ValueAct Capital’s Jeff Ubben is turning up the heat on Moody’s.
Ubben disclosed in a regulatory filing Wednesday, after the stock market closed, that he has raised his stake in the debt rating agency’s common stock to 6.1 percent. In a 13-D filing, Ubben said he acquired the shares “for investment purposes,” but added he may engage in discussions with management or directors, other shareholders, industry analysts, existing or potential strategic partners or competitors, investment and financing professionals, sources of credit and other investors.
This should not come as any surprise to people who follow the San Francisco-based activist.
At the end of the first quarter, Ubben owned a little less than 4 percent of Moody’s shares. Moody’s was also one of just 14 stocks held by Ubben and one of two stocks that the activist said had recently “graduated” to his core portfolio, along with Motorola Solutions.
He ramped up his stake in Moody’s between mid-June and mid-July, buying most of his shares between roughly $35.50 and $38 a share. The stock closed Wednesday at $36.48, down from its 52-week high of $41.93.
The rating agency — along with McGraw Hill’s Standard & Poor’s — has been criticized for failing to warn about the impending mortgage and financial crisis back in 2008.
The Wall Street Journal reported in June that the Securities and Exchange Commission is investigating Moody’s and Standard & Poor’s related to the sales and marketing of mortgage-bond deals of several financial services firms.
In recent weeks Moody’s has shown some uncharacteristic feistiness, warning about a possible downgrade of U.S. Treasuries as well as the debt of five states.
Meanwhile, on Wednesday Ubben also raised his stake in Motorola Solutions to 7 percent from 5.9 percent, buying most of his latest shares in the mid-40s.
Remember, Motorola Solutions continues to be one of the largest holdings of Carl Icahn and one of Icahn’s key people — Vincent Intrieri — sits on the company’s board of directors.
The two activists have also had a number of phone conversations regarding Motorola, according to sources.
Ubben’s style is to work with management behind the scenes and negotiate seats on the board. But don’t misunderstand. He then could become pretty persuasive.
Since 2001, ValueAct has made at least 60 ‘core’ investments. During that time its partners or other key people have sat on 27 Boards of Directors and helped to sell 18 businesses.
According to an analysis made by FactSet SharkWatch, two years after Ubben was named a director, the stocks of those companies were up, on average, 9.69 percent compared with a loss of 3.77 percent for the S&P 500, for an outperformance of nearly 14 percentage points.
