Activist Investor Calls for Leadership Shake-Up at GSK

Elliott Management said shares of GSK could jump 45% with "superior execution"

Deputy Editor
Jul 1, 2021 at 9:56 AM
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The shares of GlaxoSmithKline plc (NYSE:GSK) are up 0.4% at $39.96 this morning, following news that Elliott Management has urged the British pharmaceutical company to name a new set of board directors to decide the future of its CEO Emma Walmsley. The activist investor wrote in a 17-page letter stating that GSK has "underperformed every single peer in over nearly every conceivable timeframe," adding that with "superior execution," it  could see a roughly 45% bounce in share prices leading up to its consumer health spinoff in mid-2022. 

The U.S.-listed shares of GSK have been middling since the announcement of said spinoff, though the 20-day moving average has remained supportive. It looks like the $40.50 level could come in as a ceiling for GSK once again, though, as it ultimately snuffed out the stock's late June rally. Year-to-date, GSK is now up 8.2%. 

Sentiment is tepid at best, with just two of the eight analysts in coverage calling GSK a "strong buy," compared to six "hold" ratings. Meanwhile, the 12-month consensus target price of $49.17 is a 23% premium to current levels. 

Shorts are starting to hit the exits, however, with short interest off 21.1% in the last two  reporting periods. The 18.63 million shares sold short make up just 0.8% of the stock's available float, and would take a little under four days to cover, at GSK's average daily pace of trading. 

It is worth noting once again that premiums on GSK are cheap right now, making it an attractive time to get in on the drugmaker's next move. The equity's Schaeffer's Volatility Index (SVI) of 16% stands lower than 6% of readings from the last year, meaning options players are pricing in relatively low volatility expectations for GlaxoSmithKline stock at the moment. 

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