Company: CoStar Group Inc (CSGP)

Business: CoStar Group engages in the provision of online real estate marketplaces, information, and analytics in the commercial and residential property markets. It operates through the following segments: CoStar Portfolio, Information Services Portfolio, Multifamily Portfolio, LoopNet Portfolio and Other Marketplaces Portfolio. The CoStar Portfolio segment consists of two classes of trade receivables based on geographical location: North America and International. The Information Services Portfolio segment includes four classes of trade receivables: CoStar Real Estate Manager; Hospitality, North America; Hospitality, International; and other Information Services. The Multifamily Portfolio, LoopNet Portfolio and Other Marketplaces Portfolio segments focus on one class of trade receivables. The company was founded by Andrew Florance and Michael Klein in 1987 and is headquartered in Arlington, Va.

Stock Market Value: $26.07B ($61.50 per share)

Ownership: 0.71%

Average Cost: n/a

Activist Commentary: Third Point is a multi-strategy hedge fund founded by Dan Loeb, that will selectively take activist positions. Loeb is one of the true pioneers in the field of shareholder activism and one of a handful of activists who shaped what has become modern-day shareholder activism. He invented the poison pen letter in a time when it was often necessary. As times have changed, he has transitioned from the poison pen to the power of the argument. Third Point has amicably gotten board representation at companies like Baxter and Disney, but the firm will not hesitate to launch a proxy fight if it is being ignored.

What’s happening

On Jan. 27, Third Point sent a letter to the CoStar board calling on them to (i) replace a majority of the board and align management compensation to total shareholder return; (ii) consider strategic alternatives for Homes.com and related residential real estate (RRE) businesses; and (iii) refocus on the core commercial real estate (CRE) business. Third Point was previously bound by standstill restrictions following a settlement for board seats last year, which expired on Jan. 27. The firm now plans to nominate a new slate of directors.

Behind the scenes

CoStar Group (CSGP) is a provider of online real estate marketplaces, information, and analytics in the property market. It manages major brands including CoStar Suite, LoopNet, Apartments.com and Homes.com. Approximately 95% of the company’s revenue is derived from its core commercial real estate (“CRE”) franchises, which largely consists of CoStar Suite and Apartments.com. These businesses benefit from high barriers to entry, strong pricing power, proprietary data and subscription-based business models that drive recurring revenue and highly predictable free cash flow. Because of these dynamics, this business has historically traded at a premium to its Information Services peers but is now trading in line with them.

This regression in the company’s valuation…

Activist investor Barington Capital Group is calling for Victoria’s Secret to restructure its board of directors and scrap its recently adopted shareholder rights plan. 

James Mitarotonda, the CEO of the New York-based hedge fund, which owns more than 1% of the company’s outstanding common stock, told Victoria’s Secret Chair Donna James in a letter Monday that it has failed to realize its potential since its separation from its parent company, L Brands, in 2021, with the current board overseeing the “destruction of $2.4 billion in shareholder value.”   

Mitarotonda argued that the company’s current leadership, including CEO Hillary Super, lacks the experience and strategic clarity necessary to lead a successful turnaround. Barington noted that Super has limited chief executive and public company experience with only a brief tenure in intimate apparel. 

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Mitarotonda also stressed concerns that Super has not gained the confidence of employees, and criticized her focus on relaunching secondary brands such as Pink and expanding into athleticwear, “while failing to prioritize the company’s core business and international growth,” saying it is a sign of a “lack of strategic focus.” 

Shares of Victoria’s Secret rose Monday morning after the letter was published on the investor’s website.

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Six of the nine current board of directors sat on the board during the company’s decline, and the remaining two independent directors “have limited experience successfully scaling global consumer businesses, according to Barington. 

“We believe that Victoria’s Secret requires a reconstituted Board comprised of directors with proven experience in brand revitalization, operational execution, international expansion, and shareholder value creation,” Mitarotonda wrote, adding that the retailer “should consider replacing a majority – if not all – of the Board with independent directors who bring relevant backgrounds, fresh perspectives, and a strong track record of value creation.”  

Meanwhile, the activist investor, which also has a stake in Macy’s, said it is also disappointed by the company’s recently adopted “poison pill” plan, calling it counterproductive. 

“Equally troubling, it risks entrenching management and the Board…