What is an Activist Investor?

An activist investor refers to an individual or group which buys large numbers shares owned by a public company and/or attempts obtaining seats on the company’s board with the aim of effecting a significant change within the company. A company might be targeted by activist investors if it’s mismanaged, has exorbitant costs, and can be run more profitably as a private company or has a different problem which the activist investor thinks it can fix in a bid to make the company have more value.

What Does an Activist Investor Do?

Hedge funds, private equity firms, and wealthy individuals are entity types which may decide to function as activist investors. An indication that a company might become activist investors’ target is the SEC Form 13D filing, which has to be filed mandatorily when an investor buys 5% or more of a company’s shares. A lot of prominent activist shareholders like Nelson Peltz and Carl Icahn, execute their business activities via hedge funds or holding companies.

Carl Icahn

He is the founder of Icahn Enterprises. This is a diversified holding company which owns tons of investments made by Icahn. In previous years, Icahn has held notable positions in companies like Netflix Inc., the Clorox Company, and Yahoo Inc. Apple Inc. was one of Icahn’s major investments. Carl bought 4.7 million of the company’s shares and then pushed for a share buyback of $150 billion. On the 26th of June, 2016, Xerox Corporation announced its placement of an Icahn associate on Xerox’s board of directors.

Bill Ackman

He is the founder, as well as, CEO of the Perishing Capital hedge fund. Perishing Capital has held positions in Wendy’s Company and Target Corporation. Ackman’s more renowned moves comprise a short position in Herbalife Ltd., as well as, his huge bet on Valeant Pharmaceuticals International Inc., a troubled drug company. In 2003, Ackman entered into a partnership with Icahn for Hallwood Realty’ shares. This deal made Ackman sue Icahn over profits made from the sale of shares.

David Einhorn

David is the founder, as well as, president of Greenlight Capital. He has managed this hedge fund for twenty years. Two of his more popular plays include shorting Allied Capital Corporation and Lehman Brothers. In May 2016, he announced that Greenlight had taken a stake of $60 million in Yelp Inc.

Dan Loeb

Loeb is the founder of Third Point Partners, a $10 billion hedge fund. In 2012, he held a position in Yahoo and earned a seat on its board of directors over time. In 2013, he announced his company to be Sotheby’s largest shareholder. Third Point has sizable positions in Lingand Pharmaceuticals Inc. and Baxter International Inc.

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