The art of unlocking inherent value in listed companies

Every October, New York hosts the 13D Active-Passive Investor Conference, a major gathering for the global shareholder activism community.

This year's event featured prominent activist investors including Elliott, Starboard Value, ValueAct and Sachem Head, with discussions focused on the evolving role of activism in public markets.

I attended the conference and participated in a panel exploring how shareholder activism is evolving globally and where opportunities are emerging for investors.

One of the central themes discussed was the growing convergence between activism and private equity. Both approaches focus on identifying businesses with unrealised potential and actively working to improve their value.

Private equity has long demonstrated how active ownership can create value, but access has traditionally been limited, particularly for retail investors.

As I will highlight in this wire, activism offers a way to pursue similar opportunities in public markets through listed companies.

Bringing private equity thinking to public markets

Private equity investors seek to improve businesses, unlock value and ultimately realise a return on that improvement. Rather than simply buying a stake and hoping the market delivers, they look for opportunities to influence the underlying value of a company.

Activism applies a similar philosophy to listed businesses.

The investment opportunity is to identify a company whose potential is not fully reflected in its share price, determine what could be done differently and work towards changes that improve its long-term value.

This is not identical to private equity. The ownership structures, liquidity and investment processes differ. But the underlying principle is similar: actively working to make a business more valuable.

The two approaches are also becoming more closely aligned in practice, with some activist investors helping to fund private equity transactions and take assets private.

For investors who cannot access traditional private equity funds, listed markets can offer an alternative route to some of these opportunities.

Through shareholder activism, investors can participate in businesses where active engagement is driving strategic, operational, financial or governance changes, without having to commit capital to a private fund for many years.

The potential impact of this approach was reinforced by an interesting statistic shared at the conference.

Rich Thomas, Global Head of Shareholder Engagement and Activism Advisory at Jefferies, noted that companies targeted by activists are nearly five times more likely to undergo a sale or major transaction than companies without activist involvement.

While the data point is US-centric, it illustrates the influence activist investors can have in driving corporate change and creating opportunities to realise value.

Of course, a transaction is not an end in itself. The objective is to achieve better outcomes for shareholders, whether through a sale, a divestment or a broader strategic rethink.

Ultimately, the opportunity is not simply to passively own shares, but to identify where active engagement can help close the gap between what a business is worth and what the market is prepared to pay for it.

From confrontation to constructive change

The word activism can conjure up images of corporate raiders of the 80s, public disputes and investors seeking quick profits. Modern activism is much more nuanced.

From the sessions at the conference - which featured speakers from the US, Europe, Canada, and Japan - it’s clear that since the global financial crisis, activism has evolved to become more constructive.

Much of the engagement now takes place behind closed doors, with the focus on working with boards and management teams to improve businesses over the longer term, rather than pursuing public engagement.

In Australia, the approach is highly company specific and very idiosyncratic. It might involve improving capital allocation, reconsidering an acquisition, returning excess capital to shareholders or changing a company's strategic direction.

The key is having a clear view of what a business is worth and a credible pathway to realising that value.

BlueScope Steel: recognising value the market was overlooking

In September 2024, L1 Capital publicly identified BlueScope as an attractive investment opportunity when much of the market's attention was focused on technology stocks and banks. I outlined the case in this Livewire article, L1 Capital's top stock pick and the great resources rotation. Since then, the BlueScope share price is up approximately 50%.

Our thesis centred on a cheap valuation, growing US production and the underlying quality of the business. We believed the US operation alone could be worth more than BlueScope's entire market capitalisation, effectively assigning little value to the rest of the company. Steel spreads were also near cyclical lows, creating potential upside as conditions improved.

In early January 2026, it became public that a consortium involving Seven Group Holdings and US steelmaker Steel Dynamics had made multiple approaches for BlueScope's US assets, bringing the potential value of the business into sharper focus.

In February 2026, the consortium made an improved takeover proposal valuing BlueScope at approximately $15 billion, which the company declined to recommend at the offered price.

L1 Capital held a combined stake of more than 7% across its investment strategies. Alongside my colleagues Raphael Lamm and Mark Landau, we engaged with the board to encourage it to unlock the value we believed the market was overlooking.

Despite rejecting the takeover proposal, BlueScope outlined a series of initiatives to unlock shareholder value across announcements in February and March.

These included plans to return $3 per share to shareholders in calendar 2026 and distribute at least 75% of free cash flow going forward. The company also committed to simplifying operations, reducing costs and accelerating the realisation of value from its 1,200-hectare surplus land portfolio

After the takeover interest emerged, I revisited the thesis in March 2026 in this Livewire article, The ‘unloved’ stocks fuelling a 30% year in L1 Capital's Catalyst Fund.

The story then continued to evolve. On 26 October, BlueScope upgraded its first-half FY2027 underlying earnings before interest and tax expectations to approaching $1.1 billion, from its previous guidance range of $860 million to $960 million. Stronger US steel spreads and improved performance across its North American and Australian businesses supported the upgrade.

While not every development can be attributed to shareholder engagement, BlueScope illustrates the opportunity we seek: identifying businesses whose underlying value may not be fully reflected in their share price and engaging constructively to help unlock that value.

Why Australia offers a distinctive opportunity

Australia has several characteristics that make it an attractive market for this approach.

There are relatively few activist funds operating here, particularly at scale. Successful engagement requires capital, investment expertise and established relationships with company boards, management teams and institutional investors.

Our markets relatively small size can also work in an activist's favour. Investors and companies tend to know one another well, institutional shareholdings can be concentrated, and the market structure and regulatory framework can support constructive shareholder engagement.

Our industry composition creates another opportunity. Resources account for roughly 30% of the Australian sharemarket, compared with around 5% of the US market.

Mining is cyclical and capital-intensive, and Australian mining history is littered with costly misadventures that have destroyed billions of dollars in shareholder capital.

Management teams cannot control commodity prices, but they can control how they allocate capital, assess acquisitions and manage their businesses through the cycle.

Poor decisions can destroy substantial value. Better capital allocation and a sharper strategic focus can create opportunities for investors willing to engage.

Looking beyond the index

For me, activism is a distinct investment discipline with the potential to generate returns that are differentiated from the market’s returns.

Consider the concentration in major market indices. In Australia, the largest 20 companies account for around two-thirds of the market. In the US, the seven largest companies represent roughly 35%.

These large companies attract considerable investor attention, but they are not the only places to find opportunities. Activist investors often look beyond the market's biggest companies to identify businesses where the gap between current value and potential value is substantial.

Ultimately, activism is its own distinct asset class. It offers investors a way to pursue potentially very uncorrelated returns by applying private equity thinking to publicly listed companies.

The opportunity is to look beyond where the market is concentrated and identify businesses that could be worth considerably more than they are today.

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L1 Capital Catalyst Fund

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