News & Analysis

GlaxoSmithKline shares nosedive after investors back Emma Walmsley

Andrew Saks, Monday, 5 July 2021

In a bizarre tug of war, some of the largest shareholders in British pharmaceutical giant GlaxoSmithKline which include renowned wealth management companies M&G and Jupiter Asset Management alongside publicly listed insurance company Royal London have shown their support for GlaxoSmithKline's incumbent CEO Emma Walmsley.

Ms Walmsley has been the main target of Elliot Management, the North American fund which invested in GlaxoSmithKline, giving Elliot Management 'activist investor' status due to its swift attempt to remove Ms Walmsley from her position immediately after investing.

Over the weekend, Ms Walmsley's position as CEO was defended by another fund manager which joined Jupiter, M&G and Royal London in support of Ms Walmsley continuing as CEO.

This morning, as the markets open, GlaxoSmithKline shares depreciated by 7.06 points in the first hour of trading, equating to a 0.53% decline to 1,430.50p per share.

Observed over a longer period, the price is still at its third highest since this time last month, demonstrating that Elliot Management's initial aim to remove Ms Walmsley has been interesting to shareholders.

Thus, the dip in value is likely to be a degree of volatility due to uncertainty with regard to future leadership, or potential changes in major shareholdings should Ms Walmsley be forced out and Elliot Management increase its stake and others who backed Ms Walmsley reduce their stake, or in case Ms Walmsley stays and the opposite occurs.

One of the strengths highlighted by supporting shareholders is that Ms Walmsley has attracted some high quality leadership talent during her tenure as CEO, including Hal Barron who was elected Chief Scientific Officer at GlaxoSmithKline.

Dr Barron came to the firm with 25 years worth of senior scientific leadership positions at major institutions and pharmaceutical companies behind him and also holds current academic positions at the University of California, San Francisco include Associate Adjunct Professor of Epidemiology and Biostatistics and Associate Clinical Professor of Medicine and Cardiology.

Elliot Management's intentions to oust Ms Walmsley were bolstered by a large and comprehensive document which Elliot Management produced which criticized Ms Walmsley for underperforming share prices since she took the CEO position in 2017 and looked to shake up the boardroom via the back door by encouraging GlaxoSmithKline to hire non-executive directors with extensive big pharma and consumer healthcare experience.

Elliott Management has asked for a process to determine who should best run the group. GSK and Elliott have been holding private meetings to gauge the views of investors.

Rather interestingly, two months ago, huge investors Blackrock - the world's largest asset management company - and Dodge & Cox both supported GlaxoSmithKline's existing structure and advised the company not to allow disruptive activist investor Elliot Management to sway it from its existing strategy.

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