Here is what John Paulson has: A formerly high-flying hedge fund, clients heading for the doors and a crumbling reputation. Here is what the founder of Paulson & Co. doesn’t have: A buyer for Detour Gold Corp.
Paulson & Co. is in the midst of a war of words with Detour, which owns a single open pit mine northeast of Timmins, Ont. The hedge fund wants the company sold, or at least the board of directors replaced. It owns 5.5 per cent of Detour and is threatening to launch a proxy contest if it doesn’t get its way.
Detour’s board acknowledges it is facing operational issues – expansion of the mine is running over budget and the company is searching for a new chief executive – but insists this is the wrong time to sell. Its share price spiked over the past week on expectations of a takeover.
The Paulson & Co. campaign is an extreme example of an activist investor who is all huff and puff and no blow your house down. As an outside observer, your takeaway from this showdown should be that the more you hear about a boardroom battle, the less likely you are to see the issues resolved and share prices improve.
Activist investors are now accepted players in boardrooms. Lawyers who work with these funds say approximately two thirds of campaigns are resolved quietly and privately, with boards and management teams accepting some or all of the outsider’s suggestions.
For the rest of this column: https://www.theglobeandmail.com/business/article-paulson-co-wants-detour-gold-sold-board-of-directors-replaced-and/