Activist Investing

Extracted Attributes

Shareholder activism

Shareholder activism is a form of activism in which shareholders use equity stakes in a corporation to put pressure on its management. A fairly small stake (less than 10% of outstanding shares) may be enough to launch a successful campaign. In comparison, a full takeover bid is a much more costly and difficult undertaking. The goals of shareholder activism range from financial (increase of shareholder value through changes in corporate policy, cost cutting, etc.) to non-financial (disinvestment from particular countries, etc.). Shareholder activists can address self-dealing by corporate insiders, although large stockholders can also engage in self-dealing to themselves at the expense of smaller minority shareholders. Shareholder activism can take any of several forms: proxy battles, publicity campaigns, shareholder resolutions, litigation, and negotiations with management. Daniel Loeb, head of Third Point Management, is notable for his use of sharply written letters directed towards the CEOs of his target companies. Activism may help to address the principal-agent problem where the agents (management) do not adequately respond to the wishes of the principals (investors) of publicly traded companies. In the 2010s, investments in the activist asset class grew, with activists receiving coverage by the media and positive attention from investors. Activists have typically engaged in adversarial campaigns, but have also in some cases been able to acquire board seats with a formal proxy context. Shareholder activists are influencing mergers and acquisitions. A 2015 survey of corporate development leaders found that 60% of respondents saw shareholder activism affecting transaction activity in their industry. Increasingly, non-financial forms of shareholder activism are affecting companies in a range of sectors. Shareholders, often with a comparatively small stake in a company, are seeking to influence the company's environmental and social performance. Other forms of activist campaigns include influencing divestitures, with results from Fortune 500 companies, between 2007 and 2015, suggesting these are often more successful in terms of increasing shareholder value than management led divestitures.

Web Search Results

• What Is Activist Investing? A Catalyst for Change - Olstein Funds

  Activist investing is a unique form of value investing targeting companies that have significantly underperformed their peers or the overall market for a considerable period of time. Activist investors make substantial minority investments in the common stocks of such companies with the stated intent of influencing company management to take specific steps to increase shareholder value. An activist identifies the causes and sources of a company's chronic underperformance and recommends strategic, financial, operational or organizational changes that may provide a catalyst for increasing the value of the company's shares. [...] While a range of corporate governance issues attract shareholder activists driven by financial objectives (increase shareholder value, changes to capital structure, cost cutting, etc.) or non-financial goals (socially responsible investing, divestiture from particular countries, environmentally conscious policies, etc.), an activist investor usually seeks to advance corporate governance proposals that are likely to enhance a company's financial performance. Companies with onerous takeover defenses, entrenched management teams with stagnant operating results, excessive executive compensation that does not reward long-term performance, an uninvolved or non-responsive board, are viable targets for activists seeking to link corporate governance proposals with improved company performance. In [...] The primary reason an activist targets a company is that its stock price is perceived to be significantly less than the company's potential value, whether measured by private market value, asset value, relative value, liquidation value or another valuation methodology. The primary goal of the activist investor is capital appreciation. While many traditional value managers also pursue this objective, the vast majority of such investors focus their efforts on identifying what they believe are undervalued stocks and monitoring their investments in such companies from a passive stance while waiting for the stock price to increase. The approach of a traditional value investor relies on company management, industry experts, or Wall Street research to provide relevant information regarding

• Activist Investor | Fund Strategy Definition + Examples

  background Wall street prep logo Wall street prep logo # Activist Investor Step-by-Step Guide to Understanding Activist Investing (Shareholder Activism) ## What is an Activist Investor? An Activist Investor seeks to be the catalyst of a turnaround of an underperforming publicly-traded company to profit from share price appreciation. Activist Investor Activist Investor ## How Does Activist Investing Work In activist investing, the catalyst for change and turnaround is, in fact, the entrance of an activist investor. Activist investing is an investment strategy where an investor pursues poorly run companies with share prices that have declined in recent times. [...] Conceptually, activist investing is closely tied to value investing, because the activist perceives a target’s share price is trading far below its potential. The distinction with activist investing is that once an undervalued company is identified, the activist takes a far more “hands-on” approach to force change. Since management has likely fallen out of favor with shareholders, the firm attempts to convince shareholders that there is “hidden” value in the company that management is not capitalizing upon. However, there must be value-creation opportunities – otherwise, influence without a tangible plan ends badly for all stakeholders. [...] Interestingly, most of the top activist investment firms are public figures, whereas many successful, non-activist hedge funds attempt to stay out of the spotlight. In particular, Icahn is renowned for his aggressive, often confrontational, tactics to pressure the management teams of public companies. The success of an activist firm is contingent on their ability to gain shareholder trust (or, sometimes, the trust of the management team). But one of the most important traits is of activist investing is, in fact, the ability of the activist to attract public attention and have a public platform to promote their recommendations. ## Activist Investing Example: Starboard Value and Salesforce

• Shareholder activism - Wikipedia

  Activist investment funds include: California Public Employees' Retirement System (CalPERS), Icahn Management LP, Santa Monica Partners Opportunity Fund LP, State Board of Administration of Florida (SBA), and Relational Investors, LLC. In 2019 and beyond, notable activist investors included Starboard Value, Icahn Enterprises, Elliott Investment Management, and Third Point. In 2019, mutual funds such as Wellington Management Company began to show signs of activism. A prominent campaign by hedge fund Engine No. 1 resulted in them winning three seats on Exxon's board in 2021, with the objective of influencing the company to reduce its reliance on fossil fuels. [...] ## Performance Research has suggested that activist investment strategies may generate returns higher than those achieved through passive investing. A 2012 study by Activist Insight found that the mean annual net return of more than 40 activist-focused hedge funds consistently outperformed the MSCI World Index in the years following the 2008 financial crisis. Activist investing continued to draw attention in subsequent years. In 2013, it was reported as the top-performing hedge fund strategy, with activist funds earning average returns of 16.6%, compared to 9.5% for the hedge fund industry overall. ## Research and statistics [...] During the 1980s, activist investors such as Carl Icahn and T. Boone Pickens gained international notoriety and were often perceived as "corporate raiders" for acquiring an equity stake in publicly owned companies and then forcing them to take action to improve value or rid themselves of activist investors by buying back the raider's investment at a premium, often at the expense of other shareholders. More recently, activist investor Phillip Goldstein "Phillip Goldstein (investor)") suggested that the role of the activist investor has moved from green mail to one of being a catalyst to unlock value in an underlying security, and says that the public perception of activist investors as "corporate raiders" has dissipated.

• The New Face of Activist Investing

  The face and nature of activist investing is changing, presenting an entirely new set of challenges, and experts say many firms aren’t prepared. The field of challengers of course includes large firms helmed by superstar fund managers overseeing hundreds of billions of dollars. But a new crop of independent investment firms and smaller activist funds are driving campaigns to all-time highs. The number of independent investment firms registered with the Securities and Exchange Commission grew by 18.5% from 2018 to 2023, and now totals more than 15,000. [...] Last year, a record 160 different investor groups, including 45 first-time activists, launched campaigns against companies. Today, thanks to social media and the rise of independent journalism, any investor with a (somewhat) compelling message can attack a company and get attention. “Anyone sitting on a couch who wants to become an activist can be one,” says Daniel Yunger, a partner at strategic communications firm Kekst CNC who leads client engagements in M&A, activism preparedness, and proxy campaigns. “Companies are not as well prepared as they should be for how the activist-investor landscape is changing.” [...] \ \ \ \ \ In all, activist investors launched 243 new campaigns globally last year, an 18% increase from 2023 and the highest figure since 2018, according to investment bank Barclays. Twenty-two percent of those campaigns were launched by first-time activists, marking the first time newcomers accounted for a greater share of challenges than the top ten activist firms.

• The Recent Evolution of Shareholder Activism in the United ...

  Beyond the adoption of new media formats, activist investors have also developed increasingly sophisticated communication strategies designed to galvanize broader shareholder support. Whereas earlier activist campaigns often operated in isolation or within informal coalitions of hedge funds, today’s leading activists seek to engage larger institutional investors—including public pension funds and long-term asset managers—and to align their messaging with these investors’ governance and sustainability priorities. This evolution reflects both the institutionalization of activism as an asset class, with a demonstrable track record of investment returns, and the recognition that successful campaigns depend on mobilizing a wider base of shareholder backing.