be some decline.

then on Friday, with the twin requirements of that adage satisfied, did the market finally express its considered opinion of the plan? If so, the plan is good, but not a Wowser! kind of good. The price rose Friday, but so did the DJIA as a whole, and the Target rise was only slightly greater than the Dow's.

I'm in a lazy Sunday kind of mood so I've let the market do my thinking for me. Here's a link to those ho want to read some less lazy blogging on this issue.

Orient Express and its shareholders

I reported last week in this place that two hedge fund shareholders in Orient-Express Hotels Ltd. had offered a proposal to dismantle the dual-class shareholding system in play there.

OEH held its shareholder meeting Friday. Based on the preliminary results reported by the independent inspector, 70% of shareholders supported that proposal.

But of course the vote is of psychological rather than managerial experience. A scheme devised to effectively disenfranchise class A shareholders can't be effectively dismantled by the vote of the class A shareholders!

In a statement yesterday, the principals of the two hedge funds demanded a meeting with the OEH board. They also said: "We continue to believe that the Company’s circular ownership and voting structure – in which an entrenched Board controls 80% of the shareholder vote and remains accountable only to itself – is unlawful."

The company's response is that the board and its management "consider the matter addressed by the Special General Meeting to be closed, and [they] will continue to focus on delivering shareholder returns and managing the business in the best interests of all [their] shareholders."

Nothing very revealing has happened in terms of the stock chart in the two business days since the meeting. The price of a share of OEH gained some ground Monday and lost that ground again Tuesday.

I wouldn't want to get on a goo-goo high horse here, and I've offered the usual caveats in some of my earlier posts. But OEH's structure does seem uniquely unresponsive, and I wonder how long the market will support that. Presumably, the recourse of class A shareholders unhappy with the situation is to sell. If OEH wants to support its stock price, it should concern itself with the archaic nature of this arrangement.

The Orient Express

Yes, the hotel management company, Orient-Express Hotels Ltd., is the company that operates the famous tourist train, the Venice Simplon Orient Express.

More germane to my concerns in this blog, though, the company has an annual meeting scheduled for Friday, Oct. 10.

Two hedge fund shareholders, DE Shaw and CR Intrinsic Investors, have offered a proposal that would dismantle the dual-class structure of the company.

RiskMetrics, known until recently as ISS, has supported that proposal. Its report on this particular dispute reads in relevant part: "Irrespective of whether the current structure would be deemed legal or not, the proponents have made a strong case with regards to how the elimination of Class B shares would benefit the company in terms of good governance, which may in turn have a positive effect on the firm's value. The company, on the other hand, has not sufficiently justified how the current share structure benefits Class A shareholders."

Glass Lewis, on the other hand, supports management. Its report: "We suspect that most shareholders both understand and accept the nature and extent of Orient-Express Holdings 1 Ltd's control over the Company and the composition of its Board, particularly since this structure has been in place for a considerable period of time."

The company trades on the NYSE with the ticker symbol OEH. Its value is now at only one-third what it was a year ago.

Yes, everybody has had a bad year. But not that bad. The Dow Jones Industrial Average, for example, is at about 75% of where it was a year ago.

Yet the tourist industry is notoriously fickle, since it represents the first item many families cut when they start worrying about jobs, security, etc.

The question for shareholders asked to choose sides is: does the corporate governance issue that the activists have raised spill into performance, and thus into stock price? If not, why should I care about the abstract rightness of a dual stock structure?