It was just two days ago when United Continental CEO Oscar Munoz returned to work five months after suffering a heart attack and undergoing a heart transplant. His return was greeted by an activist battle waged by Altimeter Capital Management and PAR Capital Management.
“Right or wrong, these activists could have waited a couple of weeks. Whatever you think about the way United Continental is run, I think this is a new low for activist investing,” Jim Cramer said.
On March 8, both Altimeter and PAR Capital, who collectively own 7.1 percent of United Continental, launched a proxy contest with the goal of electing six board members of their own choosing.
And while the “Mad Money” host thought the timing was bad form, he took a close look at what the activists had to say. Do these activists have a point, or was this just unnecessary saber-rattling?
The activists’ gripes about the airline boil down to three points. One, they claim that United has a clear record of sustained underperformance, including the fact that it has been the worst performing U.S. airline stock in the last five years.
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Two, the activists believe that the board lacks expertise and experience to hold management accountable and maximize shareholder value. And three, Altimeter and PAR say that United Continental urgently needs a turnaround.
“When I read through the letter from the activists, I found this whole situation extremely puzzling, given that United Continental has been one of the best performing stocks in the entire market since the generation bottom in March of 2009,” Cramer said.
However, Cramer added that it is true that in the past five years, United Continental is up more than 100 percent, but not as much as Delta, Jet Blue or Southwest in the same period. That means the activists are technically correct, but it seemed to Cramer they were just cherry picking.
With regards to the second accusation that the board is underqualified, Cramer found that the stock has pretty consistent outperformed versus the Dow transportation index.
As for the argument that the board is too entrenched, Cramer thinks this argument was dispelled when United Continental ousted its old chairman and CEO, Jeff Smisek, six months ago.
And the final complaint that United urgently needs to course correct, this was the most galling claim of them all for Cramer.
“Remember, Oscar Munoz was only appointed last September — he IS the course correction!” Cramer said.
Ultimately, the claims of the activists at Altimeter and PAR Capital Management boiled down to being a bit ridiculous for Cramer. And now that Munoz has recovered, he thinks he can deliver.
PAR Capital did not immediately return calls for comment.