Activist Risk Vulnerability Scorecard

Overview

Boardroom Alpha’s Activist Risk Vulnerability Scorecard provides a gauge of how at risk any public company is to potential activist involvement. The risk score looks at 3 categories of metrics: Fundamental, Governance, and Returns.

Each individual metric is compared to the relevant sector peer set to identify which companies are outperforming and those that are underperforming.

After each individual metric is assessed, they are combined into an overall Raw Risk Score. That Raw Risk Score is then ranked against peers to identify which companies in every distinct sector (by size) are most vulnerable to an activist campaign based on company performance.

Methodology

The following metrics, shown previously to be useful as predictors of future activist campaigns, are used to support the Activist Risk Vulnerability Scorecard. Except where noted, percentile ranks for each metric are computed with respect to sector / marketcap peers in each interval, and missing values are treated as having a percentile rank of 0.5.

Raw Metric Scores are derived from percentile ranks of Metric values against peers. Except for CEO Tenure, Raw Metric Scores are derived from percentile ranks so that low values are interpreted as “high risk”. Furthermore, quarterly and annual values are propagated forward in time. Furthermore, for quarterly and annual data, we propagate those values forward in time.

The Raw Risk Score is produced monthly for each company over the duration when they are actively traded, and is computed as an unweighted average across all Raw Metric Scores per month.

Finally, the overall Activist Risk Vulnerability Score is computed as the percentile rank of the Raw Risk Score with respect to that company’s sector/marketcap peer group.