Carl Icahn was right to be excited about the coronavirus pandemic. Sure, there have been a few sickness-related setbacks for the self-proclaimed most peaceful man in shareholder activism, but for the most part it’s been a happy time in Indian Creek. First, COVID-19 brought one adversary to heel. Now, it’s decimating another vulnerable population Icahn wouldn’t be unhappy to see go extinct.

There are signs that a retail recovery might be particularly prolonged. Just one-third of American adults said they’ll feel safe shopping in a mall after stores reopen, according to an April 20 survey by First Insight Inc., a retail analytics firm…. Deutsche Bank analyst Ed Reardon, citing the limited ability of mall owners to reposition their properties for other uses, said lenders could lose 80 to 90 cents on the dollar. Such catastrophic losses “will basically wipe out” the subordinate, or riskiest portions, of CMBS deals with exposure to large retail loans…. Some investors with short positions said they believe the crisis is already fundamentally changing Wall Street’s view of brick-and-mortar retail.

“I don’t think that Covid did anything besides speed up what was inevitable,” McNamara said….

“We have billions and billions of dollars on the short side of this,” Icahn said last week in an interview with Bloomberg Television. “It really is a beautiful trade on a risk-reward basis.”

But it gets even better for Uncle Carl: While the quarantined men and women of the Securities and Exchange Commission are dealing with their boredom with an unusual spurt of activity, they’ve decided to not do one particular thing.

The Securities and Exchange Commission has scrapped the portion of the proposal that would have forced proxy advisers — led by Institutional Shareholder Services and Glass Lewis — to submit their voting recommendations to companies for checking before distributing them to investors in advance of shareholder meetings…. “We are encouraged that the commission seems to have moved away from the proposal to grant companies pre-review of independent proxy advice,” said Nichol Garzon-Mitchell, general counsel for Glass Lewis. “Nonetheless, we remain concerned about some of the alternatives the SEC may be considering.” The reworked proposal would outlaw “robo-voting”, under which the proxy advisers automatically submit shareholders’ votes to companies based on their recommendations.

This doesn’t make Icahn or Paul Singer particularly happy. It may, however, make the two erstwhile Republicans big fans of Joe Biden.

The idea was not addressed in the SEC’s initial request for comments, however, and adopting the change “would raise a serious question” about the final rule’s legality, activist hedge fund Elliott Management claimed in a March 30 letter to the SEC. It said such major changes require the regulator to begin the rulemaking process again — something that would mean it could be halted if there was a change in administration after November’s US elections.

Icahn’s ‘Beautiful Trade’ Pays Off Early With Malls Shut [Bloomberg]
A Short Bet Against Malls Fuels 48% Gain for One Long-Time Bear [Bloomberg]
SEC abandons key plank of proposal to curb proxy advisers [FT]

Related