09/17/2020

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Trian Fund Management Takes a Stake in Comcast



Activist Alert

Trian Fund Management LP has made a big investment in Comcast Corp. (CMCSA), the cable-TV and entertainment giant. Comcast, which has a market value of roughly $200 billion, owns NBCUniversal, Xfinity, DreamWorks Animation, and numerous other brands.

Trian is an activist hedge fund famous for pushing the companies it targets to make large operational changes. Trian is betting that the entertainment conglomerate’s stock is undervalued and has bought about 20 million shares of Comcast for close to $900 million—equivalent to 0.4% of the company.

Comcast’s Businesses Have Seen Mixed Results Recently

Some of Comcast’s businesses have suffered during the COVID-19 pandemic and some have seen growth. Sky, the British media and telecommunications conglomerate which Comcast acquired for $38.8 billion about two years ago, saw its revenue drop 16% during the second quarter and its advertising revenue fall by 43%. NBCUniversal has also been battered by the COVID-19 pandemic, with revenue falling 25% due to theatrical releases being canceled, theme parks being closed, and advertising revenue sinking.

In contrast, Comcast’s broadband business has seen rapid growth as people work, study, and entertain themselves at home. The company expects to add about 500,000 new broadband customers during the third quarter.

Looking Ahead

Trian, which manages about $8.8 billion, has a reputation for pushing the companies it targets to become more efficient, often by selling or breaking up divisions that are not performing. It made large changes to the structure of companies like General Electric (GE) and Procter & Gamble (PG).

Investors are expecting that Trian will suggest big changes for Comcast as well, though it is hard to say what those changes will entail—especially at a time when the entertainment landscape is ever-changing. Activist hedge funds like Trian can have a lot of power over the way companies are organized. When an activist hedge fund becomes involved in a company, it’s important for other investors in the company to pay attention to decisions and recommendations from the fund, and how they may impact the company’s future.


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