Insiders Eyes Arconic

08/28/2017 2:50 am EST


Stephen Biggar

Director, Product Strategy, Argus Research Corporation

A number of directors at Arconic (ARNC) have added to their holdings of late. The combined value of the shares acquired between August 8 and 10 through direct open-market transactions alone is $272,719, observes Stephen Biggar, editor of Argus Research.

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Between two directors, a total of 11,000 shares were purchased at prices ranging from $24.04 and $25.00. As well, both directors significantly increased their overall holdings.

Turning to the news flow, Arconic has had a very busy few months. On June 14, the fatal fire at Grenfell Tower in London resulted in approximately 80 deaths. Arconic supplied the cladding panels — with a combustible polyethylene core that were used in the construction of the building.

The cladding panel in question is designed for use in low-rise buildings, while Grenfell Tower was a high-rise. Arconic stated that it sells products ‘with the expectation that they would be used in compliance’ with local building codes.

The ARNC share price fell dramatically following the news of the fire. Prior to that, the company was dealing with a major shakeup among its Board and senior executives.

The changes were being pushed by Elliott Management, who announced in January that it was building its stake in Arconic. Elliott was pushing for the removal of the CEO and the appointment of additional directors.

Arconic’s Board was initially very vocal in backing then CEO Klaus Kleinfeld, but then ousted him stating that the “decision was not made in response to the proxy fight or Elliott Management’s criticisms of the company’s strategy, leadership or performance.”

Arconic appointed Director David Hess as interim CEO and Director Patricia Russo as interim Chair, and later detailed that Mr. Kleinfeld was removed from his position after the Board became aware of a letter sent by him to Elliott that “showed poor judgment.”

The company and Elliott Management have since agreed to have Elliott nominate three new Board members and Arconic an additional two.

Finally, on July 24 the company announced better-than expected 2Q17 results and increased its full-year guidance. With the possibility that Arconic is putting recent bad news behind it and performing well, the recent purchase of stock by directors at the company is of interest.

The ARNC shares are held in Vickers’ model Insider Portfolio and Argus Research currently has a BUY rating on the stock.

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