Activist Investing

Activist Investors: Pros and Cons

Introduction

An activist investor, typically a specialized hedge fund, buys a significant minority stake in a publicly traded company to change its operations or governance. They use various strategies to boost share prices, from operational improvements to boardroom shake-ups. Activists have become increasingly common in recent years, as they seek to unlock value in underperforming companies.

Experts Weigh In

"Activist investors can play a positive role by pushing companies to improve their performance," says Joe Cyriac, a partner in our New York office. "However, they can also be disruptive and may not always have the best interests of all shareholders in mind."

Sandra Oberhollenzer, a corporate governance expert, agrees that activist investors can be a force for good. "They can help to improve corporate governance, increase transparency, and boost shareholder value," she says. "However, it is important to remember that they are ultimately motivated by profit, and their actions may not always be in the best interests of the company or its long-term shareholders."

Conclusion

The role of activist investors is a complex and controversial one. While they can play a positive role in improving corporate governance and shareholder value, it is important to be aware of their potential drawbacks. As their influence continues to grow, it will be important for companies to develop strategies to manage activist investors effectively.