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What are the activist investor issues? (I haven’t been paying attention to “activist investor” behaviour for a while as so many seemed to just be pushing for “m

by olliej 5y ago

What are the activist investor issues? (I haven’t been paying attention to “activist investor” behaviour for a while as so many seemed to just be pushing for “make me rich in the short term regardless of cost”)

uoaei 5y ago
That definition seems at odds with the core concepts involved in the term "activist investor".
- HillRat 5y ago
  Traditionally, the "activist" in "activist investor" simply means "an investor who is actively pushing for specific policies," generally to increase the return on their investment. "Financial activists" like Carl Icahn or Starboard frequently take > 5% stakes in order to pressure companies to sell themselves to competitors, break themselves apart in order to shed lower-performing divisions, funnel cash to shareholders through dividends or stock buybacks, or reverse policies they see as injurious to the bottom line CEOs naturally hate this, and activist investors have a reputation -- arguably often well-deserved -- for improving the profitability of their portfolios at the cost of the companies they target. Sometimes this can force companies to walk away from suboptimal strategies -- did AOL really think Patch was going to be a market maker? -- but in many cases their activism simply results in the company's acquisition, aggressive offshoring or deindustrialization, or just straight-up bankruptcy. Icahn, for example, took a heavy position in Blockbuster and was instrumental in forcing them to reinstate late fees and drop plans to enter the streaming market, which left them exceedingly vulnerable when Netflix introduced streaming (the dueling HBR articles on this are well worth reading). Over the past few decades "social activist investors" have become more common, especially amongst large public sector and union pension plans who have both financial throw-weight and a need to answer to causes somewhat beyond their immediate bottom lines, but in general they are much smaller, and less effective, groups than the usual hedge fund suspects. For example, an organization of decarbonization activists have been trying for years to force ExxonMobil to diversify its energy base beyond hydrocarbons (as other petrochemical firms have done), but they've had notably zero effect on XOM's strategy, despite having an argument based on economics as much as ecology.
  - olliej 5y ago
    And hey, here's a good activist investor story! https://edition.cnn.com/2022/01/24/investing/peloton-activist-investor/index.html https://edition.cnn.com/2022/01/24/investing/peloton-activis... :D
vorpalhex 5y ago
An activist investor is someone who buys into a company with the intent of reforming or changing it. Maybe you really hate twitter, so you buy into it for $200 million and then use your power on the board to vote down anything good for twitter and vote for anything that is harmful. Activist investors often don't act in line with financial interest, instead focusing on "activism" even if it costs money.
- sjtindell 5y ago
  Do you have any examples of activist investors who actually wanted to do harm to a company? I’m incredulous. What a waste of time and money. I usually hear about ones who think they can turn it around.
  - riskable 5y ago
    Here you go: https://www.businessinsider.com/tim-cook-versus-a-conservative-think-tank-2014-2 https://www.businessinsider.com/tim-cook-versus-a-conservati...
    - kodah 5y ago
      That's not really an activist investor, more like a quarrel over priorities in a boardroom. Carl Icahn, and Bill Ackman are examples of activist investors. The key to being an activist investor is that you have to control enough of the company to be able to make decisions that would greatly change it. A single board seat doesn't really get you much. Secondarily, activist investors are usually seizing control of failing organizations, not successful ones.

by olliej 5y ago

uoaei 5y ago

That definition seems at odds with the core concepts involved in the term "activist investor".

HillRat 5y ago
Traditionally, the "activist" in "activist investor" simply means "an investor who is actively pushing for specific policies," generally to increase the return on their investment. "Financial activists" like Carl Icahn or Starboard frequently take > 5% stakes in order to pressure companies to sell themselves to competitors, break themselves apart in order to shed lower-performing divisions, funnel cash to shareholders through dividends or stock buybacks, or reverse policies they see as injurious to the bottom line CEOs naturally hate this, and activist investors have a reputation -- arguably often well-deserved -- for improving the profitability of their portfolios at the cost of the companies they target. Sometimes this can force companies to walk away from suboptimal strategies -- did AOL really think Patch was going to be a market maker? -- but in many cases their activism simply results in the company's acquisition, aggressive offshoring or deindustrialization, or just straight-up bankruptcy. Icahn, for example, took a heavy position in Blockbuster and was instrumental in forcing them to reinstate late fees and drop plans to enter the streaming market, which left them exceedingly vulnerable when Netflix introduced streaming (the dueling HBR articles on this are well worth reading). Over the past few decades "social activist investors" have become more common, especially amongst large public sector and union pension plans who have both financial throw-weight and a need to answer to causes somewhat beyond their immediate bottom lines, but in general they are much smaller, and less effective, groups than the usual hedge fund suspects. For example, an organization of decarbonization activists have been trying for years to force ExxonMobil to diversify its energy base beyond hydrocarbons (as other petrochemical firms have done), but they've had notably zero effect on XOM's strategy, despite having an argument based on economics as much as ecology.
- olliej 5y ago
  And hey, here's a good activist investor story! https://edition.cnn.com/2022/01/24/investing/peloton-activist-investor/index.html https://edition.cnn.com/2022/01/24/investing/peloton-activis... :D

vorpalhex 5y ago

An activist investor is someone who buys into a company with the intent of reforming or changing it. Maybe you really hate twitter, so you buy into it for $200 million and then use your power on the board to vote down anything good for twitter and vote for anything that is harmful. Activist investors often don't act in line with financial interest, instead focusing on "activism" even if it costs money.

sjtindell 5y ago
Do you have any examples of activist investors who actually wanted to do harm to a company? I’m incredulous. What a waste of time and money. I usually hear about ones who think they can turn it around.
- riskable 5y ago
  Here you go: https://www.businessinsider.com/tim-cook-versus-a-conservative-think-tank-2014-2 https://www.businessinsider.com/tim-cook-versus-a-conservati...
  - kodah 5y ago
    That's not really an activist investor, more like a quarrel over priorities in a boardroom. Carl Icahn, and Bill Ackman are examples of activist investors. The key to being an activist investor is that you have to control enough of the company to be able to make decisions that would greatly change it. A single board seat doesn't really get you much. Secondarily, activist investors are usually seizing control of failing organizations, not successful ones.