An activist (shareholder) is a shareholder who uses their ownership stake in a publicly traded orporation to pressurize management into considering alternative ways of doing business and bring about change. The goals of activist shareholders primarily include financial issues such as
- increase of shareholder value through corporate policy changes
- asset disposals
- financing structure – dividends, buy backs, increase leverage/debt
- bumpitrage
- management change
- cost reductions
More recently these goals have also come to include additional non-financial issues and social change known as environmental, social and governance (ESG) concerns which may include
- disinvestment from particular countries or politically sensitive parts of the world
- adoption of environmentally friendly policies
- climate change
- greater support of workers’ rights (e.g. abolition of sweatshops)
- board room diversity
- accountability for environmental degradation.
Activists have a number of options open to them to help achieve their objectives such as, proxy battles, publicity campaigns, shareholder resolutions, litigation, and negotiations with management. One of the benefits of this approach is the avoidance of a full takeover bid which could be costly. A fairly small stake, often less than 10% and sometimes only 5% of the outstanding voting stock may be sufficient enough to launch a successful campaign.
The following table shows the listed companies globally which were publicly subjected to activist demands in previous 6 years. For additional information, investors are encouraged to visit Activist Insight. Keeping an eye on the SC 13D filings amongst others with the SEC is a common way of tracking activist activity.
| Year | Value |
| 2018 | 922 |
| 2017 | 856 |
| 2016 | 758 |
| 2015 | 673 |
| 2014 | 572 |
| 2013 | 520 |
Activist Shareholder Operations
Previously known as corporate raiders, shareholder activists have evolved into a position or respect and admiration for initiating corporate change. Activists increasingly are transitioning from outside agitators to influential insiders.
However, they maintain their power of destruction. This comes from short-term campaigns. When shareholder activists demand a return of capital from existing resources they may push for an immediate payout in the form of dividends or a share buyback. This may trigger an instant positive share-price reaction with little or no regard for the potential side effects for the wider organization or its employees. As a result, predetermined investments in research or innovation may suffer. In light of the COVID-19 pandemic, activist strategies such as returning cash to shareholders have come under close scrutiny as business activity is reduced and many companies struggle to stay solvent.
Shareholder Activist Examples
Some of the recent activist investment funds include:
- Icahn Management LP
- California Public Employees’ Retirement System (CalPERS)
- Pershing Square
- Santa Monica Partners Opportunity Fund LP
- State Board of Administration of Florida (SBA)
- Third Point Management
- Relational Investors, LLC
Carl Icahn is perhaps the embodiment of the evolution noted previously. Icahn developed a reputation as a “corporate raider.” This originally stemmed from his hostile takeover of TWA airline in 1985. In addition to this, he is now known as an activist shareholder, a businessman, a traditional investor, and philanthropist. We refer to Carl Icahn in our article Event Driven Investment Strategies. However, activist shareholders form a uniques subset of mergers and acquisitions investing and as such these investment firms do not appear on out list of event driven hedge funds.
For further reading on this subject we recommend Barbarians in the Boardroom: Activist Investors and the battle for control of the world’s most powerful companies by Owen Walker.
