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3M activist investor: Will Morgan Stanley client target 3M spin-off as they buy 4.3 million MMM shares?

By Rob Griffin

Edited by Jekaterina Drozdovica

16:15, 28 November 2022

3M Signage Logo Top of Glass Building.
Could a potential 3M activist investor help the struggling share price? Photo: askarim / Shutterstock

Morgan Stanley has bought more than four million shares in US conglomerate 3M (MMM) triggering speculation it could potentially become a 3M activist investor.

The investment bank revealed in an SEC filing that it had snapped up 4.3 million shares in MMM stock, which has been struggling with an ongoing lawsuit and declining share price.

3M (MMM) live stock price

But what does this mean for investors and the 3M stock price? Here we consider the latest 3M news and consider the potential impact of activist investors on stocks.

What is 3M?

US-based 3M, a multinational conglomerate since 1902, was originally known as Minnesota Mining and Manufacturing. 

The company listed on the New York Stock Exchange (NYSE) in January 1946. As well as New York, it also trades on the Chicago and Swiss stock exchanges, under the MMM ticker. 

It’s also one of 30 stocks on the Dow Jones Industrial Average (US30), an index of prominent US-listed companies. 

The business is split into four divisions: safety and industrial; transportation and electronics; healthcare; and consumer. It makes more than 60,000 products that are used in homes, businesses, schools and hospitals.

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3M activist investor: What has happened? 

Morgan Stanley increased its holding in 3M by 75% during the third quarter of the year, according to data from Nasdaq.

The SEC filing revealed that 4,252,138 shares were bought at a cost of $1,283,271. This puts the number of shares held up to 9,944,750 and means it’s the sixth largest institutional investor in the business. 

The announcement came as 3M stock value has struggled this year due to a combination of lower-than-expected revenue and a pending lawsuit.

The 3M stock price has fallen 27% this year, from $177.74 at the start of January to $129.04 as the market closed on 25 November 2022.

3M stock price, 2017 - 2022

The legal action involving Aearo Technologies, which 3M acquired in 2008, relates to claims from veterans that Combat Arms Earplugs caused them damage. There are currently more than 280,000 plaintiffs in the class action lawsuit, with 3M having paid out upwards of $300m so far.

GME

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Long position overnight fee -0.0263%
Short position overnight fee 0.0041%
Overnight fee time 21:00 (UTC)
Spread 0.18

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242.86 Price
+1.320% 1D Chg, %
Long position overnight fee -0.0263%
Short position overnight fee 0.0041%
Overnight fee time 21:00 (UTC)
Spread 0.29

NVDA

120.64 Price
+2.000% 1D Chg, %
Long position overnight fee -0.0263%
Short position overnight fee 0.0041%
Overnight fee time 21:00 (UTC)
Spread 0.13

AMD

154.03 Price
+1.550% 1D Chg, %
Long position overnight fee -0.0263%
Short position overnight fee 0.0041%
Overnight fee time 21:00 (UTC)
Spread 0.48

Possibility of activist investor

So, what is the prospect of Morgan Stanley emerging as a 3M activist investor? It’s unclear at the moment what the motivation is for the increased stake.However, fellow investors in the stock will be paying attention to see if it adds to its current holding over the coming months.

What is the potential impact of activist investors? Well, investors with prominent stakes can push for the business to be taken in a particular direction.

While Morgan Stanley haven’t made any such comments, market speculation has suggested one possible route is for an to push for 3M’s consumer and industrial businesses to be separated.

There has been talk that an activist investor could potentially push for 3M’s consumer business to be separate from its industrial unit.

Don Bilson, an analyst at Gordon Haskett, has highlighted on social media Morgan Stanley’s increased holding and what it could mean.

He tweeted: “We have long thought that 3M's legal issues were its poison pill as far as activism is concerned and we still feel that way even if this week's MS disclosure has chipped away slightly at our conviction.” 

Activist investors have certainly been making their presence felt this year, according to a first-half review of shareholder activism by Lazards.

“Q2 was the second most active quarter in the past five quarters (behind only a record-setting Q1),” it stated. 

Outlook for 3M

MMM stock was a ‘hold’, based on the views of 13 analysts compiled by MarketBeat, as of 28 November. While 10 had ‘hold’ recommendations in place, three saw it as a ‘sell’. Their consensus view was for the stock price to grow to $132.93 in the next 12 months.

Joshua Aguilar, senior analyst at Morningstar, had a fair value estimate of $183 on the stock, according to the latest note he wrote on 25 October, 2022.

“Nothing in wide-moat 3M’s latest results materially alters our long-term view of the firm,” he said. 

“Management reduced its earnings guidance for full-year 2022 to $10.22, but we were already modelling adjusted earnings per share of $10.27, below the prior bottom end of the range.”

Note that analysts’predictions can be wrong and shouldn’t be used as a substitute for your own research. Always conduct your own due diligence, looking at the latest news, commentary, technical and fundamental analysis. Remember, past performance does not guarantee future returns.

FAQs

Is 3M a publicly traded company?

Yes. It’s listed on the NYSE in January 1946. As well as New York, it also trades on the Chicago and Swiss stock exchanges, under the MMM ticker.

Who owns 3M?

The company is owned by a combination of institutional and retail investors, as well as company insiders. As of 28 November, institutional investors owned 65.70% of the stock, retail investors 33.83%, and company insiders 0.47%, according to WallStreetZen.

Is 3M a good stock to buy?

Whether 3M is a suitable investment will depend on your opinion of the business and its future prospects. Remember, analysts’ views can be wrong so you need to reach your own conclusion. And never invest money you cannot afford to lose.

Markets in this article

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69 +0.170%

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