LONDON Activist shareholders are by nature no shrinking violets, but the stake size needed to be a thorn in a company's side is certainly getting smaller.
An investor group with only 210,000 shares of Vodafone (VOD.L) managed to raise the 82 billion pound telecom titan's market valuation as much as 3.5 percent on Thursday by proposing a new structure for the company.
Efficient Capital Structures ECS, the would-be reshaper of Vodafone, has just 0.0004 percent -- worth about $650,000 (329,000 pounds).
It used to be that it would take at least a 5 percent stake by one shareholder or a group of them to get the notice of a board or other investors to agitate for change.
The firm includes John Mayo, former finance director at telecom equipment maker Marconi as it steered towards billions of dollars of investor losses -- raising even more questions about just how seriously Vodafone should take the proposals.
Under UK law, the telecoms firm needs to consider any resolutions submitted by investors representing 5 percent of the share capital, or if backed by 100 shareholders. ECS has carved its tiny stake into 100 accounts.
"Sometimes big oaks grow from little acorns, but for every Tom, Dick and Harry to be able to create this type of headline is a bit over the top," Dresdner Kleinwort analyst Robert Grindle said.
Companies have been forced to adjust to a new world where investors armed with an idea and a press release call for radical change in a bid to drive up the share price.
Large funds, including Fidelity and Franklin Templeton, also are more often joining the chorus of individuals such as Christopher Hohn and Eric Knight.
Investors historically have owned a significant stake when seeking change at companies they consider underperforming, as when Nelson Peltz last year fought for board seats and cost cutting at ketchup maker H.J. Heinz & Co. HNZ.N with a 5.4 percent stake.
But shareholders have been making waves with less and less, and the Vodafone situation marks a new low to the recollection of many analysts. If ECS were to get any traction, it could inspire more small shareholders to emerge at other companies.
Hohn's The Children's Investment Fund effectively spurred an auction of ABN AMRO AAH.AS with a 1 percent stake, while veteran corporate raider Carl Icahn, as a 1 percent owner in Time Warner (TWX.N), rallied other investors and pushed the media giant to quadruple its share buyback to $20 billion.
Knight Vinke Asset Management, a hedge fund that often pushes for change including at Suez and VNU, argued that the size of the stake does not matter, even though it typically owns at least 2 percent -- or when it doesn't, in the case of larger companies, has had backing from other shareholders.
"For us, what's really important is the strength of our arguments," Knight Vinke spokesman Martin Forrest said.
By going public with its ideas, even a small stakeholder can generate support from peers, prompt analysts to change their valuation models, or persuade individual board members to rethink their positions.
"If they can rally other people, it can flush things out of the woodwork," said Andrea Williams, head of European equities at Royal London Asset Management. "It's happened at ABN AMRO."
"If the policies make sense and they are not too outrageous and too hard to implement, then I think it has to be a good thing."