Describing Comcast's management and board supervision as a "Comcastrophe" - playing off its advertising tagline of "Comcastic" - Chieftain Capital Management Inc. in New York wants better shareholder returns from the cable company.
"It's time for a change," Chieftain said in a Jan. 14 letter to the Philadelphia company's board of directors. "We want and deserve the best CEO Comcast's board of directors can find - and, based on his record, Brian Roberts is not it."
Shares of Comcast fell 77 cents to $17.41 on Thursday, moving toward a four-year low.
Chieftain owns 60.5 million Comcast shares, equivalent to a 2 percent ownership stake.
Comcast said it has met with Chieftain, an investment adviser, but disagreed with its views and will answer the letter in due course.
"Our management team is intensely focused on executing our strategic plan, investing for profitable growth and creating long-term shareholder value," Comcast said in a statement.
John Shapiro, co-founder and managing director of Chieftain, said his firm sent the letter after failing in other attempts to get management to change.
"Their emphasis has been growth, not return to shareholders," he said. "There's nothing wrong with growth, but if you overpay for it, it dilutes the value to shareholders."
Shapiro said Comcast has spent over $80 billion on acquisitions in the past decade, often paying more than 20 times operating cash flow. And he contended that Comcast spends money on things outside its core cable business, such as regional sports networks, Internet sites and the wireless spectrum.
If Comcast can afford to overpay for acquisitions, Shapiro said, then it should buy back its undervalued shares. But buybacks have so far been "modest relative to their capability," he said.
Chieftain wants Comcast to borrow more money and buy back shares to boost its stock price.
The Jan. 14 letter, signed by Shapiro and two other managing directors, said "returns on capital have been anemic, high-priced acquisitions have proven a waste of capital, capex (capital expenditure) has ballooned and free cash flow has consistently disappointed."
Chieftain also blasted Roberts' family's voting power at Comcast. Family members have a 33 percent control through "supervoting" stock even though they own just 1 percent of the outstanding shares.
Chieftain wants to get rid of the two-class voting structure.
Shapiro said the letter isn't an ultimatum but a way to get the board to act. Chieftain has been a Comcast shareholder for over five years.
To boost its position, Chieftain asked 23 shareholders that collectively own 565 million Comcast shares why they think the stock isn't performing better.
The common theme, Shapiro said, was company management and its use of capital.
Chieftain wants Comcast to hire a CEO who will improve returns, manage capital spending better, stop investing in non-core businesses and low-return assets, maintain an adequate level of debt and pay a dividend.
The shareholder wants Comcast's board to change management's compensation plan so executives will be motivated to perform in accordance with the goals proposed.
Chieftain also took Comcast to task for the compensation packaged of founder and director Ralph Roberts, who is to be paid his salary for five years after his death or his departure from the company.
